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Tuesday, Dec 6, 2022
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Sub-prime mortgage watchdogs kept on leash

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 documents that looked fake — but the problems were glossed over, ignored or stricken from reports. 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. For the full story visit http://www.latimes.com/business/la-fi-subprime17mar17,1,1725852.story

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