“The government paved the way to NINJA loans, but the banks weren’t forced to make those loans, and they may well not have if they didn’t think they could sell the toxic crap to unwary investors.”
Well, banks were under pressure to make a certain ratio of loans in those low-income and high risk areas. Management didn’t want to get the regulators’ heat, and put pressure on their loan officers which created an atmosphere where income and debts were fudged.
From there, the banks sold off the loans as fast as they could, which led to all the problems with the bundlers/investment sellers like FNMA and FHLMC.
ps; I was a bank examiner for 27 years.
>>where income and debts were fudged.
Income, Debts, and FICO scores.
>>From there, the banks sold off the loans as fast as they
>>could,
Hence the falsification of FICO scores I observed at Argent Mortgage (Ameriquest’s Wholesale arm).
Why? My guess is FICO score is the only number of interest for Asset backed securities composed of “Liar Loans”.
It was the aggregate FICO score the ratings agencies based their determination upon; and so FICO would make the difference between AAA and Junk status.