If you're wondering whether your mortgage has been "securitized," you're not alone. Since the collapse of the housing market in the late 2000s, millions of American homeowners have been asking themselves this question. Unfortunately, many are simply unable to find a satisfactory answer.
There are several good reasons to wonder whether your mortgage has been securitized. For starters, securitized mortgages were a significant cause of the housing crisis as well as the subsequent recession. In addition, the "securitization" status of your home may affect your options for securing a second mortgage, refinanced loan or other credit relief options.
During the height of the housing boom, mortgage companies chose to insulate themselves from risk by selling their mortgages to government-backed home-lending firms like Fannie Mae and Freddie Mac. This ensured that the lenders would turn a small profit on each mortgage that they issued. In turn, Fannie Mae and Freddie Mac "securitized" these mortgages by bundling them into larger "mortgage-backed securities" and selling them to global investment firms like Lehman Brothers, Bear Stearns, Bank of America and others. Each mortgage-backed security consisted of thousands of individual mortgages.
Although this process continues today, it has changed in several key respects. First, Fannie Mae and Freddie Mac no longer exist in recognizable form. This is because these firms sustained massive losses during the financial crisis and were forced to liquidate by the Treasury Department. In addition, mortgage-backed securities are far smaller than they used to be. Unlike their pre-crisis counterparts, these new investment vehicles are comprised of top-tier "prime" mortgages that come with relatively little chance of default.
In order to determine for sure whether your home has been bundled into a mortgage-backed security and sold to global investors, you'll need to call your mortgage company. In the aftermath of the financial crisis, most lenders have been forthright with their customers. In fact, your lender is legally compelled to provide you with certain information about its products. Since its decision to sell your mortgage to financial firms can affect your rights as a homeowner, it's important that you hold your lender to this obligation.
If you don't want to speak with your mortgage company or are unable to do so in the wake of a bankruptcy filing, you can apply a simple "means test" to determine whether your mortgage can be securitized. If your home loan's initial value is greater than $417,000, it will never be eligible for securitization.