The liquidity provided by private-label mortgage-backed securities fueled aggressive lending practices that have contributed to rising defaults and foreclosures, according to a Government Accountability Office study.The GAO study indicates that underwriting standards deteriorated from 2000 to 2006 along with the increase of adjustable-rate mortgages and limited- or no-documentation loans. "Growth in the market for private-label MBS beginning in 2003 provided liquidity to some brokers and lenders to support these aggressive lending practices," the congressional watchdog agency says. The National Association of Mortgage Brokers said the GAO study shows that securitization and too much liquidity led to aggressive practices by banks and other lenders. "Mortgage brokers are not to blame for the meltdown in the subprime market," NAMB president George Hanzimanolis said. The study points out that mortgage brokers accounted for 60% of originations in the subprime market and 25% in the prime market in 2005.

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