Anatomy of Risk Management Practices in the Mortgage Industry: Lessons for the Future
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Title: Anatomy of Risk Management Practices in the Mortgage Industry: Lessons for the Future
Author(s): Clifford V. Rossi
Not since the Great Depression has there been a contraction in the U.S. housing market of such scale. With much attention given already to complex mortgage securities, their risks and impacts on financial markets, this study examines the underlying loan manufacturing process that greatly contributed to excessive risk building across portfolios and mortgage securities alike. Particular attention is focused on the dynamics behind risk taking within mortgage firms leading up to the collapse in housing in order to understand what drove these firms to the brink and what lessons can be learned.