OK Smart Ass - I fully understand the issue. I was trying not to respond with 900 word replies so I used some short cuts.
So regardless of how many times the loan was sold, the fact remains is that there is no profit for lending 400 thousand and acquiring a property worth 250 thousand — regardless of how many times it is packaged and regardless if the paper is held by one group and the servicing is held by another and so on. Again, I short cut my response by just saying “bank” to include originating lender and every other entity along the way.
Nothing about this changes a fact:
If the loan is not repaid, then there is loss to the financial system that lent it. I realize that originating banks hold only a tiny percentage of the loans they originated. I also know that in certain price ranges they are almost always backed up by Fannie and Freddie and this fact impacted all the esoteric derivatives that were packaged and sold.
I actually have never defended the Wall Street practice of the packaging, other than the banks were sort of forced to do something with loans they would never have approved without government pressure.
This is Free Republic. I thought it was a site for those in favor of limited government and I see this as a classic case of over reaching government and the resultant crony capitalism. It just strikes me that there is a class warfare anger here. The anti bank rhetoric is the same anti business rhetoric that I see on the left. None of these massive amounts of loans would have been available to be sold without the CRA and the borrowers that accepted loans they could not pay as a result of the pressures brought by the CRA (and related liberal influences from government).
That was the root of the problem, and thus, the emphasis of my point. Any fraud that has resulted is nothing I support but it doesn’t change the genesis of the problem.
You're still not getting it. The minute the bank securitizes the loan, and sells it, the liability is passed on to some chump investor. Now the really creative money making begins.
Hey, let's package that MBS again in another CDO! We just doubled our money! (And make sure that annoying promissory note gets destroyed.)
Now let's rate those CDOs full of shit loans as AAA and get some nice premiums when we sell it!
And now let's bet against the shit CDO we just sold with 10 or 20 CDSs! Nice!
Oh, and let's create a 'Servicing Company' to manage the 'loan', and collect premiums!
Oh, and if the guy defaults, we make crazy money from our Credit Default Swaps, plus we get that chump's house!
Get it yet? The bank has often already doubled or tripled its money on their initial so-called 'loan', and if the home is in a good area, stands to gain much more from a foreclosure than from 'servicing'.