Sunday, Jan 07, 2007
banks are fanning the housing market
The Telegraph: Do you know who owns your mortgage?
The housing boom needs a ready stream of cheap credit – and the banks are increasingly selling mortgage-backed bonds to supply it, says Iain Dey
Posted by sold 2 rent 1 @ 11:37 AM (146 views) Add Comment
6 Comments
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1. talking rot said...
Ho Hum
"... outstanding mortgage balances in Britain has now been sold to the capital markets" and "a mortgage securitisation is a group of mortgages pooled together by a lender and sold off as a bond."
So, the money Banks loan to people as mortgages comes from the banks selling bonds.
What does this mean and does it matter if the Banks fund their mortgage lending by selling Bonds? Anyone know?
2. Ticktock said...
I think it means, firstly, that risk of delinquancy on debt is distributed more evenly than in the past, but also that speculative players (hedge funds) are holding huge ammounts of ever more risky debt. The rush for the exits when the 'credit cycle' turns (i mean really turns!) will be interesting, as such 'debt' can now be sold at the click of a mouse and Hedge Funds don't hold losing bets for long. Nobody quite knows how the dirivitive market will stand up in a crisis, or how bad that crisis will be, or just which 'gaskets' will blow first, or what parts of the economy will go the way of the pear as a result. I suspect that many will be left without a chair when the music stops.
However, without knowing how all the bets have been placed, who can pick the winners from the losers before the wheel stops spinning?
3. tyrellcorporation said...
Having read this artcile my overriding feeling is of a market where the first person to blink will set off a stampede. It has now to be vying for the biggest bubble in history.
4. Ttimgg said...
This is commonplace is the US, and is begining to go bad in a big way. At least seven mortgage lenders have gone bust in the last month because of bad loans (!!!) The result is that hedge funds and banks are much more cautious about lending, so this stream of money is likely to dry up pretty quickly.
http://br.endernet.org/~akrowne/ml-implode.html
5. sold 2 rent 1 said...
Sounds similar to the Asian savings glut that funds the US consumer spending
One half of the world finances the other's borrowing.
At some point these world imbalances have to be corrected
6. monty said...
Wahey, it's nice to see in black 'n white what I've said several times on this forum in the last few months, namely that a large proportion of mortgage debt has been sold off into the Mortgage Backed Securities market. Paragon is another of the big players here, having done 13 or more of these deals. Who owns the MBSes? Probably your pension fund. What I'd like to know is how much of the risk has been sold off. i.e. who has the responsibility to repo your house when you default? Is is the bank or some other party?