Markets Served

The recent financial crisis shed light on the details of investment devices which, until the crisis, were little understood by the public and sometimes even less understood by investors. One of these was mortgage—backed securities, also known as MBS (or RMBS, for residential mortgage backed securities). Previously a term little used outside of Wall Street, the term is now synonymous with risky investments.

But it was not always that way. Before the crisis, MBS were considered a solid investment due to the fact that they were backed by some of the best collateral available: American real estate. According to the prevailing thinking, even if a record financial crisis resulted in waves of mortgage defaults, the mortgages could be foreclosed upon and losses avoided. After all, the price of real estate was continuing to rise every year.

Unfortunately, the prevailing thinking on MBS did not take into account widespread problems with the process for transferring ownership of mortgages that occurred in the securitization process (which is explained below) and the resulting problems in establishing chain of title to mortgage accounts. In the end, these problems have resulted in a new crisis over who (if anyone) has the right to foreclose on the underlying mortgages (resulting in halting and dismissal of foreclosure cases), who owns the mortgages (resulting in securities litigation between issuers and investors in MBS, as well as tax and trust law issues), and who can prove that the mortgages are in default (resulting in legislation).

The Solution—Account Chain of Title Verification

A solution exists in the account level chain of title verification services of Global Debt Registry ("GDR"). From registration to sale, this process creates a portfolio wide and account—specific centralized chain of title that can be used by mortgagees to legally establish ownership and validity of account level data in a foreclosure suit. Each step, and each report generated as an output of the process, is electronically stored on GDR's secure computer systems and is managed and generated in a manner calculated to meet the federal rules of evidence business hearsay rule for electronic business records.

Why Securitize Mortgages Without Ensuring Transfer?

Businesses and individuals would not dream of buying real property, automobiles, or anything else of value without first having its ownership status verified by a third party. If one would not buy a car or house without title confirmation, why would one spend billions creating trillions in mortgage backed securities without the same protection? Increasingly, a higher level of integrity and verification is being required by courts, legislatures, regulators, and others. In addition to satisfying these legal requirements, validation of chain of title has many proven benefits for all of the participants. Higher standards, increased transparency and integrity in the recovery on foreclosed mortgages can only benefit the industry.

Mortgage Resources

• Global Debt Registry A Proven Solution for MBS Market in Documenting the Transfer of Securitized Mortgage Debt
• Financial Crisis Inquiry Commission Securitization and the Mortgage Crisis
• Congressional Oversight Panel Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation
• Reuters Mortgage Mess Redux: Robo-Signers Return
• Freddie Mac The Outlook for the U.S. Housing & Mortgage Markets
• BNY Mellon Rebuilding the Mortgage Market—Loan By Loan
• A Report to Congress Reforming America's Housing Finance Market
• Center for American Progress A Responsible Market for Housing Finance
• American Bankruptcy Institute Understanding the Securitization Process and the Impact on Consumer Bankruptcy Cases
• PwC Using Transparency and Accountability to Thaw the Securitisation Markets
• PwC Using Transparency to Thaw the Securitization Market