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Surely those additional costs are relatively incidental and more than covered by the increased margins now seen on mortgage rates? Previously lending margins were tiny and now are very healthy indeed.
I am not in the business, so I really don't know it, but it seems that mortgages now show be very lucrative for bank lenders if only they can find customers that meet the new lending criteria. I am also a sceptic that the sub-prime mortgage sector 'caused'
the entire collapse. I don't believe that's where the biggest holes where ('leveraged' investments made with invisible funds which when unravelled and the investments went south could not be repaid up the chain, i.e. plain smoke and mirror fraud). And those
costs are still being passed on to the man in the street because its not possible to recoup from those that took the historical 'profits' out (i.e. when the previous bank gambling paid off, they took the 'profits' paid all the fees and agents along the way
and the bonuses too, and went back for more). The man in the street benefited only by being goaded with cheaper lending in order for banks to keep increasing their leveraging capability.
But I digress! Reducing the 'default' period is supposed to stop banks getting in trouble with its residential mortgage lending, but I never believed that to be the main problem in the first place, as above.