Colli Real Estate

What role did falling US property prices play in rising mortgage delinquencies during 2007?

and another queston is ………….What role did residential mortgage backed securities (RMBS) and collateralized debt obligations (CDOs) play in the growing market share of non-deposit taking mortgage originators up to 2007?

Falling property prices may be the “result” of rising mortgage delinquencies as much as a cause of them. They did have an effect, tho. So let’s say that they caused 10%. That should be accurate.
RMBS and CDO’s were wonderful, exciting new financial instruments in the early and mid-2000′s. The old model of “your local bank gets you to open a savings account and they pay you 4.5% interest….they then loan out this money at 6.5% on a 30 year fixed rate mortgage….and they hold this loan for 30 years or until the homeowner pays it off…then they do it again” worked fine. The new CDO’s, etc worked even better. You could loan out lots more money for mortgages because you were taking in much more money than you could get from savings-account contributors. You could tap all the Hedge Funds, Pension Funds, Big Wall Street firms. It brought tons of money into the mortgage lending system.
We all know the end of the story. It was so lucrative that lenders stopped paying attention to the core issue. Who is checking to make sure that each individual borrower of a mortgage is actually going to be able to pay that money back? The answer was that no one was checking.
Oh well, it’s been an exciting time.

Mark-to-Market Debate: Private Mortgage Backed Securities

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