Are Securitization Audits Useful in Foreclosure Defense?

Facing foreclosure is an intimidating, fearful, and uncertain time during the lives of many of our clients. The Internet, while a great resource in some respects also can lead one into believing there are valuable resources, which may or may not be true. All too often consumers seeking to save their homes can be misled.

The process, while familiar to attorneys, may as well be written in hieroglyphics for the average homeowner. Much like consumers who are looking to lower or erase their defaulted credit card debt, there are plenty of companies advertising service for homeowners facing foreclosure: a Securitization Audit. Promoted as being a resource homeowner can use as a way to fight back against their lender, securitization audits seem like a great solution, but are they?

What is Securitization?

Securitization is the process of taking an illiquid asset, or a group of assets, such as residential or commercial mortgages, auto loans, and credit card debt and essentially selling the debt(s) to various investors. Think of it as a box of loan documents being bundled and sold to investors. The debts may be sold as bonds, pass-through securities or collateralized mortgage obligations. Why? Because your loan originator needs cash to operate it’s business and doesn’t want to hold onto the debt for thirty (30) years. So your loan originator sells bundles of debt to investors who are willing to wait for their return. For example: in reference to a mortgage, securitizations refer to the act of taking mortgages issued by banks and other various lends and converting them into securities that are sold to investors. This process allows the originator to write more loans to purchase the securities.

What is a Securitization Audit?

During the process of a securitization audit, a representative for the homeowner goes through the filings that are filed into the public records by the Security & Exchange Commission (SEC) that are filed into the public records. Basically, they follow the chain of the title and look for any actions that deviate from the required steps outlined by the Pooling & Servicing Agreement (PSA). The belief is that if any discrepancies are found, the plaintiff may not have the legal right to foreclosure on the property. The PSA is a document that explains exactly what is supposed to be done and whom it’s supposed to be done by and when.

Are Securitization Audits Helpful?

At first glance, hiring a company for a few thousand dollars to find a loophole in the processing of your mortgage that could potentially lead to the dismissal of your foreclosure seems too good to be true! And unfortunately, it is. Companies or individuals that offer to run a securitization audit for your mortgage are doing so knowing full well that the 3rd District Court of Appeals in Florida has previously ruled that homeowners do not have legal standing to challenge the securitization process of their loan as a method of dismissing or delaying a foreclosure. Whether the 3rd DCA was right in their decision has not yet been tested yet, so their decision stands and many trial courts have followed their decision. This means that regardless of what is found during the said audit, the information is not admissible in court during your foreclosure case and a judge will not consider it during his or her evaluation of a foreclosure defense claim.

Our recommendation? Save the thousands of dollars an audit would cost you and hire an experienced foreclosure defense attorney to review your case. If at some point in the future an issue arises where the audit is necessary, your attorney would be the best person to determine the course of an audit and the professional who should carry out the audit, as that person will be a witness in your case and be subjected to cross-examination.