Better if banks keep mortgages

There was a time when people borrowed money to buy their houses and the mortgages were held by local banks and loans were made to properties located in their neighborhoods. People made their first mortgage payment and their last mortgage payment to the same lender. The lenders had a stake in their collateral; therefore standards were set to secure their long-term positions. The banks knew their borrowers and their collateral; a sufficient down payment was made to bind the borrower and make it in their best interest to keep payment current. The ability of the borrowers to repay was documented by job verification, credit reports and a couple of years of IRS returns.

When did lenders feel it in their best interests to sell their loans which ended up in this solar system of bundled, unmarketable packages of disaster? By having individual lending institutions oversee their own mortgage portfolios controls and diversifies the risk. An investment is an investment, be it an in-house portfolio or a share of a traded and re-traded fund. With regard to mortgage lending, somehow I'd feel more confident knowing my bank was in charge of its own destiny.

Barbara Love

Mundelein