Underwater Properties
By Jim Macklin
Secure Document Research
Underwater Properties
Tag: loan
Securitization: What is it?
The idea behind securitization is that a lender can make a loan and immediately sell the loan so that their capital is not tied up for 30 years. In reality it doesn’t quite work this way.
The idea behind securitization is that a lender can make a loan and immediately sell the loan so that their capital is not tied up for 30 years. In reality it doesn’t quite work this way.
In the classic securitization example, a company that originates loans sets up an agreement with a warehouse lender (GMAC, Morgan Stanley, Bank of America, Wells Fargo, etc). The agreement typically provides that the warehouse lender will provide the capital for the loan to the originator and the originator will provide the loan to the warehouse lender for securitization.
Yesteryear
It used to be that when a homeowner took out a mortgage, the bank held the paper.
It used to be that when a homeowner took out a mortgage, the bank held the paper.
If you had questions or needed help you simply contacted the bank.
The bank held the note and mortgage on-site and could produce this paper if they needed to payoff, foreclose or sell the loan.
When the loan was sold the note was endorsed and the mortgage assigned.
The new owner of the loan actually took possession of the note, mortgage and the assignment.
The assignment was property recorded in the county and the appropriate taxes and fees were paid for the transfer.
No other party was present and the homeowner was not confused as to who owned the loan.
Those were much simpler times.