LITIGATIONS, DAMAGES AND SOLUTIONS IN RESIDENTIAL MORTGAGE-BACKED SECURITIES

Jomadar, Dinesh (2009): LITIGATIONS, DAMAGES AND SOLUTIONS IN RESIDENTIAL MORTGAGE-BACKED SECURITIES.

Abstract

Mortgage-backed securities (MBS) are debt obligations whose cash flows are backed by the principal and interest payments of pools of mortgage loans, most commonly on residential property (Riddiough, 2001). Lenders establish underwriting guidelines, evaluate prospective homeowners’ credit, and make loans. Having done so, lenders generally hold only a fraction of the loans they make in their own portfolios. Most are sold to the secondary market, where they are pooled and become the underlying assets for residential mortgage-backed securities. Individuals with strong credit qualify for traditional mortgages, whereas those with weak credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies qualify for subprime loans (Hayre, 2001). Securitization is the financial technology that integrates the market for residential mortgages with the capital markets. Investment banks take pools of home loans, carve up the cash flows from those receivables, and convert the cash flows into bonds that are secured by the mortgages. The bonds are variously known as residential mortgage-backed securities (R-MBS) or asset-backed securities (ABS).

• Item Type: MPRA Paper
• Language: English
• Keywords: Mortgage-backed securities, residential property, mortgage loans, residential mortgage-backed securities, subprime loans, asset-backed securities, Securitization.
• Subjects: F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation: Models and Applications; G - Financial Economics > G3 - Corporate Finance and Governance; D - Microeconomics > D1 - Household Behavior and Family Economics; D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; G - Financial Economics > G2 - Financial Institutions and Services; F - International Economics > F3 - International Finance; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

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The US Securities Act of 1933 § 11. 77k (a), available at http://www.sec.gov/about/laws/sa33.pdf. See e.g. (“In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue – … (5) every underwriter with respect to such security.”).

The Exchange Act of 1934

Structured Credit Investor, Feb 2, 2007, available at http://www.structuredcreditinvestor.com/story.asp?PubID=250&ISS=22088&SID=15658

www.nva-mortgage.com – home page for Carteret mortgage. Excellent discussions of underwriting criteria for nonconforming and investor loan programs.

www.hud.gov – government Web site for HUD, with dozens of articles about FHA investor loans.

www.fanniemae.com – Federal National Mortgage Association’s official Website.

www.Hsh.com – publishers of mortgage information for consumers.

www.realtytimes.com – industry news about real estate and mortgages.

www.realestateabc.com – CNBC Power Lunch “cool site of the day.” Excellent articles about the real estate and mortgage industry and different types of loan programs.