The process of pooling one or more types of consumer loans (i.e. mortgage, credit card, auto loans, student loans) into a single asset to be sold on a piecemeal basis to investors is oftentimes referred to as securitization. Securitization allows banks to offload risk and avoid capital reserve requirements while investors purchase an interest in a stream of cash flow from the pool of loans.
In order for the loans to be properly pooled into a given security, several transfers of the loans must take place. Such transfers are usually effectuated through an indorsement. In the mortgage context, an indorsement usually appears on the last page of the promissory note near the signature block, and will state: Pay to the Order of _________________.
In other words, the indorsements evidence the transfer of the loan from one party to another. In any given securitization, the loan arrives at its destination only after several different entities have "securitized" the loan.
This process of originating and pooling the loans can be fertile ground for attorneys skilled in foreclosure defense. By comparing the trust's pooling and servicing agreement with the indorsements on the note, it may be possible to identify the appropriate entity with standing to enforce a debt against the borrower. Conversely, an indorsement analysis may also prove that the party seeking to enforce the note is not the appropriate party to do so.
The attached white paper from Harvard economics professor, Jeremy Stein, does an excellent job of describing securitization and the role it has played in the (shadow) banking system. Enjoy!