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To: DB
From the article: "I have heard of instances where the same loan is in two or three pools.”

Wow. Just wow. What in the world are we in for.
9 posted on 11/15/2007 7:32:00 PM PST by Iwo Jima ("Close the border. Then we'll talk.")
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To: Iwo Jima
"I have heard of instances where the same loan is in two or three pools."

This isn't all that uncommon. This kind of innovative approach to creating securitized mortgage pools goes back to the early days of the mortgage bond industry -- when big institutions like Salomon Brothers would create these odd securities called IO/PO bonds. These terms mean "interest only" and "principal only" -- and they referred to unusual collateralized bonds in which the principal payments from one set of loans were bundled together with the interest payments from another group of loans. So a homeowner's mortgage payments -- unbeknownst to him -- may be going to two separate investors who purchased his mortgage from the bank that originally lent him the money.

I'm not an expert in the mortgage bond business, but I believe there are reasons why this type of arrangement works well for certain types of investors. It may have something to do with the inherent "cash-out" risk associated with any mortgage because of the homeowner's right to pre-pay the mortgage at any time without a penalty.

24 posted on 11/15/2007 8:02:12 PM PST by Alberta's Child (I'm out on the outskirts of nowhere . . . with ghosts on my trail, chasing me there.)
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