In many cases, they explain, mortgage originators failed to legally transfer mortgages into the trust.
And unemployment has pitched even homeowners who hold conventional mortgages into foreclosure.
With the guarantee attached, banks sell the mortgages into the market to bond investors.
Securitisation the bundling of mortgages into securities that were sold to investors diversified and dispersed risk.
Bear Stearns and Washington Mutual packaged mortgages into bonds and sold them to investors.
In 1993, the bank began a strategy of concentrating on packaging subprime mortgages into securities.
Back in New York, Mr. Kim's team was eagerly bundling risky home mortgages into bonds.
The investment banks then pooled the mortgages into securities, often by blending loans from different lenders.
Ranieri had knitted a group of inert mortgages into a tradable security.
As Wall Street bundled mortgages into complex securities, the banks needed high ratings to sell them to investors.
And bundling mortgages into securities reduces the time-consuming, unproductive friction involved in checking the creditworthiness of each mortgage applicant.
