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The information you have provided here all point to the conclusion that loan quality is the best way to go when responding to how realtors will invest. Thanks for the great information!
One of the findings of this paper is that one of the big “misrepresentations” was the existence of a second lien on the property, meaning that the actual CLTV of the property was a lot higher in many cases than what securitizers represented. Thus, buyers of securities “thought” that the mortgages backing the securities they bought were one where the owner of hte property had much less equity in their home than they thought. Equity in the home is a major explainer of defaults. So…lesson learned is that really high quality mortgages are ones where the owners of the property have equity in their homes. Policy should be driven by ensurig that property owners are highly likely to have significant equity in their homes. Low down payment mortgages should have shorter amortizations periods so buyers can build equity without any home price appreciation.
I just read the paper again. Would such mispresentation have happened to the degree that it did if securtizers were forced to retain a significant amount of the credit risk associated with the loans they put into securities? Gosh, this paper suggest that securitizers should always be required to retain risk in what they package and sell, and the whole concept of “qualified residential mortgage” should be scrapped. I think we all agree that there should be no “qualified residential mortgage” exception from private label securitized mortgages. The NAR’s post clearly indicates this to be the case.
NAR must agree that there is no rationale for a qualified residential mortgage risk retention exemption; The research is quite clear.
[...] via Investors Fed Bad Info During Boom. [...]
yes investors fed bad during doom and I agree for this post because there will be risk in every field we do.
[...] of what caused the mortgage meltdown. The mortgage meltdown was caused by lax underwriting and confusion about the strength of the mortgages that collateralized the private-label mortgage-backed [...]
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