One way of avoiding subprime crisis — not being able to sell the loan!

Kerim at Savage Minds:

And a while back NPR had a story about how one of the few banks doing well in the downturn is one which loans almost exclusively to the Amish:

O’Brien knows which farms are doing well and which are struggling. He has to. When you lend to the Amish, you’re making a loan that you’re going to keep. You can’t sell that loan to some other investor.

That’s because Amish loans can’t be securitized — they can’t be turned into a mortgage-backed security or a collateralized debt obligation — like all of those subprime loans that have caused so much trouble.

You can’t do that for an odd legal reason. Homes that don’t have electric power don’t qualify for securitization. Neither do homes without traditional insurance. Amish homes are unmodernized, and the Amish use their own kind of insurance.

Take a look!

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