5 Different grades of securities (Defined 12 CFR 1.2, limitations 12 CFR 1.3)

Type 1 Obligation of US
		bank may deal in, underwrite, purchase, and sell for its own account
Type 2 Obligations of States
		bank may have or contract to, or deal in, underwrite, purchase, and sell for its own account.  Aggregate value issued by any one obligor may not exceed 10% of the bank's capital and surplus.

Type 3 A security that is not Type 1, 2, 4, or 5
	bank may have or contract to purchase and sell for its own account.  Aggregate value issued by any one obligor may not exceed 10% of the bank's capital and surplus.

Type 2 & 3 Aggregate value issued by any one obligor may not exceed 10 percent of the bank’s capital and surplus.

Type 4 Small business related security, Commercial mortgage related security, 1st TD, any type of commercial loan with real estate attached to it; residential mortgage mortgage.
		bank may purchase and sell for its own account. Total of account is not limited.  But, there is a special aggregate limitation of 25% of capital regarding small business. 

Type 5 Rated, marketable, not type 4, secured by interests in a pool of loans with various obligors, in which a bank may invest directly.
		bank may purchase and sell for its own account.  Aggregate value of securities issued by any one issuer held by the bank does not 
exceed 25 percent of the bank's capital and surplus.

Banks may not lend:
Their depositors’ money
Their capital
Their notes
Their credit

Federal National Mortgage Association (Fannie Mae)
Federal Home Mortgage Corporation (Freddie Mac)

12 CFR Sec. 1.6  Convertible securities.
    A national bank may not purchase securities convertible into stock 
at the option of the issuer.

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00:00:24

Purpose of legal system is to prevent a monopoly by the banks and other commercial entities.

 [updated 05-04-2009]
http://frwebgate.access.gpo.gov/cgi-bin/usc.cgi?ACTION=RETRIEVE&FILE=$$xa$$busc15.wais&start=127943&SIZE=9629&TYPE=TEXT
15 USC Sec. 18. Acquisition by one corporation of stock of another
    No person engaged in commerce or in any activity affecting commerce 
shall acquire, directly or indirectly, the whole or any part of the 
stock or other share capital and no person subject to the jurisdiction 
of the Federal Trade Commission shall acquire the whole or any part of 
the assets of another person engaged also in commerce or in any activity 
affecting commerce, where in any line of commerce or in any activity 
affecting commerce in any section of the country, the effect of such 
acquisition may be substantially to lessen competition, or to tend to 
create a monopoly.
    No person shall acquire, directly or indirectly, the whole or any 
part of the stock or other share capital and no person subject to the 
jurisdiction of the Federal Trade Commission shall acquire the whole or 
any part of the assets of one or more persons engaged in commerce or in 
any activity affecting commerce, where in any line of commerce or in any 
activity affecting commerce in any section of the country, the effect of 
such acquisition, of such stocks or assets, or of the use of such stock 
by the voting or granting of proxies or otherwise, may be substantially 
to lessen competition, or to tend to create a monopoly.
    This section shall not apply to persons purchasing such stock solely 
for investment and not using the same by voting or otherwise to bring 
about, or in attempting to bring about, the substantial lessening of 
competition. Nor shall anything contained in this section prevent a 
corporation engaged in commerce or in any activity affecting commerce 
from causing the formation of subsidiary corporations for the actual 
carrying on of their immediate lawful business, or the natural and 
legitimate branches or extensions thereof, or from owning and holding 
all or a part of the stock of such subsidiary corporations, when the 
effect of such formation is not to substantially lessen competition.
    Nor shall anything herein contained be construed to prohibit any 
common carrier subject to the laws to regulate commerce from aiding in 
the construction of branches or short lines so located as to become 
feeders to the main line of the company so aiding in such construction 
or from acquiring or owning all or any part of the stock of such branch 
lines, nor to prevent any such common carrier from acquiring and owning 
all or any part of the stock of a branch or short line constructed by an 
independent company where there is no substantial competition between 
the company owning the branch line so constructed and the company owning 
the main line acquiring the property or an interest therein, nor to 
prevent such common carrier from extending any of its lines through the 
medium of the acquisition of stock or otherwise of any other common 
carrier where there is no substantial competition between the company 
extending its lines and the company whose stock, property, or an 
interest therein is so acquired.
    Nothing contained in this section shall be held to affect or impair 
any right heretofore legally acquired: Provided, That nothing in this 
section shall be held or construed to authorize or make lawful anything 
heretofore prohibited or made illegal by the antitrust laws, nor to 
exempt any person from the penal provisions thereof or the civil 
remedies therein provided.
    Nothing contained in this section shall apply to transactions duly 
consummated pursuant to authority given by the Secretary of 
Transportation, Federal Power Commission, Surface Transportation Board, 
the Securities and Exchange Commission in the exercise of its 
jurisdiction under section 79j of this title,\1\ the United States 
Maritime Commission, or the Secretary of Agriculture under any statutory 
provision vesting such power in such Commission, Board, or Secretary.

00:01:11

Securities must be graded investments pursuant to
UCC Article 8
12 CFR Title 1
12 CFR 1.2 DEFINITIONS OF TYPES OF SECURITIES

Different grades of securities
Type 1 Obligation of US
Type 2 Obligations of States
Type 3 A security that is not Type 1, 2, 4, or 5
Type 4 Small business related security, Commercial mortgage related security, 1st TD, any type of commercial loan with real estate attached to it; residential mortgage loan.
Type 5 Rated, marketable, not type 4, secured by interests in a pool of loans with various obligors, in which a bank may invest directly.

 [updated 05-04-2009]
http://edocket.access.gpo.gov/cfr_2009/janqtr/12cfr1.2.htm
12 CFR Sec. 1.2  Definitions. [excerpt]
.
.
.
    (j) Type I security means:
    (1) Obligations of the United States;
    (2) Obligations issued, insured, or guaranteed by a department or an 
agency of the United States Government, if the obligation, insurance, or 
guarantee commits the full faith and credit of the United States for the 
repayment of the obligation;
    (3) Obligations issued by a department or agency of the United 
States, or an agency or political subdivision of a State of the United 
States, that represent an interest in a loan or a pool of loans made to 
third parties, if the full faith and credit of the United States has 
been validly pledged for the full and timely payment of interest on, and 
principal of, the loans in the event of non-payment by the third party 
obligor(s);
    (4) General obligations of a State of the United States or any 
political subdivision thereof; and municipal bonds if the national bank 
is well capitalized as defined in 12 CFR 6.4(b)(1);
    (5) Obligations authorized under 12 U.S.C. 24 (Seventh) as 
permissible for a national bank to deal in, underwrite, purchase, and 
sell for the bank's own account, including qualified Canadian government 
obligations; and
    (6) Other securities the OCC determines to be eligible as Type I 
securities under 12 U.S.C. 24 (Seventh).
    (k) Type II security means an investment security that represents:
    (1) Obligations issued by a State, or a political subdivision or 
agency of a State, for housing, university, or dormitory purposes that 
would not satisfy the definition of Type I securities pursuant to 
paragraph (j) of Sec. 1.2;
    (2) Obligations of international and multilateral development banks 
and organizations listed in 12 U.S.C. 24 (Seventh);
    (3) Other obligations listed in 12 U.S.C. 24 (Seventh) as 
permissible for a bank to deal in, underwrite, purchase, and sell for 
the bank's own account, subject to a limitation per obligor of 10 
percent of the bank's capital and surplus; and
    (4) Other securities the OCC determines to be eligible as Type II 
securities under 12 U.S.C. 24 (Seventh).
    (l) Type III security means an investment security that does not 
qualify as
a Type I, II, IV, or V security. Examples of Type III securities include 
corporate bonds and municipal bonds that do not satisfy the definition 
of Type I securities pursuant to paragraph (j) of Sec. 1.2 or the 
definition of Type II securities pursuant to paragraph (k) of Sec. 1.2.
    (m) Type IV security means:
    (1) A small business-related security as defined in section 
3(a)(53)(A) of the Securities Exchange Act of 1934, 15 U.S.C. 
78c(a)(53)(A), that is rated investment grade or is the credit 
equivalent thereof, that is fully secured by interests in a pool of 
loans to numerous obligors.
    (2) A commercial mortgage-related security that is offered or sold 
pursuant to section 4(5) of the Securities Act of 1933, 15 U.S.C. 
77d(5), that is rated investment grade or is the credit equivalent 
thereof, or a commercial mortgage-related security as described in 
section 3(a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 
78c(a)(41), that is rated investment grade in one of the two highest 
investment grade rating categories, and that represents ownership of a 
promissory note or certificate of interest or participation that is 
directly secured by a first lien on one or more parcels of real estate 
upon which one or more commercial structures are located and that is 
fully secured by interests in a pool of loans to numerous obligors.
    (3) A residential mortgage-related security that is offered and sold 
pursuant to section 4(5) of the Securities Act of 1933, 15 U.S.C. 
77d(5), that is rated investment grade or is the credit equivalent 
thereof, or a residential mortgage-related security as described in 
section 3(a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 
78c(a)(41)), that is rated investment grade in one of the two highest 
investment grade rating categories, and that does not otherwise qualify 
as a Type I security.
    (n) Type V security means a security that is:
    (1) Rated investment grade;
    (2) Marketable;
    (3) Not a Type IV security; and
    (4) Fully secured by interests in a pool of loans to numerous 
obligors and in which a national bank could invest directly.

00:04:25

[updated 05-04-2009]
http://edocket.access.gpo.gov/cfr_2009/janqtr/12cfr1.3.htm
12 CFR 1.3
Sec. 1.3  Limitations on dealing in, underwriting, and purchase and sale of 
securities.
    (a) Type I securities. A national bank may deal in, underwrite, 
purchase, and sell Type I securities for its own account. The amount of 
Type I securities that the bank may deal in, underwrite, purchase, and 
sell is not limited to a specified percentage of the bank's capital and 
surplus.
    (b) Type II securities. A national bank may deal in, underwrite, 
purchase, and sell Type II securities for its own account, provided the 
aggregate par value of Type II securities issued by any one obligor held 
by the bank does not exceed 10 percent of the bank's capital and 
surplus. In applying this limitation, a national bank shall take account 
of Type II securities that the bank is legally committed to purchase or 
to sell in addition to the bank's existing holdings.
    (c) Type III securities. A national bank may purchase and sell Type 
III securities for its own account, provided the aggregate par value of 
Type III securities issued by any one obligor held by the bank does not 
exceed 10 percent of the bank's capital and surplus. In applying this 
limitation, a national bank shall take account of Type III securities 
that the bank is legally committed to purchase or to sell in addition to 
the bank's existing holdings.
    (d) Type II and III securities; other investment securities 
limitations. A national bank may not hold Type II and III securities 
issued by any one obligor with an aggregate par value exceeding 10 
percent of the bank's capital and surplus. However, if the proceeds of 
each issue are to be used to acquire and lease real estate and related 
facilities to economically and legally separate industrial tenants, and 
if each issue is payable solely from and secured by a first lien on the 
revenues to be derived from rentals paid by the lessee under net 
noncancellable leases, the bank may apply the 10 percent investment 
limitation separately to each issue of a single obligor.
    (e) Type IV securities--(1) General. A national bank may purchase 
and sell Type IV securities for its own account. Except as described in 
paragraph (e)(2) of this section, the amount of the Type IV securities 
that a bank may purchase and sell is not limited to a specified 
percentage of the bank's capital and surplus.
    (2) Limitation on small business-related securities rated in the 
third and fourth highest rating categories by an NRSRO. A national bank 
may hold small business-related securities, as defined in section 
3(a)(53)(A) of the Securities Exchange Act of 1934, 15 U.S.C. 
78c(a)(53)(A), of any one issuer with an aggregate par value not 
exceeding 25 percent of the bank's capital and surplus if those 
securities are rated investment grade in the third or fourth highest 
investment grade rating categories. In applying this limitation, a 
national bank shall take account of securities that the bank is legally 
committed to purchase or to sell in addition to the bank's existing 
holdings. No percentage of capital and surplus limit applies to small 
business related securities rated investment grade in the highest two 
investment grade rating categories.
    (f) Type V securities. A national bank may purchase and sell Type V 
securities for its own account provided that the aggregate par value of 
Type V securities issued by any one issuer held by the bank does not 
exceed 25 percent of the bank's capital and surplus. In applying this 
limitation, a national bank shall take account of Type V securities that 
the bank is legally committed to purchase or to sell in addition to the 
bank's existing holdings.
    (g) Securitization. A national bank may securitize and sell assets 
that it holds, as a part of its banking business. The amount of 
securitized loans and obligations that a bank may sell is not limited to 
a specified percentage of the bank's capital and surplus.
    (h) Pooled investments--(1) General. A national bank may purchase 
and sell for its own account investment company shares provided that:
    (i) The portfolio of the investment company consists exclusively of 
assets that the national bank may purchase and sell for its own account; 
and
    (ii) The bank's holdings of investment company shares do not exceed 
the limitations in Sec. 1.4(e).
    (2) Other issuers. The OCC may determine that a national bank may 
invest in an entity that is exempt from registration as an investment 
company under section 3(c)(1) of the Investment Company Act of 1940, 
provided that the portfolio of the entity consists exclusively of assets 
that a national bank may purchase and sell for its own account.
    (3) Investments made under this paragraph (h) must comply with Sec. 
1.5 of this part, conform with applicable published OCC precedent, and 
must be:
    (i) Marketable and rated investment grade or the credit equivalent 
of a security rated investment grade, or
    (ii) Satisfy the requirements of Sec. 1.3(i).
    (i) Securities held based on estimates of obligor's performance. (1) 
Notwithstanding Sec. Sec. 1.2(d) and (e), a national bank may treat a 
debt security as an investment security for purposes of this part if the 
security is marketable and the bank concludes, on the basis of estimates 
that the bank reasonably believes are reliable, that the obligor will be 
able to satisfy its obligations under that security.
    (2) The aggregate par value of securities treated as investment 
securities under paragraph (i)(1) of this section may not exceed 5 
percent of the bank's capital and surplus.

00:06:00

A note is a Type IV security.  Bank can purchase and sell as many as they wish, but they may not use their capital or customers’ deposits, or owned notes for that purpose.  It has value.

According to contract law, the borrower must be fully informed that he is creating the money, and the bank is buying his note.  Or, that the bank is actual a servicer of the note.  Otherwise, the contract is unconcionable and void.

Either the bank is committing a fraud upon the court, or it is violating the basic prohibition against using the Capital, Deposits, and Notes (CDN).

The bank is purchasing your purchasing power when it receives the note.  It misrepresents itself in that it is not actual lending institution, but rather it is a service institution.

The bank does a credit report because they want to be certain that you have the purchasing power.

00:09:19

[updated 05/04/2009]
http://edocket.access.gpo.gov/cfr_2009/janqtr/12cfr1.6.htm
12 CFR Sec. 1.6  Convertible securities.
    A national bank may not purchase securities convertible into stock 
at the option of the issuer.

The Fannie Mae or GMAC prospectus will show what they are offering. 
424b3 or 424b5 form has the official detail, and is filed with the SEC.

00:11:57

[updated 05-04-2009]
http://www.fanniemae.com/markets/debt/understanding_fm_debt/debt_issuance_activities.jhtml?p=Debt+Securities&s=Understanding+Fannie+Mae+Debt&t=Debt+Issuance+Overview
Fannie Mae's Funding Philosophy
Fannie Mae takes a long-term approach to its funding strategy. This is because of Fannie Mae's continuous requirements for large amounts of funding to carry out its mission. We believe it is incumbent on us to work in the best interest of investors and not to issue opportunistically for short-term gain. We endeavor to structure debt products that match the needs of our portfolio to the interests of the market. When anticipating the issuance of any new debt security, Fannie Mae works diligently with its dealers to gauge demand for various types of securities and to ensure that there will be solid distribution of a security once it is brought to market. Fannie Mae has demonstrated a long-term commitment to investors in the way we bring issues to market and monitor their performance in the secondary market.

Fannie Mae's Status as an Issuer
Fannie Mae's debt obligations are treated as U.S. agency securities in the marketplace, which is just below U.S. Treasuries and above AAA corporate debt. This agency status is due in part to the creation and existence of the corporation pursuant to a federal law, the public mission that it serves. Fannie Mae's senior unsecured debt has been rated "AAA," "Aaa," and "AAA" respectively by Fitch, Inc., Moody's Investors Service, and Standard & Poor's. Fitch, Moody's, and Standard & Poor's rate Fannie Mae's short-term debt "F1+," "Prime-1" or "P-1," and "A-1+," respectively. Fannie Mae's debt securities are unsecured obligations of the corporation and are not backed by the full faith and credit of the U.S. Government.

Regulatory Treatment of Fannie Mae Debt Securities
Fannie Mae debt obligations receive favorable treatment from a regulatory perspective. It is because of our U.S. agency status in the market, high credit quality, and public mission as stated in the charter act under which we operate that our debt is afforded such favorable treatment. The charter act actually limits Fannie Mae's business to activities that provide support and stability to the secondary mortgage market, especially those activities that promote housing for low- and moderate- income families. Fannie Mae securities are "exempted securities" under the laws administered by the U.S. Securities and Exchange Commission to the same extent as U.S. Government obligations. Also, Fannie Mae debt qualifies for more liberal treatment than corporate debt under U.S. Federal statutes and regulations, and to a limited extent, foreign overseas statutes and regulations. Some of these statutes and regulations make it possible for deposit-taking institutions to invest in Fannie Mae debt more liberally than in corporate debt and mortgage-backed and asset-backed securities. Others enable certain institutions to invest in Fannie Mae debt on par with obligations of the United States and in unlimited amounts.

00:14:20
Updated 06-03-09
REAL ESTATE SETTLEMENT PROCEDURES
http://frwebgate.access.gpo.gov/cgi-bin/usc.cgi?ACTION=RETRIEVE&FILE=$$xa$$busc12.wais&start=9805293&SIZE=8819&TYPE=TEXT
12 USC Sec. 2602. Definitions
    For purposes of this chapter--
        (1) the term ``federally related mortgage loan'' includes any 
    loan (other than temporary financing such as a construction loan) 
    which--
            (A) is secured by a first or subordinate lien on residential 
        real property (including individual units of condominiums and 
        cooperatives) designed principally for the occupancy of from one 
        to four families, including any such secured loan, the proceeds 
        of which are used to prepay or pay off an existing loan secured 
        by the same property; and
            (B)(i) is made in whole or in part by any lender the 
        deposits or accounts of which are insured by any agency of the 
        Federal Government, or is made in whole or in part by any lender 
        which is regulated by any agency of the Federal Government, or
            (ii) is made in whole or in part, or insured, guaranteed, 
        supplemented, or assisted in any way, by the Secretary or any 
        other officer or agency of the Federal Government or under or in 
        connection with a housing or urban development program 
        administered by the Secretary or a housing or related program 
        administered by any other such officer or agency; or
            (iii) is intended to be sold by the originating lender to 
        the Federal National Mortgage Association, the Government 
        National Mortgage Association, the Federal Home Loan Mortgage 
        Corporation, or a financial institution from which it is to be
        purchased by the Federal Home Loan Mortgage Corporation; or
            (iv) is made in whole or in part by any ``creditor'', as 
        defined in section 1602(f) of title 15, who makes or invests in 
        residential real estate loans aggregating more than $1,000,000 
        per year, except that for the purpose of this chapter, the term 
        ``creditor'' does not include any agency or instrumentality of 
        any State;

        (2) the term ``thing of value'' includes any payment, advance, 
    funds, loan, service, or other consideration;
        (3) the term ``Settlement services'' includes any service 
    provided in connection with a real estate settlement including, but 
    not limited to, the following: title searches, title examinations, 
    the provision of title certificates, title insurance, services 
    rendered by an attorney, the preparation of documents, property 
    surveys, the rendering of credit reports or appraisals, pest and 
    fungus inspections, services rendered by a real estate agent or 
    broker, the origination of a federally related mortgage loan 
    (including, but not limited to, the taking of loan applications, 
    loan processing, and the underwriting and funding of loans), and the 
    handling of the processing, and closing or settlement;
        (4) the term ``title company'' means any institution which is 
    qualified to issue title insurance, directly or through its agents, 
    and also refers to any duly authorized agent of a title company;
        (5) the term ``person'' includes individuals, corporations, 
    associations, partnerships, and trusts;
        (6) the term ``Secretary'' means the Secretary of Housing and 
    Urban Development;
        (7) the term ``affiliated business arrangement'' means an 
    arrangement in which (A) a person who is in a position to refer 
    business incident to or a part of a real estate settlement service 
    involving a federally related mortgage loan, or an associate of such 
    person, has either an affiliate relationship with or a direct or 
    beneficial ownership interest of more than 1 percent in a provider 
    of settlement services; and (B) either of such persons directly or 
    indirectly refers such business to that provider or affirmatively 
    influences the selection of that provider; and
        (8) the term ``associate'' means one who has one or more of the 
    following relationships with a person in a position to refer 
    settlement business: (A) a spouse, parent, or child of such person; 
    (B) a corporation or business entity that controls, is controlled 
    by, or is under common control with such person; (C) an employer, 
    officer, director, partner, franchisor, or franchisee of such 
    person; or (D) anyone who has an agreement, arrangement, or 
    understanding, with such person, the purpose or substantial effect 
    of which is to enable the person in a position to refer settlement 
    business to benefit financially from the referrals of such business.

If there is a federal document in the settlement papers, then it is known as a “federally related mortgage”.

FRB publication:  Rules Regarding Availability of Information

If a RESPA request is made, the bank may respond with a letter which will contain some form of dunning statement or admission that it is acting as an agent.  That indicates that it is a service rather than have an interest in the debt.  For that reason they would have no standing to sue.

12 USC 3754
Sec. 3754. Designation of foreclosure commissioner
(a) In general
    The Secretary may designate a person or persons to serve as a 
foreclosure commissioner or commissioners for the purpose of foreclosing 
upon a single family mortgage.
(b) Power of sale
    A foreclosure commissioner designated under this section shall have 
a nonjudicial power of sale.
(c) Qualifications
    The foreclosure commissioner, if a natural person, shall be a 
resident of the State in which the security property is located and, if 
not a natural person, the foreclosure commissioner must be duly 
authorized to transact business under laws of the State in which the 
security property is located. No person shall be designated as a 
foreclosure commissioner unless that person is responsible, financially 
sound, and competent to conduct a foreclosure.
(d) Designation procedure
                       (1) Written designation
        The Secretary may designate a foreclosure commissioner by 
    executing a written designation stating the name and business or 
    residential address of the commissioner, except that if a person is 
    designated in his or her capacity as an official or employee of a 
    government or corporate entity, such person may be designated by his 
    or her unique title or position instead of by name.
                    (2) Substitute commissioners
        The Secretary may, with or without cause, designate a substitute 
    foreclosure commissioner to replace a previously designated 
    foreclosure commissioner.
                             (3) Number
        More than 1 foreclosure commissioner may be designated at any 
    time.

 

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