Securitization insulated mortgage originators from the consequences of underwriting a bad loan.
It took two to tango. The financial industry is just as culpable as governmental regulatory agencies.
Bingo. This is the quote of the thread right here.
Ironically, securitization also made it increasingly difficult for the investors who were left holding the bad loans from exercising their rights to take possession of the asset in the event of a foreclosure.
There was a fascinating case working its way through the Utah court system last year, in which the borrower in default had been able to successfully fight a foreclosure action because the loan originator (his local bank) had securitized his mortgage and sold it off to an institutional investor who had no legal standing to initiate a foreclosure proceeding under Utah banking law.