EDM and others seem to have overlooked or to be unaware of the impact of loan servicing agreements on failed primary lenders. Companies like Countrywide and Indy Mac (Indy Mac spun off from Countrywide as a REIT and subprime lender, then got into consumer banking) made money on the front end through loan origination fees (points) and associated add-ons to the buyers (i.e., the borrowers), then shifted the loan risk to the secondary market by bundling the loans for securitization. These bundled loan sales invariably contained language that guaranteed a revenue stream to the originator of the loans (i.e., Countrywide and Indy Mac) through a loan servicing contract. As long as the loans were outstanding, the servicing companies took a piece of the cash flow. It became a low risk, fee-for-service business, until all the loans started to default. As EDM says, "investigation continues..." but now the FBI is involved in that investigation. It will be interesting to see how all this plays out on the criminal angle.
