Super Complex Chart Of How A Mortgage Gets Securitized

Gee, how could people who haven’t graduated high school mess this up? This is a chart showing how a mortgage gets securitized made by a guy whose job is to audit securitizations by reverse-engineering them. This is one he did for the mortgage on his own house. My favorite part of the diagram is where the documents go into a black hole. Literally, that’s an actual part of this flowchart.

Go here for the large version. [via Zero Hedge] (Thanks to Gary!)

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  1. misterfweem says:

    Damn hadron collider . . .

  2. MustWarnOthers says:

    Holy shit. The magical workings of creating mountains of wealth from molehills of tangible assets.

  3. Mike says:

    You could change the title to:

    “Super Complex Chart Showing How Bankers Take Subprime Loans, Make a Mess Out of Them Spreading the Risk Everywhere, Then Convince the Public to Blame it All on People Who Can’t Afford the Loan They Were Given”

    • cloudedknife says:

      so you’re saying it’s less the fault of people willingly taking on more debt than they can afford and doing so by allowing (usually knowingly) bank officials to misrepresent their income and really mostly just the fault of the banks?

      hmmm, okay then.

    • u1itn0w2day says:

      On one hand it is the bankers/mortgagers fault along with these fund and trust managers that created the market for these mortgages. If the original mortgage couldn’t have been passed down the line like popcorn at a movie then alot of them wouldn’t even have been offered.

      On the other hand you still had those who quite simply were in way over there head from the begining just shopping for a house that was out of their league. Wether it was the assumption that they would never loose a job, get promoted/want to move or they ignored the mortgage should be no more than around 3 years salary in many cases it’s still the buyers fault.

      The chart is nothing but another way of showing how the game is played by all parties

  4. obits3 says:

    “What would you be if you were attached to another object by an incline plane, wrapped helicly around an axis?”

  5. macoan says:

    I was just reading/looking at the chart on Yahoo – and thought how I liked the “Black Hole” also.

    … of course it’s a pretty small black hole, so the chart is not sized to scale.

    • obits3 says:

      I think that is because it is more about density than size. Specifically the density of those who trust in judges that don’t know what their doing. Maybe the people at CERN should weigh in on this one.

  6. Slave For Turtles says:

    I know this makes me look pretty stupid, but I still can’t tell who “owns” the house. I wonder what my own mortgage morass looks like.

    • obits3 says:

      Technically, you own the house, but that house is collateral on a loan that we call a mortgage.

      • dangerp says:

        To continue (or clarify) the question, who owns the mortgage?

        • Buckus says:

          Black hole. It’s right there on the flow chart. Surprised you didn’t catch that. It’s pretty obvious.

          /sarcasm, in case you couldn’t tell.

        • baconsnake says:

          The trust called “RASC 2005-EMX4″ is the legal owner of the note. US Bank is the trustee for that trust.

          This shows one of the things that no one really understands. Your servicer (Bank of America, Wells Fargo, SunTrust, etc) is almost NEVER the owner of your loan. It’s either in a trust, or a GSE (Fannie, Freddie, Ginnie) owns it.

  7. ZIMMER! says:

    And we wonder how fraud and ID theft happens. Think of all the hands all your information passes through. That is why I prefer cash for everything.

  8. baconsnake says:

    So, I’m in the securitization business – this chart is incorrect on just the payment stream, which is the easiest portion of the flow. The Custodian (Wells Fargo in this chart) has no interaction with the monthly payment streams at all. The Custodian is the holder of the collateral (mortgage notes and ancillary papers).

    The funds go from Servicer (ASC in his chart) to the Master Servicer (Residential Funding Corp) to the Trustee (NDEx West, LLC in his chart, which is suspect because I’m fairly certain it’s still USBank), to DTC (Depository Trust and Clearing, not the author’s company, DTC-Systems) and then finally to the certificate holders.

    I don’t have access to any of the information that could proof the rest, but this seems fairly straighforward on the payment side.

  9. spamtasticus says:

    That is hilarious and very common. I have designed and help develop 2 different loan origination solutions for some very large mortgage banks. The existing process flows for their origination procedures where about 100 times more complex than this one and did in fact contain a few logical dead ends. Basically, the loans would get to a point where nobody was triggered to do any work to them and they would just wallow there until the customer called in and forced them to hand hold it “back into the stream”.

  10. Bsamm09 says:

    ZERO HEDGE!!!!!! Love this site. Tyler Durden is the man!!!!!

  11. ZIMMER! says:

    Have any of you see this article on the “rocket docket,” “About the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase.”

    Link http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=0

  12. u1itn0w2day says:

    After increasing to 200% it looks like the payment stream and assignmnet of note should be enough but apparently not.

    The problem with the trusts is that even though they have to file with the SEC they still lack details in most SEC filings. You’d be surprised who uses trusts.

  13. sjb says:

    A interesting reason for a house being foreclosed on -

    http://www.wesh.com/r/25840018/detail.html

  14. moore850 says:

    This is what happens when you have no oversight as to how a process should go.

  15. Ratran says:

    “Gee, how could people who haven’t graduated high school mess this up?”

    Even Elizabeth Warren would have a hard time with this clusterf*ck.