The Ibanez foreclosure decision by the Massachusetts Supreme Judicial Court has gotten a lot of attention since it came down on Friday. The case is, not surprisingly being taken to heart by both bulls and bears. While I don't think Ibanez is a death blow to the securitization industry, at the very least it should make investors question the party line that's been coming out of the American Securitization Forum. At the very least it shows that the ASF's claims in its White Paper and Congressional testimony are wrong on some points, as I've argued elsewhere, including on this blog. I would argue that at the very least, Ibanez shows that there is previously undisclosed material risk in all private-label MBS. See: Ibanez and Securitization Fail
A blank endorsement (by the instrument's payee, of course) turns the instrument into bearer paper. That means it's like cash. Whoever physically possesses the note, including a thief, can enforce it against the maker. And as a recent 9th Circuit BAP opinion, In re Veal (about which I hope to blog more) noted (fn 25), bearer paper has long had lots of nefarious associations (I would add Godfather III to the bearer bonds movie list in that note). In contrast, a special endorsement limits who can enforce the note; only the specially noted endorsee has rights in that note and can enforce it (they could transfer it to someone else, but that's another matter). See: Fraud Problem
The securitization of residential mortgage notes has created a maze of complex issues and problems for the bankruptcy and foreclosure courts.
One fundamental issue is who is the actual holder and owner of the mortgage note. In order to answer this question, it is necessary to dig deep into the contracts, warranties and representations that were executed in the formation of the securitized trust. See: The Alphabet Problem
Student Loan Asset Backed Securities (SLABS) collateralized by student loans comprise one of the four (along with home equity loans, auto loans and credit card receivables) core asset classes financed through asset-backed securitizations. See: SLABS
You Can Wipe Out Your Default Student Loan With an Administrative Process. See: Legally Cancel Your Securitized Default Student Loan