Pressure at Mortgage firms led to Mass Approval of Bad Loans

Human beings are nothing if not predictable.  Especially when the greed of large commissions are motivating.  A story today in the Washington Post highlights that the same old characteristics have been running rampant in the mortgage business of the past few years as have accompanied other similar manias and cash grabs throughout market history.

http://www.washingtonpost.com/wp-dyn/content/article/2007/05/06/AR2007050601402.html?referrer=emailarticle

“But salespeople worked on commission–meaning the more loans they sold, the more bonus money they received.  “That's a bad business model.  Its absolutely contradictory.”

My thought:  of course the conflicts are staggering, but the whole financial sales business works this way.  Governments and regulators continue to be willfully blind as they dance on the arm of the sales firms.  More fallout to follow. 

 

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One Response to Pressure at Mortgage firms led to Mass Approval of Bad Loans

  1. Anonymous says:

    The really surprising issue here is that the lending industry is so pressured to make money it refuses to acknowledge the problem coming. Talk of the risks of higher interest rates and the housing bubble had been headline news for a year before the meltdown. Lending companies so worried about missing out on the last bit of profit take on the excessive risk. Sound like another industry?
    Sue

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