This article shows how securitization has enriched middlemen, while impoverishing lenders. The difference between mortgage rates and Treasury rates is now more than a half percentage point higher than in 1972-8.
Silva, Lauren and Martin Hutchinson. 2007. "The Cost of Complexity." Wall Street Journal (6 September): p. C 14.
"Well, one defense of all the complexity would be that it saved home buyers money -- but that doesn't seem to be the case. It looks like borrowers now pay more for this financial technology. Between 1972 and 1978, in the days when banks offered mortgages to their customers and held the loans, the average mortgage interest rate was 1.07 percentage points higher than Treasury bonds, according to Fed figures. Between 2000 and 2006, when most mortgages were securitized, the spread was 1.59. The figures don't include more expensive subprime loans. One-half percentage point is a big number in debt markets."
"While home buyers may wonder if they are getting their money's worth, financial institutions probably have no so such qualms about the change in the home-lending business over the past 30 years. Mortgage securitization, despite the slide in the subprime sector, has made Wall Street a lot of money."