By Cory Doctorow (GPG 0xBF3D9110957E5F4C) @doctorow.pluralistic.net · 25/07/2026Subprime mortgages supercharged the practice of loan origination and resale (where a bank offers you a loan and then sells that loan to someone else, so your default becomes their problem) by splitting the loans into pieces. 13/ 1243
By Cory Doctorow (GPG 0xBF3D9110957E5F4C) @doctorow.pluralistic.net · 25/07/2026These pieces were recombined according to complex mathematical formulas that supposedly "proved" that the default risk from poor borrowers had been "offset" by combining them with other borrowers' loans and wrapping them in opaque insurance contracts. 14/ 1291
By Cory Doctorow (GPG 0xBF3D9110957E5F4C) @doctorow.pluralistic.net · 25/07/2026Those subprime mortgages came with cheap "teaser rates" - the interest rate you paid over the first couple years - but then the interest payments "ballooned" to farcical sums that borrowers had no hope of repaying. Those farcical sums were the risk premium. 15/ 1496
