NY Times reports that they have an internal 2004 memo that warned of problematic loans at the mortgage giant, but the questionable practices continued. The memo stated that the firm’s underwriting standards were becoming shoddier and that the company was becoming exposed to losses.
I think we will find more and more incidents like this where federal and state regulators failed to do anything about the pending real estate crisis. Builders will tell you that the housing market is cyclical. The last upward spike was unusually long. The government and many lenders failed to realize that it would have to cycle down.
It appears that the lack of proper regulation of the housing and lending industries may make this dip in the real estate market much worse than it should be.
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