The Basics of Securitization

The basic definition of securitization is to pool certain form of assets so that they can be clubbed together into interest-bearing securities. This decade old concept is given a bad name since the devastating mortgage crisis of 2007 began. In securitization the payment of principle and interest of the assets are passed on to the buyer of the securities.

The process of securitization dates back to 1970’s when government backed agencies pooled the home mortgages. Beginning from 1980s, the market has grown leaps and bounds in the recent years as other income producing assets were also securitized. In certain markets, for example in case of risky subprime mortgages backed securities, the investors lose confidence as the quality of the assets deteriorated.

Poor origination of credit, inefficient methods of evaluation, and loop holes in regulatory oversight has caused considerable harm to financial stability; this is evident both through the persistence in audit crisis and the scale of it.

More and more financial institutions are switching to securitization and pass on the credit risk of the assets which is shown from their balance sheet to that of various other financial institutions such as insurance companies, banks, and hedge funds. This is done to achieve various purposes. It has been found that it is economical to accumulate funds through securitization.

For banks it is less costly to hold on to these securitized assets as financial regulators have set up different parameters for them in comparison to assets that underpinned them. This principle of “originate and distribute” has come up with several economic benefits too. It diffuses the concentration of the risk by spreading the credit exposure and systemic vulnerability is reduced.

Until the crisis of subprime was disclosed it is mostly considered that securitization only has positive and fruitful effect. But securitization has also been used by some as a means to have minimum parameters of prudent lending, management of risk and investment at a time of small returns.


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New Twists in Forensic Mortgage Audits

Professionals dealing with fraudulent foreclosure activities work on fifty percent truth or outright lie and promote their service with the promise to bring relief to people who are on the verge of facing foreclosure. As per The national consumer protection agency, “The Federal Trade Commission”, the latest in the line is homeowners who are financially strapped and use the method of forensic mortgage audit to save themselves from foreclosure.

These homeowners pay an upfront fee to the forensic auditors also known as foreclosure prevention auditors, who, along with forensic attorney go through the documents of your mortgage loan to find out whether your lender has complied with laws given out by the state and the federal government or other lending laws.

The report given to you by the auditor after scrutinizing your documents can be used to speed up the modification process of the loan, avoid foreclosure, reduce the principal on the loan, or can even get the loan canceled. There is nothing beyond the truth. As per FTC and its partners in law enforcement:

–        One cannot be hundred percent certain that there will be modification of loan or any other type of foreclosure relief as their documents goes in the hands of forensic mortgage auditor, even though they may be experienced, licensed and legitimate lawyer or professionals.

–        There is provision in federal law which gives the homeowner the liberty to sue his or her lender in case there is any error in the documents of the loan. But the lender is not bound to make the payments for loan more affordable, even if the person wins the case in the court.

–        In case the homeowner terminates the loan, then he or she is required to return the money that is borrowed, and the end result will be that the person will lose a place to live.


If the homeowner is at default in the mortgage or is facing foreclosure, than it is quite likely that the person targeted by foreclosure rescue scam. It is worth to be aware of the telltale signs and be able to recognize them and report it in time.


Get more info about Forensic Mortgage Audits at Securitization Audit Reports