Securitisation...degrades credit quality by weakening lenders' incentives to monitor the quality of the loans they write. If loans were even less likely to come back to their originators, this monitoring problem would only get worse...Many mortgage brokers and originators were concentrating on writing as many loans as possible and passing them on to arrangers who would parcel them into securities.Seems to be that these loans are now beginning to come back to their originators. In tomorrow's Wall Street Journal, and article entitled Investors Press Lenders on Bad Loans speaks a bit about what is going on - although in more of an overview.
Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.Companies under litigation include Countrywide and WMC Mortgage Corp. (which was General Electrics sub-prime mortgage unit).