Yes, you might be investing in a fraction of your own and your neighbors mortgages!
As a point of reference, the global fixed income market is about 100 trillion dollars, of which the United States comprises one-third.
Investors ranging from common retirees, high net worth individuals and family offices to pension and endowment funds are all receptive of investment products that offer a high and steady payout, low volatility, low correlation to equities and limited sensitivity to interest rate movements i.e.
At LendIt, Prosper s president Ron Suber voiced that Citigroup over-estimated the risk of the loans and hence demanded a higher interest rate spread.
And if the securitization model stops working, the origination platforms need to broaden their lender base in order to distribute the loan inventory that they warehouse on borrowed capital.
With securitization, investors have little idea if the underlying pool can support all the AA bonds issued.