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The Governance Revolution by Deborah Midanek

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Chapter 10 Mortgage Backed Securities and Structured Products Conundrums

As the supply of both new and seasoned mortgages continued strong, the teeming hordes on Wall Street continued to seek ways to build a broader market for the product. While there was a long-established bank to bank market for pools of whole mortgage loans, the selling process was cumbersome as the loans were small and buyers generally wanted to reunderwrite a good- sized sample to test the quality of each pool.

Further, the loans were small and required servicing, which meant that each month the principal and interest needed to be collected and accounted for. While other mortgage lenders could do this, investment funds and insurance companies could not. Finally, the right ...

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