Sub-prime mortgage crisis: 2.0
At one point in 2021, 50% of mortgage's never had a human being enter the property. From 2020 to 2022 this average floated above 40%. These mortgages were then bundled and sold to investors. If this sounds familiar, its because it is what was done in 2006-2008 - only then they didn't look at the person's real credit. Now, they don't look at the asset.
One of the main risks of securitizing mortgages without proper due diligence is the potential for fraudulent or faulty loans to be included in the securitized pool. Without onsite inspections of properties, there is a risk that the quality and condition of the properties securing the mortgages may not be accurately represented, which could lead to default rates higher than expected. This could result in significant losses for investors who purchased the mortgage-backed securities.
Additionally, securitizing mortgages without proper due diligence can lead to a lack of transparency in the mortgage market. This can make it difficult for investors to accurately assess the risk of the securities they are purchasing, which can lead to mispricings and market instability. It can also make it difficult for regulators to identify and address potential issues in the market.
Fannie Mae has packaged rotten assets for years. This will lead to a lack of trust in the mortgage market and potential disruptions in the broader financial system if defaults and losses are higher than anticipated. Its only a matter of time.