Understanding the Current Securitization Process and it’s Problems for Creditors

(PRWEB) March 28, 2012

In an era where a very large portion of mortgage obligations have been securitized, foreclosure becomes an intriguing process for close examination by securitization reporters, legal counsel and related parties. In February of 2012, Lance Denha, principal attorney of the Law Offices of Lance Denha, noted that before the subprime boom, little mortgage securitization was utilized, leaving it instead to Fannie Mae and Freddy Mac. Today, the ongoing foreclosure epidemic in the U.S. continues to be a key factor in the global economic crisis and the securitization of millions of delinquent mortgages is at the forefront of the problem, says Mr. Denha.

Securitization is a complex series of financial transactions designed to maximize cash flow and reduce risk for debt originators. This is typically achieved when assets, receivables or financial instruments are acquired, classified into pools, and offered as collateral for third party investment. A typical Securitization process goes as follows: A borrower goes to a mortgage lender. The lender then finances the purchase of real estate. The borrower signs the note and mortgage or deed of trust. The original lender sells the note with hundreds or thousands of similar obligations to create a package of mortgage backed securities, which are then sold to investors as bonds. The mortgage payments are those received by an agent called a servicing company.

When a borrower defaults, the party seeking to enforce the obligation and foreclosure on the underlying collateral sometimes cannot find the note. It has been said by sophisticated attorneys in the industry that more than a third of the notes securitized have been lost or destroyed. In a decision by the Fifth District Court of Appeals on September 30, 2011 in the case of Gee v. U.S. National Association, as trustee, the court reversed a summary judgment which established that the traditional argument made by banks that the borrower defaulted so who cares if we have the right documents will no longer prevail in foreclosure actions.

This is especially the case when the judicial process is involved rather than the non judicial process reason being many defenses can be made by the defendant in a foreclosure defense case in court because at times it can be very difficult to determine the name of the holder of the note, the assignee of the mortgage, and the parties with both the legal right and standing under the Constitution to enforce notes, whether in state or federal court. Mr. Lance Denha states These cases can be highly defensible if not winnable. In Non Judicial Foreclosures whereby foreclosures are processed without court intervention, these types of foreclosures simply require certain types of notifications be sent to the homeowner and publication according to state statutory law. Homeowners should note that they have the ability and opportunity to convert these types of non judicial foreclosures into the judicial courts via filing wrongful foreclosure actions, temporary restraining orders, quiet title actions, etc. should they discover wrongdoing associated with their mortgage.

As reported by The Associated Press, foreclosure activity has surged across half of the United States. The pace is increasing after all 50 states reached a $ 25 billion settlement last month over foreclosure abuses. Many foreclosures had previously been stuck in limbo as the government investigation into foreclosure paperwork problems dragged on. The legal securitization and documentation of many of the nations five biggest mortgage lenders came into question, and is still a major point of scrutiny and legal defense.

It is highly advisable to seek legal expertise to determine the best course of action moving forward in order to gain an understanding of the particular direction best suited for the client. Lance Denha has professionally challenged foreclosures, negotiated any deficiency and sought out alternatives to foreclosure or other bankruptcy options. The Law Offices of Lance Denha has the prerequisite legal knowledge and expertise readily available to assist homeowners to stay in their homes. For further information or assistance, please call at 954-840-0770.