What does it mean by saying “pooling the loans or mortgages”?
Question by Aung Chan Aye: What does it mean by saying “pooling the loans or mortgages”?
Best answer:
Answer by doreen k
It means that an investment company purchased mortgage loans from hundreds of different mortgage loan originators, put them in one big group (pool) and then sold them in fractional amounts to investors.
Supposedly, by pooling the mortgages, it minimized the risk to the investors. As time has told, it did not. Investors lost money and borrowers lost their homes in many cases.
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Tags: Loans, Mean, Mortgages, pooling, saying
Think of going to a grocery store. You buy 50 cans of food and put them in a huge bag. You then either sell the entire bag to someone, or you sell shares of the contents of the bag. Perhaps you take a tablespoon from each can and put it in a small bags and sell each bag separately.