Mortgage Backed Securities – Part 3
I suppose on the one hand that’s fair, with one of these bonds you are buying a fixed income asset, you expect to get your x% and no more, its not like a stock with a variable dividend based on performance.
However I think it would only be fair if they put the money aside to make up for any defaults and if there was not enough defaults to use it all up at the end the bank could keep, it of course with banks being banks this would never happen.