I don’t think it was disguised. I think banks were made to feel more comfortable originating and selling these loans. They probably thought that since the govt wanted them to do these loans, what could possible go wrong down the road. I have been in the business for 9 years and I have been telling people that our problems today can be dated back to the late 90’s when all the programs came out that were very easy to qualify for. I know the bank I used to work for did several loans based on their CRA value and not their credit worthiness. You reap what you sow.
Agreed. The government let it be known that it was, essentially, cool to lend where other feared to tread and so everyone piled on. My question is: how did the cooler heads in the investment community get hoodwinked?. Did Fitch, Moodys, S&P really fall asleep at the switch when they rated this junk AAA? Or did the principal issuers of this junk, Fannie and Freddie, somehow fudge the facts in the prospectuses? Call me naive, but I still can’t understand how so much garbage got sold so readily to “sophisticated” investors.