Mortgages and What Is A Bad Loan

Financial backers that pumped money into the mortgage industry are getting pretty tight with their money. In the following example the banks we refer to are not like your local bank. These banks lend money to a mortgage lender, the mortgage lender funnels that money into mortgage loans, and the mortgage loans act as collateral securing the credit line. Lenders are not normally entitled to demand upfront repayment. A margin call takes place when collateral securing a loan loses its value. When that happens, there is nothing protecting the lender from default by the borrower – in this case the borrower is a mortgage lender – so the lender pulls the plug with a margin call.