 Quote:
Originally Posted by Texas Proud
Actually they know exactly who owns it... it is the trust.... but since you are right in that it is cut up to a lot of different people, it is hard for the trustee to change the rules... because if you do then someone gets more and someone else gets less of the money that comes in....
If you own the IO, then you HOPE that the loan continues forever and you make out great... but if you have the PO, then you might want to have the house foreclosed and then sold off to get as much as you can... because if you let the person pay 'only' interest... then you get nothing and the PV is horrible....
That is one of the big problems with a fix... it does not hit all the 'owners' the same.... and why is the banks getting hit hard? Because they owned the 'residual'... that is the money that would have been left over if everything went perfect and all loans got paid off at the original terms... these are the most volatile tranches... so they can go to zero from a big number quickly...
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If anyone is interested in delving further into this phenomenon, here is a place to start.
http://www.securitization.net/public...Zissu_Cpt3.pdf
Also good bedtime reading for those of you with kids. You might want to print out this link and use it for a bedtime story
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