In theory, brand new money financial institutions securitizing the brand new financing was indeed independent regarding the lenders originating them
Once the could have been reported (age.g. Engel and you may McCoy, 2011; Immergluck, 2009; Newman, 2009), during the housing increase added bonus structures into the mortgage financing world was better aligned to guarantee short-term winnings for the financial support banking institutions you to definitely securitized the fresh fund and you will the stars who got its start them, yet not to assure this new loans’ protection and you can soundness. Payouts to have loan originators and financiers depended largely on the deal fees and most critically on the size of the fresh pit within interest prevailing during the time of origination and therefore paid down because of the borrowers.
Especially, however this is specializing in securitization looked for to get the possibility of upcoming focus goes up onto borrowers because of the direction them to your varying price mortgages, thereby promising traders a steady price of get back over the U.S. Treasury price when you find yourself position individual borrowers vulnerable to financial fret because of increased costs (Shapiro, 2014; Vanacker, 2014).