|
In response to
"The bundling of the mortgages in and of itself was not the problem. The ratings agency issues are real and significant. -- nm"
by
pmb
|
The bundling of the mortgages itself was no problem. But the on-selling could be - for example, where the lender sold all the bundled mortgages.
Posted by
Roger More (aka RogerMore)
Dec 14 '09, 09:20
|
A lender that bundles the mortgages, sells (say) 80% of them and keeps 20%, has an incentive to ensure that its lending practices were sound - basically, lending the right amount to people based on their income
A lender that bundles the mortgages and then on-sells all of them and won't face any losses on the mortgages that fall through doesn't have this incentive.
|