MSC - Mortgage Securitisation Claims - Launch
Mortgage Securitisation: Whose Loan is It Anyway?
The UK’s millions of borrowers may feel they understand how their mortgages work but they could be in for a big surprise.
Most lenders in the UK offer loans so that people can buy residential property, whether this is for their own use or as buy to let landlords.
The mortgage acts as an additional security measure for the advance the borrower receives. Like most people, the borrower probably thinks the security is the property itself.
However, as Bruce Lamb, spokesperson for Mortgage Securitisation Claims (MSC) explains, this is not the case.
“The property is the underlying security, but the main security is the borrower’s pledge to pay the loan back over a defined length of time.”
This pledge is, essentially a promissory note. Is a negotiable security and it becomes an asset on the lender’s balance sheet, before any money is released.
The value of this asset is based on the amount the lender loans to the borrower plus the total amount of interest payable over the term of the mortgage. In other words, as an asset, it is worth a lot more than the amount borrowed, giving the lender a level of capital protection.
“Here’s the crux of the matter. The mortgage lender can do what they want with this asset. They can transfer, assign or sell it. They can do this without the borrower’s knowledge or consent, remember this is not the mortgaged property, it is the negotiable security to which the mortgage is attached”
This is what is known as mortgage securitisation, and it has been a common practice among many banks and building societies to allow them to lend more and more money.
Full article and additional details will be published through M3 medias Property Aspects Digital Magazine later this month.