Analysis of the seeds of housing crisis

Grim statistics reveal that as many as 10,000 foreclosures are occuring each day in the United States—and the total is climbing. All this while a financial meltdown roars around the world. Unemployment is high, inflation is increasing, and real estate values are plunging, as is the stock market. Yes, we live in interesting times.
Most of the problems began years ago when banks and savings and loan associations started selling their mortgage loans—rather than holding them—to replenish funds to make more loans. This became the norm in the banking industry, such that today almost no bank continues to hold and collect payments on the loans it makes. This allowed the lender to process many more loans. Unfortunately, it also compromised the underwriting of loans since the loans often were merely hot potatoes quickly sold to others for ownership and servicing.
And then it got worse. In the 1980s lenders began to pool mortgages and securitize them for sale on Wall Street. The quality of individual loans seemingly was irrelevant since most conventional mortgage security pools were backed by Fannie Mae and Freddie Mac. Because the loans were being sold as a security, small increments of the total loan pool or package could be sold on the national and international stock markets.
As these investments became more and more popular, the secondary mortgage market went on steroids. It began selling mortgage derivatives and futures, and sold pieces of the mortgage pools such as years 1 through 5 or years 21 to 30, much like butchers use all of the pig, including the ears and the oink. The lawyering and marketing were most creative, but the control and valuation were impossible. When the mortgage market began to sputter due to the predatory and unsecured loans, foreclosures increased, causing home values to decline. Like an epidemic, confidence in all mortgages came into question and the entire house of cards began to come down, augmenting the number of foreclosures.