Even if your mortgage has been sold into a securitisation vehicle, lenders usually retain rights — but errors in assignment or notice can create serious obstacles. Here’s what actually happens in practice. In most cases, securitisation alone will not stop repossession. However, the 2025 case of Lloyds Bank Plc v Cook suggests that some securitisation arrangements may raise legal issues significant enough to prevent summary judgment and require a full trial.
What Happens When a Mortgage Is Securitised and Turned into a Derivative?
I’ve previously written before about mortgages and very specific cases where the debt can be cancelled or avoided, link here. A very interesting case was reported in October 2025 relating to mortgage securitisation. i.e. In the 2009 financial crisis, if your bank sells your loan to another person, can they then repossess the house which is mortgaged if the borrower defaults?
You can argue – “yes, they can” – as there is a legal charge on the title – AND – you can argue “No, they can not” – as the lender on the title is no longer owed any money. The bank can’t repossess on a loan which has already been paid off… can they?
Mortgage securitisation is the process by which a bank (the originator) bundles thousands of individual home loans into a single financial instrument known as a mortgage-backed security (MBS). The bank sells these pooled mortgages to a special-purpose vehicle (SPV), a legally separate entity created solely for this transaction. The SPV then issues bonds (tranches) backed by the cash flows from the underlying mortgage payments.
These bonds are sold to investors worldwide—pension funds, hedge funds, sovereign wealth funds, insurance companies, etc.
Once sold, the bank typically no longer owns the beneficial interest in the mortgages; whether is owns a legal interest in property is also questionable.
The SPV (and ultimately the bondholders) does. In many cases, especially after the 2000s boom, these mortgages are further sliced, repackaged, and used as collateral for even more complex derivatives such as collateralised debt obligations (CDOs), CDO-squared, and synthetic CDOs that bet on the performance of the original MBS via credit default swaps (CDS).
Michael Burry, portrayed in The Big Short, famously realised that the rating agencies were dramatically underestimating default. He made hundreds of millions when the underlying mortgages defaulted en masse.
Does securitisation break the legal chain of title and stop repossession?
This is the central claim made in some sovereign-citizen and “Great Taking” circles: because the original promissory note was sold, transferred, and possibly destroyed or lost in the securitisation process, the chain of title is irreparably broken, and no one has standing to repossess. The most recently cited authority is Lloyds Bank Plc v Cook [2025] EWCC 43, a County Court appeal decision handed down in 2025.
In this case, the borrower defended possession proceedings by arguing that the securitisation of his mortgage (via an equitable assignment of the beneficial interest to a covered bond or SPV, while Lloyds retained legal title) meant the bank no longer had enforceable rights to repossess the property. The Deputy District Judge initially struck out the defence as a “fishing expedition,” but on appeal, the Judge overturned this, ruling that the securitisation arguments disclosed a “real prospect of success” due to conflicting legal authorities.
Specifically, the court highlighted a conflict authorities between Three Rivers District Council v Bank of England (No 3) [2001] UKHL 16 (suggesting assignees must be joined in proceedings – following the BCCI fraud where notably, the assignees showed no interest in claiming back the money…!) and Paragon Finance plc v Pender [2005] EWCA Civ 760 (holding that the legal owner can enforce without joining beneficial assignees i.e. the ultimate creditors and the beneficiaries of the mortgage payments from the borrower don’t have to be part of the litigation for the claim to succeed.
The judge also noted potential issues under the Financial Services and Markets Act 2000 (FSMA): if securitisation makes the mortgage trustee a “party” to the contract without FCA authorisation, the agreement could be unenforceable. The Land Registry entry was not updated to reflect the beneficial ownership transfer, raising questions about the charge’s validity under the Land Registration Act 2002. However, the court did not decide the merits—only that summary judgment was inappropriate, allowing the full defence to proceed to trial.
How the legal right to repossess is preserved?
When mortgages are securitised, the transfer is almost always done under a documented legal sale and assignment. The mortgage debt and the payments become held under a trust – like a series of Russian dolls. The money is owed once the in initial loan or consideration has passed, to the lender’s contractor’s contractor’s contractor (insert as many assignments of the original contract as you like!). In England and Wales, registered mortgages are only legally transferred by deed of assignment and registration at HM Land Registry in the name of the new owner or nominee. The 2025 case of Cook underscores that equitable assignments without registration may complicate matters, potentially requiring the beneficial owner (e.g., SPV trustee) to be involved and re registered.
Conspiracy theories and ‘The Great Taking’.
The theoretical foundation that made the derivatives market possible was the 1973 Black-Scholes-Merton option-pricing model, which allowed virtually any cash flow to be replicated and priced as a derivative. Combined with cheap computing power and lax regulation, this gave birth to the multi-quadrillion-dollar derivatives market. By 2007, the notional value of derivatives was estimated at ten times global GDP. Mortgage-backed securities and their derivatives became the largest single asset class within that market.
The “Great Taking” thesis -David Rogers Webb’s 2023 book ” The Great Taking” (link to the YouTube video included!) argues that the entire securitisation and derivatives superstructure was deliberately designed so that, in a major financial collapse, secured creditors (the derivatives counterparties) legally leapfrog depositors and even bondholders under revised UCC and EU rules, taking client assets held in “security entitlement” form. It is somewhat conspiratorial in tone! But there is an element of truth in it, although it may be subject to dramatic hyperbole from time to time – as even the author admits.
While the book and the video raises legitimate concerns about legislation changes and the “safe harbour” provisions for derivatives, it does not claim that ordinary mortgage securitisation prevents repossession in normal circumstances—only that in an engineered collapse, the collateral (your house) could theoretically be seized by derivatives counterparties ahead of the mortgage trust itself. That is a systemic risk argument, not a defence to individual repossession. Cook sheds some light on this – at one end of the chain is the homeowner who cannot afford repayments each month and is in arrears. At the other end of the chain are a number (‘n’) of companies or individuals receiving the money from the securitised loan. Which of them, if any or all, can repossess the debtors house to recover their arrears? No one knows at this stage [December 2025]. Even absent a crisis, incomplete documentation in securitisation could in fact delay or derail repossession claims.
It is a theoretical repossession process perhaps exaggerated to a logical extreme which may just be a step too far. The Cook case also raises a pragmatic point – how would any one of ‘n’ great takers actually dispossess a home owner from their demises?
For the overwhelming majority of borrowers, securitisation does not yet impair the lender’s (or more accurately the trustee’s or servicer’s) legal right to repossess the property if payments stop.
Courts have seen these “show me the note” and “securitisation broke the chain” arguments for fifteen years and almost always reject them when proper documentation exists—which it usually does in institutional loans. However, Lloyds Bank v Cook [2025] EWCC 43 introduces caution: where there’s a “tension in the law” over equitable assignments and FCA authorisation, repossession may not be summarily granted, giving borrowers a fighting chance at trial. The real risks exposed by Burry, the 2008 crisis, and now highlighted again in The Great Taking are systemic, AND individual: over-leveraged derivatives can destroy banks and economies, but they do not, in normal operation, give homeowners a free house—though procedural hurdles like those in Cook might buy time. Ultimately, if the loan must be repaid to someone, the question is merely who it must be paid to and then, when are they going to get it?
Signing your medieval death pledge or ‘mortgage’ …!