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Ford Motor Co. Message Board

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  • vernonhardappel vernonhardappel Aug 13, 2009 1:36 PM Flag

    Ok, mortage crises?

    Person A, berated by Person G, encouraged, protected and funded by Person W lowers his lending standards because he knows he can take his profit and sell the risk to unsuspecting Person C and GSE's


    "The originate-to-distribute model seems to have contributed to the loosening of underwriting standards in 2005 and 2006. When an originator sells a mortgage and its servicing rights, depending on the terms of the sale, much or all of the risks are passed on to the loan purchaser. Thus, originators who sell loans may have less incentive to undertake careful underwriting than if they kept the loans. Moreover, for some originators, fees tied to loan volume made loan sales a higher priority than loan quality. This misalignment of incentives, together with strong investor demand for securities with high yields, contributed to the weakening of underwriting standards.

    "


    http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

 
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