Securitization epitomized the process of how markets can weaken personal relationships and community. With securitization, trust has no role; the lender and the borrower have no personal relationship. Everything is anonymous, and with those whose lives are being destroyed represented as merely data, the only issues in restructuring are what is legal—what is the mortgage servicer allowed to do (see "Mortgage Shark Attack")—and what will maximize the expected return to the owners of the securities. Enmeshed in legal tangles, both lenders and borrowers suffer. Only the lawyers win.
This is an issue. But let's not get too sentimental about the days in which we relied on relationship lending. In those times, if one was white or male, his relationship with lenders was automatically better than anyone else's. When lending decisions were made based on borrower "character," it re-enforced the ability of well-connected people to get access to capital, while others were shut out.
There was something to be said for a model where measurable credit-worthiness--rather than personal relationships--determined loan outcomes. The problem was not the securities, but rather the fact that lenders did away with all underwriting--measurable and unmeasurable.
3 comments:
Yes, loans should be based upon measurable credit-worthiness, not race.
However, securitization means that citizens have lost confidence in banks as savings vehicles. Something is wrong with the banking system, if its customers abandon it.
I agree with the above comment that loans should be given on credit worthiness not because of race. But in today's world the circumstances are too down market and corrupted. I can say people loss their ethics as well as humanity.. I wish all of them get well soon and be human at least.
Amen. Brother.
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