Quote:
Originally Posted by pknopp
In a rational world, that would be fraud.
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Yes, but in order to give low-income and high risk borrowers access to home ownership, HUD and the GSEs began accepting "nontraditional" qualifications for approved loans in 1994 when Clinton and the Dem Congress rewrote the CRA.
As Mircea said, no fraud was committed by the loan originators, e.g. Mozilo at Countrywide, they were just functioning under their affordable housing agreements with HUD , etc. Where the fraud came in was when the GSEs bundled and sold the loans as MBS, not disclosing the "nontraditional" loan documentation and leaving the securities buyers thinking that the loans backing the MBS had met all traditional documentation requirements.
There have been no prosecutions of loan originators because the federal government was complicit. And there will be no prosecution of the GSEs' nondisclosure of adverse loan conditions because, again, the government was complicit.