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Mortgage Flow.3
Mortgage Flow.3
Step 1: Originator makes loan to homebuyer, gets Note and Mortgage; In NJ, the Mortgage is lien on the property and represents collateral and claim to title; originator may be financed by warehouse liquidity bank or LOC home buyer
Note and Mortgage
Loan $
originator
Pre-1990s, the originator would have been a local bank who kept the mortgage in house for the life of the loan.
The Note and Mortgage would have been duly filed with county clerk or registrar as evidence of a lien on the property
In NJ, the Deed might remain with the homebuyer
home buyer
Note and Mortgage
Loan $ Note and Mortgage Note and Mortgage Note and Mortgage
originator
Sale $ warehouse liquidity bank
sponsor
Sale $
depositor
Sale $
MBS trust
Step 2: MBS pool Sponsor buys loans from Originators and re-sells loan package to Depositor, who places loans in issuing Trust; Note and Mortgage assigned at each step. Qualifying loans typically had to be placed in the Trust within a 90 day window.
home buyer
Note and Mortgage rating agency; bond insurer; credit default swap Note and Mortgage Note and Mortgage
originator
Sale $ warehouse liquidity bank
sponsor
Sale $
depositor
Sale $
MBS trust
Bond
Investment $
investor
home buyer
Note and Mortgage rating agency; bond insurer; credit default swap
Loan $
originator
sponsor
depositor
MBS trust
Bond
Investment $
investor 1. 2. 3. 4. 5. 6. Mortgage separated from Note; never assigned so no chain of title to MBS trust Assignments recorded with MERS, if at all, and not with County Clerk or Registrar Sponsor and Depositor were dummy entities with no assets, so no true sale occurred Loans upstreamed to MBS Trust directly from originator in some cases MBS Trust has no legal interest in the property Warehouse bank may be true lender
Mortgage P&I
Mortgage P&I
home buyer
Title?
loan servicer
Title?
The loan originator, and the pool sponsor and depositor are long gone. The MBS Trust hires a loan servicer to process homebuyer payments and manage the loans via a Pooling and Servicing Agreement. The servicer has no ownership interest in the property and cannot foreclose.
MBS trust
Bond P&I
investor