Source: Los Angeles Times
Loan checkers say their warnings of risk were met with indifference
They could see the meltdown coming.
Freelance financial watchdogs who examined the paperwork on sub-prime
home loans being sold to Wall Street had an inside view of the boom in
easy-money lending this decade. The reviewers say they raised plenty
of red flags about flaws so serious that mortgages should have been
rejected outright -- such as borrowers' incomes that seemed inflated
or do***ents that looked fake -- but the problems were glossed over,
ignored or stricken from re****ts.
The loan reviewers' role was just one of several safeguards --
including home appraisals, lending standards and ratings on mortgage-
backed bonds -- that were built into the country's complex mortgage-
financing system. But in the chain of brokers, lenders and investment
banks that transformed mortgages into securities sold worldwide, no
one seemed to care about loans that looked bad from the start. Yet
profit abounded -- until defaults spawned hundreds of billions of
dollars in losses on mortgage-backed securities.
"The investors were paying us big money to filter this business," said
Cesar P. Valenz, one of the loan checkers. "It's like with water. If
you don't filter it, it's dangerous. And it didn't get filtered."
http://www.latimes.com/business/la-fi-subprime17mar17,0,782997.story
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