That is, the buyers can demand that the seller repurchase the loans at par if defects are found in the loan underwriting contrary to representations and warranties in the pooling and servicing agreement that created the securitization trust or the whole loan mortgage purchasing agreement.
At the time of the putback, the loan has usually gone into default, sparking a review of the original loan application file. The defaulted loan, given current market conditions, is typically worth substantially less than par, thus the put-back transfers any potential loss from the buyer back to the seller.