We used to see only virtues in having loans packaged and resold to third parties, but now there are critiques:1. It is harder (impossible?) to renegotiate loan terms if something goes wrong (this is from Brad DeLong, and Paul Krugman today).
2. The loan holder no longer has market-stabilizing, special information about the value of the loan (see Avinash Persaud in yesterday's FT). This decreases the likelihood of anyone "supporting the market" and holding or buying up the assets in hard times.
Notes on Leverage and the Sub-Prime Mortgage Market
By Jim Zellmer on August 18, 2007 5:37 AM
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About this Entry
This page contains a single entry by Jim Zellmer published on August 18, 2007 5:37 AM.
America's Fastest Growing Suburbs was the previous entry in this blog.
Foreclosure Radar / California Housing Forecast is the next entry in this blog.
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