[mcnees287]

It sounds like a reasonable theory on its face. However, the outcome of this is likely that banks will stop making loans all together. If they were to offer mortgages at all, it certainly would not be a 30 year fixed rate product.

It's not correct to say that banks can sell off all of their risk through securitization. They do in fact retain some of the risk. Though most has been transferred.

The buffer is (in theory) in excess of the losses. So, after a crises a bank would be left with the buffer and be able to continue to operate as a going-concern. The question is how to set the buffer and how big ?

[woodandsteel]

>However, the outcome of this is likely that banks will stop making loans all together.

Really? We had a healthy mortgage market for a great many decades before mortgage backed securities were invented. And if mortgages are such a bad idea that banks can't make money off of them, then we shouldn't have them.

[evanpw]

The secondary mortgage market isn't a recent invention. It's been an explicit policy goal of the US government at least since the Great Depression.

[cylinder]

It's quite simple to get a mortgage in other countries where banks don't securitize. And if you get into trouble they will work with you rather than immediately foreclose.

Fixed rate mortgages for 30 years are a scam. How can a consumer predict interest rates over 30 years? If they go down they have to spend money on fees to refinance which benefits the Lenders. Adjustable rate mortgages are far better and allow for quick stimulation to consumers when rates are cut.