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 [...]
But in this case wouldnt the first bank lose money? Snce it doesnt earn interest (it sold the loans to the I-bank) and has to pay those people who deposit $ in it interest annually?
When you take out an interest only mortgage you don’t pay any of the capital back until the end of term (which in this case is 10 years) and so every year you pay back the interest on the $1m that you borrow which is $100k. This means you pay back $100k every year for [...]