Concerning private-label subprime residential mortgage-backed securities, Wall Street securitizers misrepresented in about 10% of the cases, and that was only 1 year and concerning only 2 of many factors. If a study were done for the whole decade leading up to the crash and concerning dozens of factors that likely should have been taken into account were the Wall Street securitizers performing proper due-diligence for their investor clients, one wonders just how bad the results would be.
Researchers from Columbia University and the University of Chicago have done mortgage investors a big favor by teasing out two examples of how investors were fed bad information on the safety of so-called private-label subprime mortgages during the housing boom.
…in just one year, 2007, the researchers found misrepresentation in about 10 percent of the cases. “Misrepresentations on just [these] two relatively easy-to-quantify dimensions of asset quality could result in forced repurchases of mortgages by intermediaries in upwards of $160 billion,” they say.
…minimum down payment and other requirements like that might be less helpful than focusing on transparency on the loan quality that goes into the security.