December is a month of celebrations and traditions. The end of the year brings with it gift giving and party throwing—and, of course, family movie traditions such as It’s a Wonderful Life, starring Jimmy Stewart as George Bailey in a classic slice of Americana. In this film, Bailey lived in the world of building and loan banking when bank lending was a very different business than it is today. Bailey had never heard of “securitization” of debt; and while checks may have been a common way of paying bills, most long-term debt obligations were financed and serviced by small, local banks.
In today’s world, more and more homeowners manage their single biggest asset and liability using a smartphone in the palm of their hand. There are even TV commercials depicting first-time homebuyers falling in love with a house and using their phone to find a mortgage that suits their needs. Speed and efficiency have replaced small and locally owned. Bailey probably would not recognize the modern-day banking system—in particular, the transferability of long-term debt obligations and the problems this creates in terms of using records of prior servicers when a default occurs.