Recently, a few commentators have raised a number of legal theories questioning whether securitization trusts, either those created by private financial institutions or those created by government-sponsored enterprises, such as Ginnie Mae, Fannie Mae or Freddie mac, have valid legal title to the seven trillion dollars of mortgage notes in those trusts. in an effort to contribute thorough and well-researched legal analysis to the discussion of these theories, the American Securitization Forum (“ASF”) issues the enclosed white paper entitled “Transfer and Assignment of residential mortgage loans in the Secondary mortgage market” (the “White paper”). The White paper provides a detailed overview of the legal principles and processes by which mortgage loans are typically held, assigned, transferred and enforced in the secondary mortgage market and in the creation of mortgage-backed securities (“MBS”). These principles and processes have centuries-old origins, and they have continued to be sound and validated since the advent of MBS over forty years ago.

While the real property laws of each of the 50 U.S. states and the district of Columbia affect the method of foreclosing on a mortgage loan in default, the legal principles and processes discussed in this White paper result, if followed, in a valid and enforceable transfer of mortgage notes and the underlying mortgages in each of these jurisdictions. To be thorough, the White paper undertakes a review of both common law and the uniform Commercial Code (the “UCC”) in each of the 50 U.S. states and the district of Columbia. One of the most critical principles is that when ownership of a mortgage note is transferred in accordance with common securitization processes, ownership of the mortgage is also automatically transferred pursuant to the common law rule that “the mortgage follows the note.” The rule that “the mortgage follows the note” dates back centuries and has been codified in the UCC. in essence, this means that the assignment of a mortgage to a trustee does not need to be recorded in real property records in order for it to be a valid and binding transfer.