From the InterAgency Report:

The Federal Reserve System, the Office of the Comptrollerof the Currency (OCC), the Federal DepositInsurance Corporation (FDIC), and the Office ofThrift Supervision (OTS), referred to as the agencies,conducted on-site reviews of foreclosure processingat 14 federally regulated mortgage servicers duringthe fourth quarter of 2010.1This report provides a summary of the review findings and an overview of the potential impacts associated with instances of foreclosure-processing weaknessesthat occurred industrywide.

Promissory Notes are "negotiable instruments" and have a face value similar to cash. The mortgage trusts all have clear criteria for the storage of the notes. All of the SEC filings I have read in regards to these trusts name a document custodian, usually the trustee. I have not yet seen even one trust prospectus or pooling and servicing agreement (PAS) where the servicer is named the document custodian. Here's an example, of a trust where Bank of America is the servicer, Wells Fargo is the Trustee of Banc of America Mortgage 2006-B Trust (prospectus here). Note that instead of BoA as servicer for this trust, Wells Fargo as trustee is tasked with document custodian duties!

In addition, the Mortgage Loan Purchase Agreement will provide the Depositor with remedies against the Sponsor for the failure by the Sponsor to deliver the Mortgage Loan documentation required to be delivered to the Trustee or a custodian under the Pooling Agreement. Wells Fargo Bank, National Association (“Wells Fargo Bank”) will act as Trustee and custodian under the Pooling Agreement. Wells Fargo Bank will also act as custodian of the Mortgage Files pursuant to the Pooling Agreement. In that capacity, Wells Fargo Bank is responsible to hold and safeguard the Mortgage Notes and other contents of the Mortgage Files on behalf of the Certificateholders. Wells Fargo Bank maintains each Mortgage File in a separate file folder marked with a unique bar code to assure loan-level file integrity and to assist in inventory management. Files are segregated by transaction or investor. Wells Fargo Bank has been engaged in the mortgage document custody business for more than 25 years. Wells Fargo Bank maintains document custody facilities in its Minneapolis, Minnesota headquarters and in three regional offices located in Richfield, Minnesota, Irvine, California, and Salt Lake City, Utah. As of June 30, 2006, Wells Fargo Bank maintains mortgage custody vaults in each of those locations with an aggregate capacity of over eleven million files.

Last fall, we got hints of the expected-yet-still-shocking revelation via a Countrywide/BoA employee, Linda DeMartini (testimony here), exposed the securities fraud practices in a depo taken during a NJ bankruptcy case, Kemp v Countrywide. A direct quotation from the judge's opinion in the bankruptcy case:

"She [DeMartini] testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents."

That assertion certainly seems to suggest that the failure to transfer a promissory note from Countrywide Financial to the security trust in this case was not an isolated error—but a matter of policy at Countrywide Financial. If mortgage-backed securities aren't in fact "mortgage-backed," investors who bought these securities from Countrywide could hold Bank of America accountable. "If Countrywide's practice was to hold onto the note, then investors in this pool and others may question whether the security was constructed properly and legally and may be able to require Bank of America to buy back their securities" Gretchen Morgenson of the New York Times explained.

FROM PAGE 3 OF THE INTERAGENCY REPORT:

The reviews also showed that servicers possessed original notes and mortgages .

(NOTE THAT THE SERVICERS, NOT THE TRUSTEES ARE IN POSSESSION OF THE ORIGINAL NOTES & MORTGAGES)

FROM PAGE 4 (oddly it appears third party vendors where tasked with negotiable instrument document custodian duties)

Third-party vendor management. Examiners generally found adequate evidence of physical control and possession of original notes and mortgages .

FROM PAGE 6

Furthermore, concerns about the prevalence of irregularities in the documentation of ownership may cause uncertainty for investors of securitized mortgages. Servicers and their affiliates also face significant reputational risk with their borrowers, with the court system, and with regulators.

FROM PAGE 7 (Keep in mind the financial sector's propensity to fabricate evidence. Note the slippery language "may not have been sufficient" & "generally was sufficient".)

..examiners noted instances where documentation in the foreclosure file alone may not have been sufficient to prove ownership of the note at the time the foreclosure action commenced without reference to additional information. When additional information was requested and provided to examiners, it generally was sufficient to determine ownership.

Can't wait to see the backpedaling on this one. If you remember the Kemp v Countrywide case, they scrambled to unwind the testimony of the employee that claimed the notes were at the servicer. If it's true that the notes are held by the servicers and not the trusts, and we have no reason not to believe the fed's findings, things can get real ugly real fast for the banksters...

Oh, and one more thing, where ya at IRS? You are missing out on $TRILLIONS$ in lost taxes.

Can anyone spell REMIC RULES?