Friday, May 2, 2008

Who is Who in Mortgage Securitization

Seller - usually the first entity that sells a portfolio of mortgage loans to the Depositor. Often the Seller originated the mortgage loans or buys them from other originators.

Depositor - a "special purpose entity" established to buy portfolios of mortgage and sells them into trusts. It sells the bonds or certificates (securities) issues to investment bank underwriters. The special purpose entity is a "bankruptcy-remote" entity.

Underwriter - when the trust purchases a mortgage loan pool from the Depositor, it issues bonds or certificates representing ownership interests in the trust to the Depositor. The Depositor sells these securities to the investment bank Underwriters who then sell them to investors.

Trust - holds the mortgage loan portfolio. Its issues the bonds or certificates that are sold by the investment bank Underwriters to investors.

Trustee - the person appointed to administer the trust. It holds the loans in his capacity as trustee on behalf of the trust.

Master Servicer - oversees the mortgage sub-servicers and accounts for the remittance payments to the Trustee or directly to the investors. Often the Originator will retain the servicing rights after securitization.

Servicer - a sub-servicer appointed by the Master Servicer. Popular servicers include Litton Loan Servicing, Select Portfolio Servicing, and America's Servicing Company.

Certificate or Bond Insurer - issue credit enhancement, such as a surety bond, for the pools of mortgages to enhance their credit rating. This lowers the cost of securitization and the return demanded by the investors in the bonds or certificates sold to the investors.

Rating Agencies - agencies such as Standard and Poor's, Moody's, or Fitch that assess the leval of risk posed by various tranches of bond or certificates sold to investors.
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