Mortgage loans are going global

Philadelphia Inquirer, The, April, 2007 by Harold Brubaker Inquirer Staff Writer

If you get a home mortgage from Abington Community Bank in Jenkintown, chances are the money will come from deposits kept there by other residents of Philadelphia's northern suburbs.

The 140-year-old bank has been making loans this way for decades, and then keeping the loans on its books instead of selling them. "We are looking for the relationship with the customer," said Tom Wasekanes, vice president of originations.

While Abington has stayed with community-lending methods, the U.S. mortgage industry has transformed itself in a way that has opened conduits to global capital markets.

By turning mortgages into securities, many lenders have opened up vast distances between homeowners and their mortgage holders, who can be anywhere in the world. Investor appetite for mortgage-backed securities contributed to the explosive growth in recent years of subprime lending, and allowed credit standards to evolve to the ...