The blame game for the development of the current mortgage crisis is now in full swing, and, with one exception, no major participant escapes unscathed: Lenders and investment bankers drastically relaxed their underwriting standards in response to the euphoria associated with rapidly rising home prices during 2000-2006. They approved loans that could not possibly be repaid without an indefinite continuation of house-price inflation. Bank regulators ignored the breakdown of underwriting standards until it was much too late to take effective action. Mortgage brokers and loan officers encouraged borrowers to buy more house than they could afford, and to accept toxic mortgages that they did not fully understand. Consumers allowed themselves to be seduced into buying houses they co...
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