Schneiderman’s RMBS Working Group

dday talks about Schneiderman’s RMBS Working Group: Resources, Jurisdiction and Will. "But I want to pull out the sentence I highlighted previously in Schneiderman’s interview which shows that at least he is thinking creatively about this. He said that ‘We have the Internal Revenue Service in because there are huge tax fraud implications to some of the stuff that went on.’ I suppose he could be talking about a few different things (like the tax evasion from the banks using MERS instead of recording mortgage transfers at public records offices and paying a fee), but my guess is he’s talking about REMIC claims.

REMICs are an acronym for Real Estate Mortgage Investment Conduits. When you’re talking about mortgage pools used in securitization, you’re talking about REMICs. And REMICs have special tax treatment; they are exempt from federal taxes provided they only invest in ‘qualified mortgages’ and other permitted investments. Here’s the important part: under the 1986 Tax Reform Act, the REMIC must receive all of its assets in the trust within 90 days and the assets have to be performing (not in default). Any REMIC violations make the vehicle subject to a penalty tax of 100%, with additional penalties as they apply."