yeah, "they" probably did own residuals. The securitization work was all done by the WaMu entity called WMIIC (refered to as "whimsic"). Internally it was referred to as a Broker / Dealer. Operationally, it worked literally right next to the Treasury / Capital Markets groups and the Mortgage accounting groups. They did not seem to be "different" at the time, but looking back with the legal entity structure in mind, it's clear that they were.
WaMu, the banking subsidiary that was regulated by the OTS, was not able to have a broker dealer as a subsidiary if I recall correctly (not authorized by the FDIC, kind of like banks with Insurance divisions), which meant that WMIIC was a separate subsidiary of the holding company. So when WaMu was seized WMIIC was left behind (and declared bankruptcy with WMI).
So, the only question is WHO owned any residuals. If the residuals were still owned by WMB, then they were seized and JPMC would get any payouts from the trust. If they were owned by WMIIC, then they may have been bankruptcy remote.
I dont know the exact arrangement. WMB couldnt just originate loans and give them to WMIIC. There would have had to be a transaction involved. And WMIIC wasnt in the business of holding loans in a portfolio or investing in MBS. They were in the business of being a broker / dealer.
Any bank could have used a 3rd party broker / dealer to help them issue and MBS security (complete with the necessary Trust). And in that case the bank itself would retain the interest by owning part of the security.
I suspect that WMB owned the residuals, and as a result JPMC has them now after buying WMB out of receivership....
News 
Market Data 
Discover 
AI
