It Still Boils Down to Principles

In a post yesterday I titled Mortgaged Principles, I noted that the subprime mortgage meltdown had seemingly fallen below the radar of the major news media.  Well, this morning, I see that the Washington Post’s subprime radar is rotating and radiating with a piece on the subprime lending industry’s woes by David Cho titled Pressure at Mortgage Firm Led To Mass Approval of Bad Loans.

Cho’s piece, put together with interviews with various boots on the ground subprime loan grunts, does provide a wee glimpse into the front line of subprime lending, but, as Cho’s piece is titled, should we accept that the pressure to produce loans for sale in the secondary market led to the “mass approval of bad loans,” as if this was some form of mass hysteria?

Though the subprime lending industry’s woes were exacerbated by the “pressure” to produce more and more loans, the root cause of the subprime lending industry’s meltdown is the following, as written in Cho’s piece.

And a detailed inquiry into the situation at New Century and other subprime lenders suggests that in the feeding frenzy for housing loans, basic quality controls were ignored in the mortgage business, while the big Wall Street investment banks that backed these firms looked the other way.

It’s all about the principles.

Posted by on 05/07 at 04:29 AM

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