Figure 1: RTC Securitization—Flow of Funds

RTC's securitization flow of funds is divided into four parts, beginning with the Borrower. The funds move to the Master Servicer and then to the Trustee/Custodian. Finally, the funds are paid out to the Investors in Certificate. The tasks of each part are described in this document.

Part 1: The Borrower makes monthly payment of principal and interest.

Part 2: The Master Servicer

1. Collects monthly payments.
2. Holds or forwards payments to eligible accounts.
3. Tracks payment status on each loan.
4. Advances delinquent payments on behalf of borrowers.
5. Pursues delinquent borrowers, handles foreclosures and liquidations of real estate owned.
6. Reports on pool to trustee, investors, and the RTC.
7. Monitors payments of taxes and insurance by borrowers.
8. Files insurance claims if insured loans default.
9. Performs tax reporting for trustee and investors.

Part 3: The Trustee/Custodian

1. Holds certificate account before distribution date.
2. Makes payment to investors.
3. Holds mortgage note and security documents.
4. Holds and draws on reserve fund.
5. Advances on behalf of master servicers, if necessary
6. Maintains certificates register.
7. Oversees master servicer's performance
8. Represents interest of all certificate holders.
9. Holds and reinvests reserve fund amounts, pays out excess to the RTC.
10. Calculates payments to certificate holders.

Part 4: The Investors in Certificate receive payments from the Trustee/Custodian.

Source: Lehman Brothers Completed Transactions Book, Security Series 1991-1 (July 1991).

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