The Building Blocks of Securitization

In the practice of foreclosure defense, one of the issues I frequently run into is securitization of mortgages.  We’ve talked about securitization on this site numerous times.  There is also plenty of internet chatter about securitization–some of it legit, some of it little more than crazy talk out of people with way too much time on their hands.

I’ve explained the concept of securitization to many, many people–clients, other attorneys, and judges.  After a thorough discussion, most have a basic understanding of the principles behind it.  But I’ve often wondered what people would think if they saw it in action.

Well, here is your chance.  You want to take on the bank?  Good for you.  Here’s a prospectus for an asset-backed trust (this one happens to be a Bear Stearns trust).  The prospectus describes the trust, and is essentially the sales “brochure” to potential investors.  Want to know how that trust was formed and operated?  Here you go–the Pooling and Servicing Agreement.  The Pooling and Servicing Agreement is basically the the operating manual for the trust.  The posted links take you directly to the documents posted on SEC’s EDGAR website (which lets you search the filings for all publicly traded companies from the comfort of your computer).

You still want to take on the bank?  Then you’d better understand every word of those documents (or similar ones) so you know exactly how the trust was supposed to have handled your mortgage.  After all, you can’t know whether they did something wrong if you don’t know what they needed to do to be in the right.  And then you’d better be able to explain it in terms that are understandable to your mother or grandmother, who has no understanding of Wall Street structured finance.  Why?  Because ultimately, that’s who’s going to be on a jury (if you make it that far) deciding your fate.

If this post seems a little snarky, I promise that’s not the intent.  But I firmly believe that homeowners need to know what they’re up against, particularly if they have any inclination of doing it alone.  It’s simply not enough to read Neil Garfield’s Living Lies blog,, or  Those are great websites, don’t get me wrong, but there’s a big difference between reading commentary and analyzing the building blocks of securitization on your own.  You need to be able to find, read, analyze, and comprehend the primary sources concerning your mortgage–the trusts’ prospectuses and pooling and servicing agreement.

Taking on the big banks in defense of a foreclosure is serious business, and homeowners should be prepared for the fight.  Generalization about some case three states over isn’t going to convince any judge.  You need solid evidence about YOUR mortgage, and that includes an analysis of the asset-backed trust that may, allegedly, hold your note.  Just like the old saying, don’t go into a gun battle with a knife.


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