Regulations without gov monitoring to make sure the mortgage bankers do not cheat the consumer or investors who buy the mortgage notes is useless. Someone claims to make 90,000 dollars to buy a 600,000 home with 10 percent down, when he actually makes 45 000 a year and borrowed money for the 10 percent down makes it a totally different risk factor. Well the bankers took the application with false info and claim it was a AAA mortgage note. Investor buys it by leveraging, ala 1 dollar down to buy 10 dollars worth of mortgage notes, and insures the investment against loss by buying derivatives. The underwriter of the derivative assumes the mortgage is AAA based on what the banker told him and charges the investor a low premium due to the notes falsified low risk. Unfortunately this went on since the gov Fannie Mae and Freddie Mac was willing to buy bundled mortgage notes from bankers without truly verifying the info on each mortgage note. Bankers knew that, and immediately embarked on a massive campaign to sign up as many mortgage applicants as possible, collect the fees and points and selling the risk to FM&FM. Government was trying to do mortgage bankers a favor and they repaid it with fraud. Countrywide was not the only mortgage banker who encouraged false application info, THEY ALL DID IT!!! Freepers need to understand one cannot blindly trust businessmen. If no one monitors them they will cheat the consumer and corrupt gov officials, unless we return to the frontier way of doing business, the banker will be shot by the cheated customer (probably it is a more effective way then relying on gov that can be brought by lobbyists).
The government should not be backing mortgages in the first place, nor should it force banks to make mortgage loans to those who cannot pay them back