Bank’s that sell their loans typically have a clause with the mortgage back security holders that if there are nonperforming loans in the securitized package, the bank has to buy them back, not sure if it’s all or a certain percentage. This could really create some problems down the road. A lot of smaller banks portfolio their loans. I know of several that are at serious risk. Some losses can be minimised through the use of credit default swaps but there’s no guarantee.
