In practice, however, problems arose in recent years throughout the originate-to-distribute chain, resulting ultimately in a broad retreat from this model late last summer. First, at the point of origination, underwriting standards became increasingly compromised. The bestknown and most serious case is that of subprime mortgages, mortgages extended to borrowers with weaker credit histories.
To a degree that increased over time, these mortgages were often poorly documented and extended with insufficient attention to the borrower's ability to repay. In retrospect, the breakdown in underwriting can be linked to the incentives that the originate-to-distribute model, as implemented in this case, created for the originators.