Saturday, March 15, 2008

So what caused the Mortgage Banking Scandal?

So what caused the Mortgage Banking Scandal? In one word --GREED!

"It became commonplace for banks to outsource their mortgage lending to free-lance brokers. Instead of doing their own credit checks they relied, often exclusively, on various online credit questionnaires … where no follow-up was done.

"It became common practice for mortgage lenders to offer brokers bonus incentives to bring in more signed mortgage loan volume, another opportunity for massive fraud. The banks got more gain from making high volumes of loans than selling for securitization.

"The world of traditional banking was being turned on its head. Many US banks, simply to churn loan volume and returns, gave what they cynically called "Liars’ Loans." They knew the person was lying about his credit and income to get that dream home. They simply didn’t care. And they sold the risk once the ink was dry on the mortgage.

"A new terminology arose after 2002 for such loans, such as "NINA" mortgages—No Income, No Assets. "No problem, Mister Jones. Here’s $400,000 for your new home, enjoy."

[Excerpt of an article by F. William Engdahl, Global Research]

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