Sat 6 Aug, 2011 03:46 pm
I believe before the mortgage meltdown investment banks used to purchase mortgages from mortgage banks, package them and later sell them as a security. But prior to the sale as a security, it would hire a firm (e.g., Clayton Holdings) to evaluate the loans. That firm (e.g., Clayton Holdings) would produce a document summarizing its findings (i.e., amount and detail on bad loans). I believe that document was made available to prospective purchasers of the securities.
Why didn't the investment banks turn back the bad mortgages to the mortgage banks?