Securitisation - what does it mean

[Bronte]

"Please note that your loan has not been securitised however it should be noted that under the terms of the mortgage agreement, the loan may be securitised at any time."

This is posted for someone else. They have been sent the above in a letter seeking repayment of mortgage agrears. What does the quoted sentence above mean?

Does it mean the original bank, who gave the mortgage, and is now seeking payment has sold on the mortgages to another bank/investment company/bond.


If it's been sold on, does this mean the original mortgage company cannot pursue this debt.

 

[David_Dublin]

"Please note that your loan has not been securitised however it should be noted that under the terms of the mortgage agreement, the loan may be securitised at any time."

This is posted for someone else. They have been sent the above in a letter seeking repayment of mortgage agrears. What does the quoted sentence above mean?

Does it mean the original bank, who gave the mortgage, and is now seeking payment has sold on the mortgages to another bank/investment company/bond.


If it's been sold on, does this mean the original mortgage company cannot pursue this debt.

My understanding is that after securitisation, the loan can still be "operated" by the original institution, or can be operated by the institution that has securitised that loan, or any other third part in fact. It effectively means that the "new" institution has sort of bought some or all of the loan book of the "old" institution. So only one institution will have the responsibility to pursue the debt, be it for themselves, or on behalf of the institution that has securitised the loan.

 

[Jim2007]

"Please note that your loan has not been securitised however it should be noted that under the terms of the mortgage agreement, the loan may be securitised at any time."

Well first of all the mortgage has not been securitised and given the state of the financial markets it doubt it will happen any time soon. And secondly, it really has nothing to do with debt collection as we know it.

A full explanation of the term can found here, any of the first three items on the search list give a good definition.

 

[MrEarl]

Hi

This is commical .... in the context of what has been included in an arrears letter.

One could consider the comment, contained within an arrears letter, to mean: please bring your arrears up to date quickly, as we need to sell on your loan as part of a bundle to raise funds ... and we can raise more money if we sell your loan on to another party, when it's not in arrears

Securitisation, is effectively the bundling of homeloans (or other forms of debt, as the case may be) and selling them on in one transaction, to another party. Historically, it was used as a form of fund raising, for the mainstream lenders, to allow them to raise capital and then lend additional funds. However, in today's market, it could equally be used to help Banks raise much needed capital, to meet current and future regulatory requirements. As for who continues to manage your account, it tends to remain with the original lender although in theory, it could move depending on the terms of the agreement between your original lender and the purchaser of the bundle of loans.

Whether or not your loan has been sold on, by way of Securitisation, does not matter to you - remain contractually bound by the terms, as is the counterpart (even if this becomes a new entity).

Do all you can to pay your arrears & if your in financial difficulty, do go and speak with your Lender and provide all information they require, as regularly as requested or if you have a change in circumstances.

Regards

Mr. Earl.