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What caused the subprime meltdown?

By
Mortgage and Lending with The Federal Savings Bank

After creating a market that allowed almost anyone to qualify for a loan the secondary market (mortgage investors) suddenly stopped buying loan types that didn't perform as predicted.   

Investors also exercised their contractual right to force originators to buy back defaulting loans resulting in many loan originators going out of business.

Investors also stopped buying mortgage bonds with any marginal loans and raised the guidelines for almost every mortgage backed securities they buy.

Unable to sell the loans they originate many lenders were trapped with no buyers for their  "product" - subprime loans. 

While your originator may retain servicing as a separate profit center, your loan is almost always sold to investors regardless what lender originates it.  All originators, including retail "direct" lenders are required to show the percentage of loans they sell & service with your standard disclosures.  

Contact Greg Zaccagni for confidential & reliable mortgage advice @ www.MortgageAdvisor.info

See related articles:

Subprime Defined FHA Secure Subprime Bailout   FHA Loans Pros & Cons   Subprime Lending Guidelines After the Fallout   Avoiding Foreclosure

 The real culprits in this meltdown & The real cause of the meltdown

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