Mortgage Backed Securities Attorneys

Mortgage-backed securities (MBS) are complex debt obligations that represent claims to the cash flows derived from pools of mortgage loans, typically secured by residential properties. These mortgage loans are initially purchased from various sources such as banks, mortgage companies, and other loan originators. Subsequently, these loans are aggregated into pools by either a governmental, quasi-governmental, or private sector entity. This entity then undertakes the process of securitization, issuing securities that embody claims on the principal and interest payments that borrowers make on the loans within these pools.

The securitization of mortgage loans is a sophisticated financial process that transforms individual mortgage loans into securities that can be traded on the financial markets. This process allows for the diversification of risk among a wide array of investors but also introduces complexities, particularly regarding the legalities and compliance with regulatory standards.

In such a detailed and regulated environment, the role of attorneys experienced in real estate securities becomes crucial. These legal professionals have a deep understanding of the laws and regulations that govern the issuance and trading of MBS. They provide vital legal guidance to ensure that the securitization process adheres to all applicable laws and that the interests of all parties, including originators, issuers, and investors, are legally protected.

Attorneys skilled in mortgage-backed securities are also instrumental in drafting the necessary documentation for these transactions, negotiating terms between parties, and advising on the structuring of MBS to optimize financial outcomes while minimizing legal risks. Their expertise extends to addressing any disputes or challenges that arise in the course of these complex transactions.

For entities involved in the creation or trading of mortgage-backed securities, consulting with knowledgeable attorneys is essential. These experts not only navigate the intricate regulatory landscape but also contribute to the efficient and lawful execution of MBS transactions. They ensure compliance with financial regulations, offer strategic legal advice, and protect clients from potential legal pitfalls associated with mortgage-backed securities. This legal support is invaluable for maintaining the integrity of the securitization process and for fostering trust in the financial markets where these securities are traded.

Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. Ginnie Mae, backed by the full faith and credit of the U.S. government, guarantees that investors receive timely payments. Fannie Mae and Freddie Mac also provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury. Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as “private-label” mortgage securities.

Mortgage backed securities exhibit a variety of structures. The most basic types are pass-through participation certificates, which entitle the holder to a pro-rata share of all principal and interest payments made on the pool of loan assets. More complicated MBSs, may be designed to protect investors from or expose investors to various types of risk. An important risk with regard to residential mortgages involves prepayments, typically because homeowners refinance when interest rates fall. Absent protection, such prepayments would return principal to investors precisely when their options for reinvesting those funds may be relatively unattractive.