1. Fannie Mae – Fannie Mae, acting in its corporate capacity, who purchases the loans from the master servicers/sellers, is now the lender that securitizes the pool of mortgage loans. This is known as an arms length transaction. This means that it was the final aggregator of the mortgage loan pool and then sold the loans directly to the trust, which in turn sold them as Mortgage Backed Securities (MBS). In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, Fannie Mae, acting in its corporate capacity normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

2. The Originator- The “Originator” sells loans (one-by-one or in bundles) to the (Sponsor or the Master Servicer in the case of a Fannie Mae Trust) who sells the loans to the Securitizer who is Fannie Mae, acting in its corporate capacity. This function is pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly named document. The purpose of the MLPSA is to sell all right , title, claims, legal, equitable and any and all other interest in the loans to the Securitizer¬. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Which requires a Fannie Mae- form 4249 prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.

3. Master Servicer- The “Master Servicer” in a Fannie Mae Trust takes the place of sponsor with functions similar of a private-label trust and is the trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. The master servicer now switches hats from performing the functions of a sponsor and maintains is role as the Master Servicer for trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the originator but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, and based on the average balance of all loans in the Trust.
4. Fannie Mae, acting in its corporate capacity takes the place of depositor with functions similar of many private-label trust for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. Fannie Mae, acting in its corporate capacity purchases the loans from the master servicer, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the master servicer for Fannie Mae, acting in its corporate capacity’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that Fannie Mae, acting in its corporate capacity owns the loans is limited. Fannie Mae, acting in its corporate capacity has no other functions, so it needs no more than a handful of employees and officers.

5. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/”FDIC-remote” analysis that Fannie Mae, maintains its own existence separate from Fannie Mae, acting in its corporate capacity, the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

6. The limited purposes of Fannie Mae, acting in its corporate capacity, in general, to acquire, own and sell mortgage loans; to issue, acquire, own, hold and sell mortgage pass-through securities and home equity asset-backed pass-through securities which represent ownership interests in mortgage loans, collections thereon and related properties; and to engage in any acts which are incidental to, or necessary, suitable or convenient to accomplish, the foregoing.

7. Fannie Mae, acting in its corporate capacity will have limited obligations and rights under the Trust Agreement after the Closing Date. Fannie Mae, acting in its corporate capacity buys conventional mortgage loans under several loan purchase programs from mortgage loan originators or sellers nationwide, including affiliates that meet its seller/servicer eligibility requirements and services mortgage loans for its own account and for others.

8. The Servicer will not have custodial responsibility for the mortgage loans. The custodian will maintain mortgage loan files that contain originals of the notes, mortgages, assignments and Allonges in vaults located at the custodian’s premises. Only the custodian has access to these vaults. The shelving or filing system segregates the files relating to the mortgage loans from other assets custodies by the custodian by means of a document tracking system. The Custodian will be responsible to hold and safeguard the Mortgage Notes and other contents of the Mortgage Files on behalf of the Trustee and the certificate-holders.

9. The Custodian will segregate the Mortgage Files by boarding each in an electronic tracking system, which identifies the owner of the Mortgage File and the Mortgage File’s specific location in the Custodian’s vault. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

10. This is done for safe keeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.

 Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.

 There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“Government Sponsored Entities”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.

 The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.

 In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.” This requires the Custodian to find assignments or endorsements meaning that the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” ensuring not to allow the Custodian to approve files in which the last endorsement is from the master servicer and in all states, the Note must be endorsed to “Fannie Mae,” not “Federal National Mortgage Association.” And that the Trustee has been recorded in the local land records.

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