American dreams built on a shaky foundation of subprime loans

FROM THE KANSAS CITY STAR

Wall Street connection

Soaring subprime profits quickly attracted Wall Street investors.

As fast as brokers sold more teaser-rate loans, they quickly bundled them into packages and sold them like securities to investors, who pumped even more money into the subprime market.
The Compliance Technologies study showed that more than half of the subprime loans made in Kansas City’s 5th District were securitized and sold off to investors.

“Originators were making loans based on quantity rather than quality,” said Kurt Eggert, a law professor at Chapman University in Orange, Calif., who served on the Federal Reserve’s consumer advisory counsel. “They made loans even when they didn’t make sense from an underwriting standpoint.”

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