Securitisation: & then Showcased relative to Irish Banks – example KBC Bank

Ireland PLC - and relevance to Court Proceedings by those Banks

‘’Further, for so long as neither the Issuer nor the Trustee has obtained legal title, it must join KBCI as
a party to any legal proceedings which it may wish to take against any Borrower to enforce its rights
under the relevant Mortgage and its related collateral security. In this respect, KBCI will, pursuant to
the Mortgage Sale Agreement, undertake for the benefit of the Issuer and the Trustee that it will lend
its name to, and take such steps as may reasonably be required by the Issuer or the Trustee in
relation to, any legal proceedings in respect of the Mortgages and their related collateral security.
Source: p21 Prospectus for Phoenix Funding 4 Limited (now DAC) of 4th August 2009 available online.

[Emphasis Added]

This paragraph above is from a Securitisation Prospectus from 4th August 2009 relevant to an Irish
Bank company. The Issuer, i.e. the Securitisation Special Purpose Vehicle (SPV), is Phoenix Funding 4
Limited (now DAC). KBCI is the Bank company with legal name of KBC Bank Ireland PLC. This
paragraph seems to clearly state that if the Issuer SPV wishes to sue a borrower in Ireland (like for
Possession of their family home) before they have assumed legal title (e.g. before they register a
charge over those lands on the land folio where the family home sits and/or take physical possession
of the Mortgage Deed) from KBCI then it needs to make KBCI a co-Plaintiff with it, i.e. it needs to first
lead the suing as the monies are supposedly owed to it under equity and not to KBCI. We shall revert
to this later as it appears Phoenix Funding 4 DAC do not sue people for Possession of their homes
while KBCI most certainly do.

_____________________________________

The following below then is both a general analysis of securitisation and also then relating it largely,
though not exclusively to one Irish Bank, being that company KBC Bank Ireland PLC. We will examine
that company’s own documentation, like annual accounts, to question if they really do possess the
necessary rights and bona fides to be taking families up and down the country into the Courts to get
possession of their homes, business and farms. The contents herein is not the offering of legal advice
or the making of any legal claims. This is purely for information purposes only and is meant to also
be purely an exercise in critical thinking that may be of interest to others. Also it is of course a mere
glance at the industry of securitisation since it is such a deliberately convoluted, complex and multi-
faceted practice as to be impossible to fully analyse in one viewing. Further, neither is it a case that
KBC Bank Ireland PLC is being ‘picked on’. It is merely that their own paperwork is actually very clear
as to the standing of these matters. Before we do look at their paperwork and published accounts
we must get background and refresh the very concept of securitisation.

Movies like The Big Short have attempted to explain to the public the utter terrifying reality of how
the securitisation of mortgage loans descended into such a quagmire that it brought the Financial
World to the brink. They manage to do it to a certain extent but this practice was all so deliberately
opaque and involved so many diversions and smoke and mirrors and side deals as to what really
happened that it is contended the true gravity and picture was not really fully absorbed into the
public consciousness by such movies notwithstanding how entertaining they were.

1
We will also ignore some of the mind benders that is mortgage loan securitisation in and of itself in
this analysis. For example one anomaly is how can you take an individual loan with individual
security (Mortgage Deed) on particular unique lands and then pool that loan with thousands of
other mortgage loans into one financial product and sell it to investors as a pooled resource when
the pool of loans itself is also subject to a pooled group security Deed. Another anomaly is surely it is
not possible to convert a mortgage security into a stock which is effectively what happens, i.e. you
are converting the type of debt at question into an investment stock as such whereby the income
stream from the borrowers is considered an income stream group receivable and no longer the
proceeds of individual mortgage loans.

Securitisation was often done where the equitable title to the Mortgage was split from the Legal
Title. In basic terms what this means is that the third party investors (pension funds/insurance
companies/private capital etc.) via a special purpose securitisation vehicle/entity (often referred to
as SPV or SPE) bought the loans out fully for a fixed figure and then take the future income stream
on a monthly basis from the borrowers but legally it still looks like the party of interest is the Bank,
i.e. that no sale occurred as registrations/delivery of deeds have not officially occurred.

Ireland has a Property Registration Authority for ‘Registered’ land, i.e. land which comprises well
over 90% of Ireland and is striving to get to 100%. The Land law and Bible for ‘Registered’ land is the
Registration of Title Act, 1964. Section 62(2) therein states;
(2) There shall be executed on the creation of a charge, otherwise than by will, an instrument of
charge in the prescribed form (or an instrument in such other form as may appear to the
Registrar to be sufficient to charge the land, provided that such instrument shall expressly charge
or reserve out of the land the payment of the money secured) but, until the owner of the
charge is registered as such, the instrument shall not confer on the owner of the charge
any interest in the land.

[Emphasis added]

Once a loan of monies is made say from a Bank to a person to buy or build a house on lands then a
Mortgage Deed will be created. The Mortgage Deed once created and then signed by the borrower
will ultimately secure the loan on the lands and the lands can be possessed [allegedly – a separate
discussion] if the loan is not repaid. An instrument derives out of the Mortgage Deed and this
Instrument Number, thus a record of the Deed, is registered on the Land Folio of the borrower(s). If
the loan is defaulted upon then as per s. 62(7) of the same Act the Lender can get Summary
Judgment for Possession, i.e. that statutory rule meaning there is no possible Defence as the monies
were lent, there was default and the lender is the registered owner of the charge on the lands and is
the one in Court seeking Possession as remedy.

A loan sold by the original lender bank to a third party through securitisation clearly means a new
entity now owns the loan and security, i.e. the intention is there for the buyer to become full legal
owner in time. So the charge on the folio will actually now become the equitable property of the
buyer of the loans although they do not take physical delivery of any deeds – [nor can they as these
Deeds in their original format should be destroyed for there to be a group pooled Deed]. HOWEVER,
as the law (s. 62(2) above) clearly states until the new owner REGISTERS their ownership THEY HAVE
NO (ENFORCEABLE) INTEREST IN THE LAND. It is like owning a lotto ticket that wins but the owner
fails to sign the back of it. If they lose the ticket they can have no further enforceable claim to the
win as they failed to register their interest, i.e. sign the ticket. The Supreme Court of Ireland has
confirmed the mandatory requirement of this registration of interest in a charge to have what is

2
known as an ‘interest in the lands’, i.e. to even attempt to sue for possession or for example to
appoint a receiver.

And so coming back to securitisation the loan was likely paid in full by the investors and the future
income from the borrowers on their monthly payments went to the new buyer but the originating
bank remained registered on the folio, i.e. retains the appearance of legal and equitable ownership.
The new relationship was never disclosed to the borrower, which is that their originating bank is
now merely the servicer of the loans in that they collect the monthly payments and pass it on to the
SPV and they retain a small percentage as a fee to ‘service’ the loans. And so the equitable and legal
title are split. At equity (e.g. money) the investors collect and legally (e.g. registration of charge) the
Bank appears to own, although in reality surely neither has any rights as the mortgage Deed is
destroyed and the debt then is at best unsecured.

[As an aside where did the money the Banks received go? All of the income received in the past by
the Banks for this conventional securitisation should have cleared their balance sheets for those loans
but as we know history says they were all effectively insolvent a decade ago. That matter is for
another discussion.]

Coming back to Possession cases where the law in Ireland says the Borrower has NO DEFENCE open
to them if the Bank/lender has called in the loan and they failed to pay it. Here is the wording of that
Summary Judgment legislation.

(7) When repayment of the principal money secured by the instrument of charge has become
due, the registered owner of the charge or his personal representative may apply to the court
in a summary manner for possession of the land or any part of the land, and on the application
the court may, if it so thinks proper, order possession of the land or the said part thereof to be
delivered to the applicant, and the applicant, upon obtaining possession of the land or the said
part thereof, shall be deemed to be a mortgagee in possession.
[Emphasis Added]

Remember the originating Bank is the servicer only of the loans now and the investors own the loans
as they paid full consideration for them. For Borrowers paying in full who continue to perform
nothing appears to be amiss. [Well perhaps until they seek to redeem the Mortgage on the Final
Payment that is. Again for a different discussion.] If a Borrower got into difficulty though they will
have monthly arrears and very quickly a Final Demand will have to issue. However, they do not owe
the monies to the Bank anymore, they owe it to the SPV/investors. And so the SPV is obliged to call
in the loans as due and owing to them at equity. However, they cannot do so and also avail of
Summary Judgment for Possession as above as they are NOT at the same time the registered owner
of the charge, i.e. they have still failed to register their interest in the lands.

The Bank cannot call in the monies as owing to them as that is not true if the loan was securitised.
Those Final Demand letters then will likely not actually state monies are owed to the Bank rather
that monies are just due and owing. They will perhaps show a Balance statement and perhaps say
those monies are owed and are being called in, but not state who is calling in the loans. They will
deem the right to send this letter is a servicing agent right. Or alternatively solicitors will issue it and
call in on the loan on behalf of their client (the bank) but again it is what is not said that is more
important, i.e. that even if the Demand was met by the borrower their client (bank) will merely pass
the sums to the SPV and retain their servicing fees out of it.

The problem now though is that once the Bank sends that letter, either themselves or through
solicitors, it starts a process that must continue to the Bitter Death to maintain that (false?) claim in

3
Court. They have now embarked on a road that has no end. They are in Court effectively deeming
monies are owed to them; monies that are not owed to them and cannot be owed to them if the
loan is securitised, and they are also showing that they are the registered owner of the charges
when in fact and in reality they no longer own the charges and it is waiting on the new owners
registering - as of now only equitable interest - in their own names.

What of course should have happened is that the new owners disclosed their position to the
Borrowers once they purchased the loan in full. They should have then stated they were employing
and retaining the services of the originating Bank that sold the loan to them to service the loan since
it made logistical sense to do so. At that juncture then the investors register their charge which they
also effectively purchased in their own name on the lands and take physical possession of all Deeds
etc., i.e. meaning they now have legal rights, like the right to appoint a receiver or to seek possession
in Court in a summary manner as per s. 62(7) above. [This assuming of course original individual
Deeds can be delivered to the SPV which of course is a big if.] If a default occurs then the SPV call in
the loan(s), and the letter could even issue from the Bank, but in the name of the SPV. Then those
investors via the SPV avail of s. 62(7) to seek Possession.

The question to ask is why would the investors not have done this to be absolutely sure they had full
enforceable legal rights. The prospectus to invest in these mortgages effectively market a stock
market floatation of secured income stream. These documents often extended to over 100 pages of
legal verbiage and technicalities. But a few advantages of not disclosing the new status for the
investors may be a) they could rely on Bank’s knowledge and administration process of the loans to
keep the monies coming in without having to hire third party servicing agents, b) not registering
ownership of charges resulted in huge savings on registration charges/legal fees, c) they knew they
could use the Banks name in Court to gain Summary Judgment for Possession and that the Irish legal
system, as one example, do not question the validity of the paperwork of Banks – regrettably the
facts speak for themselves on this last point and d) could an SPV register a charge in their own
names knowing that the underlying security Deed has been destroyed for that Land Folio.

In short both the Banks and Investors profited from not disclosing to borrowers and to Courts/
Revenue/ Registration Authorities the transaction that happened. [Again the separate discussion as
to where those income monies went for the seller Banks, something surely Revenue should have an
interest in]

In tabular format then we see something like the following;

Borrower Lender/Bank Securitisation Vehicle SPV

Signs Loan Contract & Mortgage
Deed.
Meeting Contract
Significant Majority of Borrowers
keep paying loan with no issues
Takes Receipts of Monthly payments
and ensures Charge is registered on
Folio in its own name
Decides to Securitise Loan thus
changing status of loan to a pooled
investment product. Receives Full
payment for Balance from investors.
Becomes servicing agent but retains
charge in its name on Folio. Side deals
entered into with investors and others.
Bank never discloses status over
course of performance of borrower to
end of life. At end of life can Bank
lawfully redeem for borrower? After
all Mortgage has been converted from
individual’s loan to what is effectively
(Investors)
-
Purchases Loan with view to getting
revenue stream of future mortgage
payments including interest. Retains
Bank as Servicing Agent. Does not
register charge in its own name.
Enters into side deals with sellers
and others.
Takes receipt of income stream and
disseminates to individual investors
as revenue stream exceeds
investment lump sum. Can’t offer
lawful redemption surely as they
don’t take legal title to be registered

4
 a stock with pooled loans, thus
separate security. Was the Original
Mortgage Deed destroyed to facilitate
this? Thus can redemption be lawful?
A smaller percentage miss Payments Bank tries to get performance from
Borrower as servicing agent. In time
issues Final Demand even though
money not owed to it. Appears to be
getting Possession Order without
equitable or essentially legal right to
do so.
owner of charge, as but one
example.
Does not register charge in its name
to then issue Final Demand Letter.
Should be suing in its name only but
is not or should be suing with Bank
to join legal and equitable title.
Again does not.

We can call the above securitisation Mark I. In time the crash came and it became evident that Banks
had sold loans to investors that were highly suspect and risky. The whole system came crashing
down and nobody knew where the bodies were buried, i.e. none of the paperwork matched or was
valid. It was a mess of astounding proportions. The market completely dropped out of securitisation
from external investors around this period a decade ago.

One side deal of securitisation Mark I, or even of separate sale/repurchase agreements could be that
the Banks were entitled to purchase back the loans from the SPV once certain triggers happened.
This would certainly have happened, allegedly then joining the circle again of matching the equitable
and legal titles back to the originating Bank since legal title never went to the SPV in the first place.
However, if Mortgage Deeds for example were destroyed as part of pooling of mortgages under the
original securitisation deal and one new master Deed of security was created then this attempt at
closing the circle again for individual mortgage loans would surely fail. Some people refer to this as
the concept of wine from grapes and attempting to later get grapes back from the wine. You can
convert grapes to wine (individual loans with individual security destroyed then going to pooled
loans with master security) but you cannot get the grapes back from a bottle of wine once the
conversion is done.

Banks needed securitisation to continue though as it offered them lump sums of monies to invest
elsewhere or allegedly to fund other loans. Mortgages are considered illiquid, i.e. slow steady
performers, but Banks wanted instant gratification of full payment in one lump sum and they were
hooked on the securitisation model but without investors they could not partake. It was at this
juncture securitisation Mark II commenced in earnest.

It took off circa 2007-9 and has been progressing steadily ever since. These ‘new’ securitisations
were either then of new bank customers mortgage loans from that time frame or perhaps the older
loans now re-purchased back from SPV’s as per side deals of securitisation Mark I. Mark II effectively
allowed for ‘internal securitisation’, i.e. what is in essence a sale to oneself but still converting the
illiquid asset (mortgage) into a different item, i.e. a group receivable income stream with a lump sum
payment up front.

Except there is no external investor. The Bank itself sets up the Securitisation Vehicle and often will
place its own company Directors as a Director of these other companies. It then ‘sells’ the loans to
this entity but retains full ownership of the stock notes generated. It then goes to the Central Banks
who give it cash for these notes. Because the Banks then own the notes issued they effectively
control the securitisation companies even though they are separately incorporated companies. In
that sense even though there is an alleged ‘sale’ of those mortgages the accounts of the separate
companies are incorporated or consolidated back into the annual accounts of the seller Banks. In
summary then it is merely a way of keeping the loans on the balance sheet while changing the status
of the loans from illiquid mortgages into stock debt securities for faster and more liquid returns, with

5
the central bank funding that liquidity to the Banks. The Central Bank then itself becomes registered
as being the beneficiary of a different charge over the Domestic Banks on the CRO records, it
appearing these charges are for this liquidity funding.

However, to enable all of that a whole infrastructure had to be designed to mirror the old scenario
of external investors. Firstly a few direct quotations from two Bank reports to corroborate what we
have just said about securitisation Mark II.

The motivation for retained securitisations was to create eligible assets to be used in central bank
refinancing operations – a trend that was seen across many other euro area countries. This was
achieved by securitisation vehicles issuing notes in the form of debt securities which were then
‘purchased’ by the domestic banks and subsequently used as collateral with the ECB. This meant that
mortgages on the domestic banks’ balance sheets were being replaced by holdings of debt securities
issued by securitisation vehicles set up by the domestic banks themselves. – Meeting the Statistical Challenges
of Financial Innovation: Introducing New Data on Securitisation - Central Bank of Ireland Quarterly Bulletin 03/July 2011

‘retained securitisations’ means the securitisation was no longer to external securitisation vehicles.
‘central bank refinancing operations’ meaning the Central Bank would recognise and provide direct
financing back to the Domestic Banks for this process once the internal securitisation had occurred
based on the subsequent ‘Notes’ issued and it confirms it was done right across Europe. ‘purchased’
in parenthesis like this implies it is not a true purchase/sale as we understand it but more an
accounting appearance of same. It admits the Banks set up these securitisation vehicles and that
mortgages then were being converted into debt securities, i.e. into something else – or grapes to
wine and that it was all green lighted and actively encouraged across Europe by each countries
central bank.

‘’Indeed, banks could not directly pledge loans as collateral (at least until some revisions of the
collateral framework introduced at the end of 2011), but they could collect various loans in a pool of
assets to set up a securitisation operation and then retain the tranches on balance sheet. These
products could then be posted as collateral in the refinancing operations with the Eurosystem. In this
perspective, banks potentially interested in obtaining central bank liquidity had the incentive to
increase the amount of eligible collateral assets on balance sheet, since the availability of adequate
collateral was a pre-requisite for banks to participate in liquidity operations.’’ – Report Securitisation, Bank
Capital and Financial Regulation Alessandro Diego Scopelliti: May 2016

This banking paper then clarifying it was necessary for Banks to do this as mortgages were not
recognised as collateral whereas debt securities, i.e. securitised mortgages, could be considered
bank collateral and thus the Bank was now effectively incentivised to hold these loans on their
balance sheet instead of externally securitising them as they could get the required liquidity they
needed from the Central Bank by retaining them on their balance sheets.

‘’BANK of Ireland has begin a refinancing of £2.27bn of Bank of Ireland UK-branded residential of
performing mortgages. Refinancing of the UK assets is largely internal but will include issuing bonds
to third party investors backed by a £250m to £350m bundle of the mortgages. The bulk of the deal
involves the bank securitizing mortgages but retain the bonds issued against the assets for
contingent liquidity purposes….The bank said the deal will have no impact on customers. Bank of
Ireland will continue to service the mortgage accounts and all terms and conditions remain the same,
it said. Securitisation allows lenders to raise new funds by borrowing against the value and income of
mortgages they have issued.’’ – Source: Irish Independent 23rd May 2019 [Emphasis Added]

6
Further proof that internal securitisation is very real and active in all mainstream banks and those
banks then become merely servicing agents and the mortgages convert into debt securities as per an
Irish Independent article of as recently as 23rd May 2019.

***

It is at this point then that we introduce the paperwork and accounts of KBC Bank Ireland PLC
(‘’KBCI’’ to stay consistent) below to show how they are claiming all of this operates for them. Below
we have Note 34 from the Annual Accounts of KBCI for the year 2017.

‘‘34. SECURITISED TRANSACTIONS [Blue Text added Notes of explanation]

The Bank [KBCI] has ownership of all floating notes issued by Phoenix Funding 2 DAC, Phoenix
Funding 3 DAC, Phoenix Funding 4 DAC, Phoenix Funding 5 DAC and Phoenix Funding 6 DAC.
[Securitisation Vehicle company Names, of which there are five, and KBCI confirming it owns all
Notes issued on the ‘sale/purchase’ of mortgages to these SPV’s.] In 2008, the Bank transferred
mortgage loans into Phoenix Funding 2 DAC and Phoenix Funding 3 DAC, in 2009 into Phoenix
Funding 4 DAC, in 2012 into Phoenix Funding 5 DAC and in 2016 into Phoenix Funding 6 DAC. The
share capital of Phoenix Funding 2 DAC, Phoenix Funding 3 DAC, Phoenix Funding 4 DAC, Phoenix
Funding 5 DAC and Phoenix Funding 6 DAC is held on trust by Capita Trust Nominees No. 1 Limited or
Capita Trust Company (Ireland) Limited, companies not related to KBC Bank Ireland plc or any of its
subsidiaries. [The process started in 2008 and is up to 2016 as of now.]

KBC Bank Ireland plc is exposed to and shares in the risk and rewards of the Phoenix entities by virtue
of its entitlement under the relevant subordinated debt agreements, to any residual income after
specified expenses in all of those entities. As a result, the Bank has determined that it controls
Phoenix Funding 2 DAC, Phoenix Funding 3 DAC, and has consolidated the financial statements of
each entity into the consolidated financial statements of KBC Bank Ireland plc. [KBCI, since it owns
the Notes issued retains all risks/rewards and this is the litmus test that it must pass to include the
accounts of these other five companies on its own balance sheet]

The floating rate notes issued by Phoenix Funding 2 DAC, Phoenix Funding 3 DAC, Phoenix Funding 4
DAC Phoenix Funding 5 DAC and Phoenix Funding 6 DAC are listed on the Irish Stock Exchange.
[Confirmation that KBCI has taken mortgages and through this internal securitisation has converted
then from illiquid assets on its balance sheet into debt securities (stocks) on the Irish Stock Exchange
where their presence as such allows the banks to take extra liquidity from the Central Bank on the
back of same]

The gross carrying amount of mortgages in the securitised companies recognised in the statement of
financial position is: [And so the vast majority of KBCI mortgages are securitised and still carried on
books of KBCI]

2017 2016
€’000 €’000

Phoenix Funding 2 DAC 4,480,536 4,871,666

Phoenix Funding 3 DAC 1,816,669 1,982,918
Phoenix Funding 4 DAC 476,576 525,227
Phoenix Funding 5 DAC 569,039 648,559

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Phoenix Funding 6 DAC 991,852 1,249,377
________________________
8,334,672 9,277,747
________________________ ‘’

This 8.33 Billion is a significant majority of KBCI’s loan book as of end of 2017 [circa 10.7 billion] and
so the same bank would surely actually be required to prove a particular individual loan, be it
commercial or residential, was somehow not securitised in the past under Mark I or II rather than
that it was securitised, which is clearly the normal action based on the figures as approx. 80% of the
loans appear to have been securitised.

Note 4 of Phoenix Funding 4 DAC 2017 Annual Accounts then states;

Treatment of transferred mortgage loans and related interest rate swap [again added notes in Blue]

The Company acquired a portfolio of residential mortgages from KBC Ireland plc for a consideration
equal to the principal balance outstanding on the mortgage loans on the date of transfer of the
portfolio. [Whether or not physical consideration, i.e. real money transacted is immaterial as the
annual accounts state that consideration effected and cleared the loans on that date inclusive of any
arrears of interest outstanding and fees (as per Prospectus Document of 4th August 2009) and neither
party (KBCI or Phoenix Funding 4 DAC) then can claim later consideration did not effect] The
Company has entered into an interest rate swap with KBC Bank Ireland plc under which the Company
pays the interest rate applicable to the mortgage portfolio and receives a Euribor-based rate of
interest. From the perspective of KBC Bank Ireland plc, the mortgage loans did not qualify for
derecognition as KBC Bank Ireland plc has provided the credit enhancement to the securitised
portfolio. [Credit Enhancement is one of the side deals referred previously referred to. It is another
qualifier for the Bank to retain the mortgages on its balance sheet, although no longer as mortgages
but as debt security receivables every month.]

We will now in tabular format list the structures of these SPV’s relative to KBCI;

Phoenix Funding Phoenix Funding Phoenix Funding Phoenix Funding Phoenix Funding
2 DAC 3 DAC 4 DAC 5 DAC 6 DAC
Incorporated 15/4/08 9/10/08 9/7/09 2/3/12 17/10/16

‘Sale/Purchase’ 7.5 Billion from 3.2 Billion from 850 Million from 890 Million from 1.26 Billion from
size of loan book KBC Mortgage KBC Mortgage KBCI KBCI KBCI
Bank Bank
KBCI Director of Chief Financial Chief Financial Chief Executive Chief Executive Executive
Each SPV Officer of KBCI Officer of KBCI Officer of KBCI Officer of KBCI Director KBCI
Company
Servicing Agent KBC Mortgage KBC Mortgage KBCI KBCI KBCI
on date of sale Bank Bank

Servicing Agent KBCI KBCI Same Same Same

change

Borrower No No No No No
Informed

8
 KBCI secured Yes on Land Yes on Land Yes on Land Yes on Land Yes on Land
Lender to current Folios- No in Folios- No in Folios- No in Folios- No in Folios- No in
date: actuality as no actuality as no actuality as no actuality as no actuality as no
monies owed to monies owed to monies owed to monies owed to monies owed to
them them them them them
SPV Status: Lender at Equity Lender at Equity Lender at Equity Lender at Equity Lender at Equity
who have failed who have failed who have failed who have failed who have failed
to register their to register their to register their to register their to register their
interest in land interest in land interest in land interest in land interest in land

And so we come back to that section of Page 21 of the Prospectus for the Note issuance for Phoenix
Funding 4 Limited from 4th August 2009.

’Further, for so long as neither the Issuer nor the Trustee has obtained legal title, it must join KBCI as
a party to any legal proceedings which it may wish to take against any Borrower to enforce its rights
under the relevant Mortgage and its related collateral security. In this respect, KBCI will, pursuant to
the Mortgage Sale Agreement, undertake for the benefit of the Issuer and the Trustee that it will lend
its name to, and take such steps as may reasonably be required by the Issuer or the Trustee in
relation to, any legal proceedings in respect of the Mortgages and their related collateral security.

The Issuer, i.e. the Securitisation Vehicle is stating it paid consideration in full for the loans to KBCI. It
then has equitable title to the loans. The Bank is retaining legal title and is remaining on the Folio as
registered owner of the charge. [As an aside KBCI may not even be the registered owner of the
charge in any event as it is often KBC Mortgage Bank. However a Statutory Instrument allegedly
allows for this, even though s. 62(2) of the Registration of Title Act 1964 was never amended to
reflect this. Again another separate matter.]

Phoenix Funding 4 DAC then can be the only party at an equitable loss as per its own and KBCI’s
annual reports and also as per the Prospectus from 2009. (The same true for the other four Phoenix
Funding vehicles). It outsources its services to KBCI to collect monies for it. It could outsource to KBCI
to call in a loan but KBCI surely cannot call in any such loan as due and owing to it. If KBCI calls in the
loan and relies on s. 62(7) to seek possession then it is surely making a false claim as there is no
secured monies owed to it, even though the securitisation is internal, as it is a matter of public
record they received consideration in full for the loans.

If Phoenix Funding 4 DAC wish to sue for possession of a family home for example while they are not
the registered owner of the charge they would need to call in the monies in their name and then add
KBCI as co-plaintiff relying upon their registered charge as per the Prospectus document, or else
firstly register their interest in the lands before calling in the loans. In short surely the only entity
that cannot sue in its own name would be KBCI. Phoenix Funding 4 DAC can once it first registers the
charge in its name, or both can sue even though that is questionable as two entities are trying to join
and enforce for one claim.

And if KBCI do deem they are being ‘picked on’ Annual Reports of other Banks are equally
transparent as to securitisation and the majority role it assumes in lending. And of course certain
‘mortgage banks’, like EBS Mortgage Finance, AIB Mortgage Bank and Bank of Ireland Mortgage
Bank were all set up specifically relevant to the Asset Covered Securities Act, 2001 and so they are
specifically designed for the securitisation market and its related models.

9
 Call in Loan? Type of Litigation? Possession, Via s. 62(7) 1964 Act?
KBC Bank Ireland Yes on behalf of Not Permissible in own name as no No, since no monies owed to them
PLC - KBCI one of Phoenix monies owed to it as per its own they cannot rely on charge in their
Funding SPV’s, Documentation name
Not for itself
Any of: Phoenix In its own name and failing Yes, if charge registered in their
Funding 2-6 DAC Yes through KBCI registration of charge then name and monies called in for
Summary Summons for monies is them. Otherwise KBCI to be co-
surely only litigation open to it as plaintiff to try and join Equitable &
no security, thus unsecured loan Legal Title (As per Prospectus)

***

Have we now descended into Securitisation Mark III? What about ‘Vulture Fund’ Sales? The narrative
from Banks is that it is the absolute pits of customers who are sold on to these funds, i.e. debts that
can never be resolved or never written off either. However, anecdotally now even fully performing
loans are being sold on. Why are the banks willing to sell to these funds for mere fractions of the
alleged balances outstanding. If these are legacy customers, i.e. not new accounts, surely then those
customers mortgage loans were previously securitised under either Mark I or Mark II as above. If so
then the seller bank are mere servicing agents now so it appears then they have no true legal rights
to sell these loans, even though they remain legal title owners. Is that why all of these sale/transfer
Deeds that appear in Court allegedly quantifying these transactions are all so heavily redacted. If the
loans were previously sold via securitisation then is there even a valid Mortgage Deed surviving?
What is being sold? Who is the seller? Is anything being sold? Is that why these loans cannot be sold
back to the borrower at the discounted price?

Interestingly KBCI sold 1.9 Billion of loans in late 2018 to a ‘Vulture Fund’. Considering at end of 2017
it appears, at least, that ~80% of its loan book was securitised (both commercial + residential
mortgages) then surely at least a significant percentage of this 1.9 Billion Euros was previously
securitised.

‘’KBC previously said that as a result of the transaction, non-performing loan (NPL) levels at KBC Bank
Ireland would fall by about 40pc, resulting in the NPL ratio reducing by roughly 11 percentage points
to about 25pc.’’ – Source: Irish Independent 3rd December 2018

If the NPL’s went down 11% to 25% then it was 36% or just more than one third of all loans in 2018.
If that is so and if circa 80% of the entire loan book was securitised then mathematically half of that
1.9 Billion, at least, has to have been previously securitised. What is the implication of this for bona
fides as per the previous questions of what was sold, by whom (surely KBCI can’t as servicing agent)
and for what figure?

***

Of course as mentioned it seems all banks also partake in these practices. For example Bank of
Scotland (Ireland) Limited, they who were subsumed by cross border merger into Bank of Scotland
PLC in Edinburgh on 31st December 2010 ran what appears to be a securitisation Mark II scheme in
2008 & 2009 with two companies, being Wolfhound Funding 2 Limited and Wolfhound Funding

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2008-1 Limited, all to the tune of 7.4 Billion. Interestingly a lot of the ‘service’ support for same was
facilitated by none other than Structured Finance Management (Ireland) Limited, they being the
same company that today in 2019 out of offices in Haddington Road Dublin have Directors for hire
for the Vulture Funds who often hold over 100 Directorships each. Of further interest of course is
that the likes of Start Mortgages, Tanager Funding DAC etc. were a lot of the companies who
allegedly purchased parts of the same Bank of Scotland (Ireland) Limited loan book from Bank of
Scotland PLC and again the questions to be asked are a) what was purchased, b) for how much and
c) were those sales merely a securitisation Mark III or another Mark II.

After all, the two Wolfhound SPV’s own ‘loan books’ it seems were re-deemed in full on 5th & 7th
November 2013 to the tune of just over 4 billion combined, i.e. around the same time then Bank Of
Scotland PLC started ‘selling’ to the aforementioned companies, e.g. Tanager sale was announced on
6th December 2013 for over 50% discount with Tanager’s accounts implying they themselves are
involved in many complex deals with entities like Phoenix Lux Co S.à.r.l. (Luxembourg) Havbell No.2
DAC, EPF acquisition Co 84 S.à.r.l., Deutsche Bank etc. notwithstanding they may be registered on
Irish Land Folios.

Or a scenario where Start Mortgages DAC are appearing to hold legal title too (e.g. Registered on
Land Folios here) but are forwarding beneficial interest in these loans (monthly mortgage
repayments) to for example LSF IX Paris Investments Limited and LSF IX Java Investments Limited.
The latter ‘Java’ 2017 company accounts at Note 14(d) admitting Start Mortgages DAC are only
servicer to them for the debt owed to ‘Java’. The same ‘Java’ then selling more of these loans to
European Residential Loan Securitisation 2017-PL1 DAC (ERLS-PL1) in March 2017 for 169 Million,
who Start Mortgages DAC also ‘service’ and ‘Paris’ also ‘selling’ to that ERLS – PL1 in March 2017. In
fact Start Mortgages DAC own 2017 accounts claim they only provide ‘Mortgage Management
Services’. Perhaps registering charges on Land Folios in Ireland as secured lender and gaining
Summary Manner Possession orders is a ‘mortgage management service’. [Any and all of this Data
readily available from CRO and press releases.]

And if further data is required on securitisation in Ireland here is a direct quote from Permanent
TSB’s webpage on their recent loan book sale, a lot of which are family homes;

‘Permanent tsb has announced the completion of the sale and transfer of certain loans to Start Mortgages DAC
(trading as Start Mortgages). From 01/Feb/2019 Start Mortgages is the legal owner of the loans and
responsible for the servicing of the loans.

Start Mortgages is a retail credit firm regulated by the Central Bank of Ireland since 2008 and is supported by
LSF Irish Holdings 97 DAC. Both LSF Irish Holdings 97 DAC and Start Mortgages are entities within the wider
Lone Star Funds network.’

The same trend of Start being Legal owner and ‘servicer’ but no claim as to being beneficial owner,
but then they are ‘supported’ by LSF Irish Holdings 97 DAC. What is the betting the latter may be the
beneficial owner and Start will register charges as secured lender, i.e. no monies are owed to Start
but the same Start will be availing of Summary Manner Possession in the Circuit Courts on those
loans?

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The net questions keep coming to the surface;

• Does the Plaintiff itself have any rights to be in Court?

• Do they have any true interest in the lands even though they are on the folio?
• Are they owed any monies at all, or is it only a small fraction servicing fee?
• If it is a servicing fee has this other contract being displayed to the Court?
• Was the original Mortgage Deed destroyed?
• If so is the matter now unsecured debt?
• If unsecured is it even enforceable as nothing has been disclosed?
• Who is owed that unsecured debt if enforceable?
• What is the true debt figure owed, i.e. have insurance claims and tax write offs been made,
or alarmingly where is the money the Banks specifically got for Domestic Mortgage losses
from the Irish Tax Payer gone? After all was it not 9 Billion Euro?
• Where did the proceeds of securitisation received by Irish Banks go?
• Most major Banks and mortgage Banks now have charges registered against them from the
Central Bank since circa 2008 as a result, it seems, of the same Central Bank offering them
cash, i.e. liquidity, for the Notes generated from the internal, or retained, securitisation
Mark II. Is the same Central Bank so then indirectly claiming charges over Irish family homes,
businesses and farms as a result, as the Banks themselves continue to rely on those
recourses, albeit in a highly questionable manner?
• Do ‘Vultures’ have any rights at all, i.e. can they show they bought anything of substance?
• Is a lot of this now all Data Breaches under the GDPR failing disclosure?
• Is it any coincidence that Section 110 Taxes Consolidated Act 1997 Charitable Trust Status
repeatedly crops up on CRO records for so many players in the securitisation industry?
• As for the fully performing borrowers are their problems only to begin on final payment
when they try to redeem the Mortgage and get Title Deeds etc.?

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