You are assuming an high level of intergration between the originations side of the business and the servicing and/or capital markets side of the business. There have been competing camps within the industry, one saying that these exotic mortgages are too risky and a bad idea (back in 2001, by the way), the other saying that everyone else is doing them, so we will miss out on huge short-term profits if we don’t offer them. They have been in a competitive bind, hoping for the best since these are new mortgage products.
Well, the writing is on the wall, and just like the credit card reforms last year affecting all existing credit card debt, the new regulations can potentially affect existing loans.
