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Loan Modification Myths Break: Securitized Mortgage Can Not Be Changed
First is the borrower who wants to buy a house. The borrower can go directly to a mortgage broker, who has a mortgage bank to issue the loan. Moreover, the borrower can go directly to a lender, a native of the loan. The mortgage bank, which operates in many cases the issuer securitizing the loans with other similar loans. A loan originator in particular, the entity that interacts with the future owner and provides him / her money, often can not generate sufficient volume of loans through its direct and personal. Therefore, to supplement its own production of loans, a customer purchases often ready to go, or indirectly through a network of mortgage brokers or lenders. In this way for the promoters of both the original loan through their own efforts and total loans originally generated by third
In this role of initiator appeals Seller.The loan is an entity created for that sole purpose, but has no creditors. The depositors are mostly an intermediary between the author and it will end the SSPE. At the same time, the Depositor sells the loans to another special purpose, a bankruptcy remote entity (SPE), which will eventually be used securitization vehicle.Although other types of companies are possible, the SPE is usually a trust that was created specifically to hold mortgages and loans to be securitized. The SPE is the issuer of the securitization issuer "problems" the securities will be purchased by investors
Certificates can be publicly registered to sell securities or a private transaction. Most registered certificates are rated by one or more of the participants rated as sponsors agencies.The / GuarantorsThe issuer of the securities is usually a trust is established for the sole purpose of holding title to the mortgage and the note, but has no employees. Therefore, the structure of the securitization of calls for the formation of another entity known as the sponsor. Sponsors are the responsibility of accumulating and sharing loans, hire a lawyer and investment bankers running the securitization and build trust so that certificates can be issued.Historically, the main sponsors of the GSE RMBS, FNMA and FHLMC including
They also often receive additional fees for extra services. When the repair is not sufficiently used by an experienced teacher, some or all costs of periodic maintenance of attention to the management of special sub-servicer.A usually used to treat non-performing loans or loans after securitization identified with particular defects or deficiencies. The maintenance of a loan is transferred from the Master in Management of Special Administration of the occurrence of various events identified, usually including a loan default remaining uncured for a period of time, often 30 to 60 days.The Special Administrator has particular expertise in the foreclosure recovery of overdue credit and supervision and the process of real estate sales
If the loan is transferred to the special servicer to cure the default values ??when the service time of the loan is transferred back to the Sponsor Evaluation Master AgenciesThe Servicer.The always commit to on behalf of the issuer of a credit agency rating or ratings (eg , Moody's, Fitch and Standard & Poor 'certificates of sin) to vote or position of each lot, it is proposed are sold holders.The trust the rating agencies will also provide the scores for each grade, created by securitization. Transactions that require the strengthening of the credit rating agencies also need to determine the levels of subordination of the bonds authorized to vote, wanted
Often, the PSA provides that failure, servicers are paid extra extra work. Usually require the servicer in advance any payment is returned to the pool when the remaining recovery. Although some have suggested the former provision is to encourage the seizures (for additional charges), in reality it is the latter provision is PSA problem.The generally requires servicers to maximize returns to the default values ??for pools. If changes to the maximum possible return, servicers should be changed. However, PSA can effectively prevent or eliminate the possibility of a loan modification, or, even worse, the PSA may require, that the request for a loan modification is sent to the approval of the investor shooting
This can be a death knell for the request, because the number of investors, it is impossible to get the votes, because the fragmentation of the property. Moreover, even if the PSA allows or encourages a loan modification, the PSA may be clear what the funds can be used to repay the manager for all the money that the servicer advances, or require that servicers receive shares of any change in the payment . In the latter case, it will take years before they have fully repaid the servicer, as expected, servicers will not find a qualified borrowers modifications.Second, insurance can greatly affect the ability to change, including mortgage insurance (usually required for loans over 80% of value) and credit default swaps
Unfortunately, if the agreements do not refer to changes that, by default, lenders must give up the changes and close to collect insurance or credit default swaps. Insurers stung by a massive loss of many of the loans of dubious quality, are increasingly refusing to pay claims, asserting that the loans did not meet the standards required for coverage.Finally, model FDIC / HAMP to determine eligibility for a modification is relatively simple. "Housing costs" is reduced to 31% with the main index, the duration and / or as needed. Then the net present value (NPV) of the mortgage change input value is calculated with a standardized program. If NPV favors the change, ie
if the lender will be more money to change the locks on the market, the change is supposed to granted.Some factors entered into the program must be estimated, the resale price, for example, the time to exclude / sale, the probability re-default, etc. Therefore, the provider of service or repair, can skew the results by including cost estimates knowingly false and / or values. Moreover, the change in income in the calculation can be complicated, since it does not follow the underwriting guidelines exactly. Given the high likelihood that one or more factors used may be unreasonable or deliberately distorted, the denial of the changes should trigger a careful review of input factors to determine whether the denials were really warranted.ConclusionUnfortunately for reasons as summarized above and domestic political reasons that lenders can not reveal, lenders have not adopted the concept of change
The frenzy of foreclosure is now and will continue to overwhelm and overload the justice in that the final judgments will continue to be robo-paid, despite the many examples of Robo-signed documents that are used to run foreclosure.Until U.S. government grants Bank write-downs, so that the outstanding principal balance of loans criminals are in line with current market values, there will be a slow progress, correct to resolve the mortgage crisis, and that progress is blocked or reversed in a still fragile economy, where unemployment remains at record levels. As such, we can only hope that lenders will finally begin to appreciate the long-term benefits for themselves and the nation to accelerate the resolution of this crisis of foreclosure.