In the car business, if you incorrectly inflate a persons income on a credit app and it becomes a repo - you buy back the contract.
This instills a penalty that is much greater than the financial gain from processing the transaction.
THAT is the accountability that MUST be associated with originating a mortgage - especially if it gets diced into tranches(I think that concept is dead for now).
To reinvigorate the concept - which has proven it can work - there will need to be certification and a large pool of money backing up the integrity.
This is the root of the problem, bob. I very significant portion of the "originators" are now gone (New Century...et al), closed their doors and/or went bankrupt. Most walked away, instead of standing up to their responsibilities/liabilities for writing the bad paper in the first place. I personally know of only one guy in the industry who did not walk away but stepped up and made good on the few 'bad' contracts that he was involved with. This has been the perfect storm for him. He's been in the industry for 20+ years. Everyone, and I mean everyone walked away when these questionable (at best) loans started to come home to roost... except my friend. The lawyers involved still can't believe that this guy actually stood up and took the financial heat/medicine.
Now add in the fact that the mortgage market is so very poor right now. There is a very good chance that he won't survive but, he's one of the few independents who's left standing at this stage of the process. I try to encourage him whenever we talk. A stand up guy in this environment is quite an exception. If he survives, he'll be able to tell some excellent stories about how all the competition simply closed up their shops and walked away from the trouble they helped create. Also, he'll be the type of customer that the banks (when they finally return to some degree of reason) will want to do business with.
Given this as the back drop, its clear that the banks are doing everything in their power to eliminate the last of the little guys, like my friend. There's almost no one left for the banks or the govt to go after. There's only countless companies that have gone under during this process. The banks are responsible for doing business with these defunct entities, as they made incredibly easy money based on their fees, that is, while the getting was good.
Obviously, my perspective is based on an anomaly in the market, so my view is jaded. I still think that those left standing (the major banks) are keeping a strangle hold on the 10 year bond rate to prevent a new round of refis. They've had to take the pain and they're powerful enough to distribute this pain to the masses. Both out of spite and because, in the long run, they'll have less competition the longer they survive while the pain gets too much for everyone else.
jmo
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