Blog: Home Loans Securitization

Most home loans in California in the last 12 years have been “securitized”. Securitization is the process where many loans are bundled together and transferred to a passive trust. The trust holds the loans and issues bonds to investors that are repaid from monies generated by mortgage payments. Most of these trusts operate under New York law. New York law states that any conveyance in contravention of the terms of the trust are void.There is a contract between the loan servicer, the trust, and investors that governs the operation of the trust, called a pooling and servicing agreement.

Most pooling and service agreements state that all mortgage files transferred to the trust must be done prior to the closing date of the trust. The closing date cant be violated without the trust and the investors losing tax advantages and protection from bankruptcy creditors.

The Glaski v. Bank of America case allows the homeowner to contest the right of the lender and the trust to foreclose based on the fact that the deed of trust is not trust property since it was never timely transferred to the trust.

Since the deed of trust is the only instrument providing the lender power to foreclose, the homeowner can get a court ruling stopping the bank from forever foreclosing, or at least until the lenders can find a way around the huge tax problems and potential reach of creditiors into trust assets if they attempt to open the trust to deposit these deeds of trusts.

This is only one of several issues of standing the homeowner can currently raise to get a free home or at least the leverage for a great loan modification.

Stephen R. Golden

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