Mortgage loans frequently play a prominent role in financing various types of real property, from tiny homes to multi-unit apartment buildings.
Banks and other traditional lending institutions are now actively providing loans to investors who want to purchase real estate. This is done by buying a property with a partner. The legal title of the property being held by one person and the equitable title being held by another. A loan is taken out to buy real estate, whether from an institutional lender or a private investor, and is referred to as a mortgage loan.
However, because of the highly regulated nature of the financial services industry, mortgage loans fall into the category of regulated and heavily scrutinized investments. Similarly, because they are considered assignable assets, the Securities and Exchange Commission (SEC) regulates the secondary sale of these loans.
The secondary sale of mortgage interests came to national prominence during the Great Recession that began in 2006 and lasted through 2009. It was revealed that several central banks in the United States had been improperly transferring mortgage interests to their investors, violating several auditing, disclosure, and securities regulations. These banks often moved mortgage obligations to their investors without knowing them. Frequently, these mortgages were transferred multiple times without even a paper trail (a practice later dubbed "Robo-signing").
The revelation of these multiple transfers, coupled with the improper disclosure and failure to register specific securities, led to the downfall of several banks, private individuals, and law firms around that time.
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