Realized Losses in Securitization
By Daniel Edstrom
DTC Systems, Inc.
It is of interest to note that no loss is calculated in securitized transactions until the
loan is liquidated. It is also of value to note that usually the principal and interest is advanced until the loan is liquidated (as I saw in a case where it was stated by Deutsche Bank National Trust Company in an answer to discovery). So principal and interest payments are made by the servicers and/or trustees, and no loss is actually realized until after the house is foreclosed upon and sold to a 3rd party. So what came first, the default or the loss? No default occurs until the loan is liquidated, which doesn’t occur until after the foreclosure sale. This means the homes are sold while the loans are current. I would venture to say that nearly ALL foreclosures in at least the last 10 years on homes with securitized transactions, have been fraudulent and invalid. This is because the paperwork used to foreclose is VOID. Not voidable, but VOID.
Take a look at these definitions from the Argent Securities Inc. 2003-W6 Trust:
State Principal Balance
As to any mortgage loan or manufactured housing contract, the principal balance of the mortgage loan or manufactured housing contract as of the cut-off date, after application of all scheduled principal payments due on or before the cut-off date, whether or not received, reduced by all amounts, including advances by the master servicer, allocable to principal that are distributed to securityholders on or before the date of determination, and as further reduced to the extent that any realized loss thereon has been, or had it not been covered by a form of credit support, would have been, allocated to one or more classes of securities on or before the determination date.
Advance
As to any Mortgage Loan or REO Property, any advance made by the Master Servicer or a successor Master Servicer in respect of any Distribution Date representing the aggregate of all payments of principal and interest, net of the Servicing Fee, that were due during the related Due Period on the Mortgage Loans and that were delinquent on the related Determination Date, plus certain amounts representing assumed payments not covered by any current net income on the Mortgaged Properties acquired by foreclosure or deed in lieu of foreclosure as determined pursuant to Section 4.03.
Determination Date
With respect to each Distribution Date, the 10th day of the calendar month in which such Distribution Date occurs or, if such 10th day is not a Business Day, the Business Day immediately preceding such 10th day.
