RESECURITIZATION: ADDING MORE LAYERS FOR THE FORENSIC ANALYST, EXPERT, LAWYER AND LITIGANT

NEWS REPORTS HAVE BEEN SPORADICALLY REFERRING TO THE OLD DERIVATIVES BEING RE-PACKAGED AND SOLD AGAIN. This is called resecuritization. It takes the old pools, or what’s left of them, puts them together with other old pools, and creates a brand new Special Purpose vehicle that issues brand spanking new mortgage backed bonds.

The backing in this case is the old mortgage backed bond which in turn is evidence of the ownership or “beneficial ownership” of the underlying loans.

This produces the desired effect of making more money while at the same time leading litigators down blind alleys and the equally desirable effect of showing the Judge that you were full of crap. Of course if you do the proper discovery and explain with expert witness declarations or even testimony what is going on, then the Judge will either give you the go-ahead to pursue your line of inquiry or not, leading to an interesting appeal. Witness the following:

Fitch Rates J.P. Morgan Resecuritization Trust 2009-12

Business Wire, Nov 30, 2009

NEW YORK — Fitch Ratings has rated the J.P. Morgan Resecuritization Trust 2009-12. This transaction consists of nine non-crossed groups. Each group is a resecuritization of a residential mortgage backed securities certificate. Fitch is not rating Group 3, 6, and 9 certificates.

–Group 1 is a resecuritization of 55.26% interest in CHL 2007-9, Class A-6;

–Group 2 is a resecuritization of 6.97% interest in WFMBS 2006-AR12, Class II-A-1;

–Group 4 is a resecuritization of 11.08% interest in CHL 2005-29, Class A-1;

–Group 5 is a resecuritization of 12.55% interest in FHASI 2007-2, Class I-A-4;

–Group 7 is a resecuritization of 30.33% interest in WFMBS 2007-11, Class A-85;

–Group 8 is a resecuritization of 4.92% interest in WFMBS 2007-11, Class A-96.

As resecuritizations, the certificates will receive their cash flows from the underlying classes of certificates. The underlying certificates represent beneficial ownership interest in fixed-rate and adjustable-rate, conventional, first lien residential mortgage loans, substantially all of which have original terms to stated maturity of 30 years.

This transaction contains certain classes designated as Base Certificates and others as Exchangeable Certificates. Group 1 A-1 certificate is a Base Certificate and can be exchanged for certain combinations of A-3 through A-16. The A-1, A-2, A-3, A-4 and A-6 certificates in group 2, 7 and 8 are Base Certificates and can be exchanged for certain combinations of A-3 through A-19. The class A-3, A-4 and A-6 certificates in group 4 are Base Certificates and can be exchanged for class A-1. The class A-1 certificate in group 5 is a Base Certificate and can be exchanged for certain combinations of A-3 through A-8. Classes C-A-1 through C-A-8 can be exchanged for certain combinations of certificates from group 7 and group 8.

ResiLogic, the regression-based model used by Fitch, takes into account multiple risk factors which can broadly be placed into three categories in the following order of influence: seasoned loan risks, economic risks, and collateral risks. For seasoned loan risks, the delinquency status and volatility are the most important with regards to Frequency of Foreclosure (FOF), while change in home price index and loan age are the most important with regards to Loss Severity (LS). Economic risk is solely comprised of state and MSA level risk multipliers as well as a national multiplier. In the category of collateral risk, the credit score, credit sector, and combined loan-to-value (CLTV) ratio are the most heavily-weighted risk factors in calculating the FOF. Closing balance, loan-to-value (LTV) ratio and loan coupon are the most heavily-weighted risk factors in calculating Loss Severity. Due to concerns over recent pool performance and volatility, loss levels were adjusted higher than the ResiLogic model results for Group 5.

2 Responses

  1. Anyone else have SerVertis REO Pass-Through Trust I?

    This is how my friend’s loan got there. Originator, New Century, then the creditor that is the owner of hte mortgage loan changed from DB Structured Products Inc., to Green Tree SerVertis Acquistion, LLC and then immediately changed to U.S. Bank, N.A. as solely the trustee for SerVertis REO Pass-Through Trust I.

    It is believed, as far as I can tell, that this SerVertis is a very new securities trust and it may have Cayman involvement.

    Also, if anyone has come across any SEC documents on SerVertis REO…. please let me know.

    I think this new securities trust is one of these re-securitizations.

  2. the sec,ftc,fdic & the other rocket scientists of wall st are breeding a new
    strain of bottom feeders. this turns into the same results as mad cow disease
    thus producing a prion – an abomination of nature.
    cattle, who are normally herbivores, being fed the remains of other cattle in the form of meat and bone meal [ slaughter house garbage becomes feed], oh btw… you cannot kill a prion [smallest living organism] without killing the host. Brilliant !

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