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<p>[QUOTE=&quot;medoraman, post: 1256542, member: 26302&quot;]The securitization structure, not Countrywide. These structures are separate legal entities. </p><p><br /></p><p>Here is a simpler way to explain it. Countrywide, (CW), sets up a legal entity. They donate mortgages are equity. These get cut into tranches. Lets make it simply, say there are 3 tranches for interest, first 5 years, second 5 years, and last 20 years. Then there is a principal tranche, and a residual, (equity) tranche. When a payment is made, CW makes money from servicing, then the rest of the money goes to the entity. In this case the 1st interest tranche would get the interest payment, and the principal tranche gets the principal. If a mortgage is paid off early, that is great for the principal tranche, bad for the interest tranches. Creating these tranches costs money for legal fees and credit opinions, but these fees are more than offset by the added value by creating the tranches. Therefor, CW will receive more than face value for the mortgages. All originators used to keep the residual piece, but because this puts them on the hook for what happens to the entity, so for the last decade of so most residuals, (equity), of the entity is sold off cheap.</p><p><br /></p><p>Bottom line CW is not responsible for what happens to the mortgages, that is the reason for this structure. However, the lawsuits are contending that CW lied while it was still setting these up, a charge that could be a liability to them.</p><p><br /></p><p>Chris[/QUOTE]</p><p><br /></p>

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