Investors scalded by losses in private-label mortgage-backed securities (MBS) during the housing crash are reluctant to jump back in the game because record keeping remains shoddy and legal protections haven’t changed much, writes former banker David Fiderer at American Banker.
The restoration of a secondary market for private-label MBS is seen as critical if the government is to wind down Fannie Mae and Freddie Mac and shift more risk onto the private sector. In a June report, Moody’s Analytics Chief Economist Mark Zandi estimated that investors in private-label MBS lost $450 billion. “Deeply scarred, they simply abandoned” the private-label MBS market, Zandi wrote. “Effectively no subprime, alternative-A or jumbo mortgage securities have been issued in five years.” Source: American Banker