Servicer Advance Financing and Securitization

In today’s complex mortgage securitization market, the use of servicer advance financing facilities continues to be an important and efficient source of financing advancing obligations for non-bank mortgage servicers. The structures for advance financing facilities have run the gamut from revolving lines of credit (or repurchase facilities) secured by a pledge or sale of the servicer’s advance receivables attributable to specified servicing agreements to securitization structures, including master trust structures allowing combinations of term ABS and revolving variable funding notes. Servicer advance financing has also become a critical component of the financing for servicing portfolio acquisitions. 

Hunton Andrews Kurth LLP has over 25 years of experience representing servicers, lenders, investors and placement agents in servicer advance financing facilities using a variety of legal structures. We understand the challenges involved, and are adept at generating creative solutions.

Servicer advance financing facilities provide critical liquidity to mortgage loan servicers. In order to ensure continuity of payment to securityholders, mortgage loan servicers in residential mortgage-backed securities transactions generally are obligated to advance delinquent principal and interest payments and to make certain servicing advances relating to the preservation and maintenance of mortgaged properties (e.g., taxes, insurance, foreclosure costs). Advancing obligations can create significant liquidity challenges for mortgage servicers. Moreover, the structuring of servicer advance financing facilities raises complicated issues regarding UCC, tax, bankruptcy and securities laws. 

Hunton Andrews Kurth has brought together lawyers from our structured finance, tax and bankruptcy groups to focus our combined experience on assisting our clients in developing innovative transactions for financing and investing in servicer advances.