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How Did the Securitization of Loans Contribute to the Housing Crisis

termpaperwarehouse.com | August 5, 2014

How did the Securitization of Loans Contribute to the Housing Crisis?

“Worm or beetle - drought or tempest - on a farmer's land may fall, Each is loaded full o' ruin, but a mortgage beats 'em all” (Will Carleton 1845-1912). A mortgage is the greatest investment the average individual will make in their entire life-time. However, according to today’s standards, the true magic of a mortgage is not when one signs the note and mortgage but what the lender does with it after it has been conveyed. In almost every case after a mortgage is signed, it is almost immediately sold to the secondary market, this is where the loans become securitized. This is where most Americans believe is the root of our current housing crisis. This paper will analyze (1) why most Americans believe that loan securitization is the reason why we are in a housing crisis. (2) How lax screening processes by lenders played a part (3) Risky lending practices and (4) finally, the opposing views on securitization and our current crisis.

Why do most Americas believe loan securitization is the problem?

In most cases, when we can’t laugh at our mistakes, we have already started looking for someone to blame. In the case of our current mortgage crisis, we have engaged in a myriad of who’s to blame. Some say the lenders failed to properly screen borrowers, while others say the government protected the secondary market as they bought and sold one bad note after another. Most people believe that securitization started in 2004 and continued until the housing market crashed. However, securitization can be traced back for decades without issues that we face today. Banks and lenders often rely on a borrower’s Fair Isaac Corporation Score also know as FICO score which is another name for a credit score. By 2005 most banks and lenders used the FICO of 620 as a threshold to approve mortgage loans. FICO scored under 620 typically would not be approved....

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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