There is a movie coming out that claims to be about why the mortgage industry collapsed. They managed “explain” the securitization process and leaves out Fannie Mae, Freddie Mac and the other government agencies responsible for 90% of the mortgage securitization market. The government invented subprime mortgages and pushed them on the banks. Where do they think the banks were laying off most of these crappy loans? On the government! Banks knew the loans were subprime and that is why none of the banks kept them in their portfolios - the government was buying and guaranteeing them (through the agencies which have the full faith and credit of the US treasury.) There was a no risk to Banks BECAUSE OF THE GOVERNMENT. That made them prime loans to the banks.
And have these agencies stopped this ridiculous practice. Nope. They are still offering balloon teaser rate loans and subprime documentation. Without acknowledging the reason for it, the situation will never get fixed.