That's because Banks, are Chartered Depository Institutions regulated by the FDIC and require compliance with CRA, where as Mortgage Firms aren't regulated by any federal agency and are likely to push predatory loans and loan pooching to jack up Origination Fees for the Mortgage Companies.
A sub-prime loan is any loan that the purchaser gets to buy a home that does not require 20% down payment. Sub Prime loans pay higher origination fees to the mortgage broker. So, mortgage are rewarded more for placing consumer in sub prime loans than provided them access to better loans with lower rates which many of them qualified for.
It is the greatest of American motivations........ Greed!!!!
San José State University
Department of Economics
The Nature and the Origin
of the Subprime Mortgage Crisis
"In the 1990's under the administration of Franklin Raines, a Clinton Administration appointee, Fannie Mae began to demand that the lending institutions that it dealt with prove that they were not redlining. This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes. These subprime borrowers would be charged a higher interest rate. Having put the lending agencies into the position of granting subprime mortgages Fannie Mae then had to accept lower standards in the mortgages it purchased. That set the ball rolling. If a bank granted a mortgage to a borrower that was not likely to successfully pay off the mortgage then all the bank had to do was to sell such mortgages to Fannie Mae. The banks typically earned a loan origination fee when the mortgage was granted. The lending agencies could then make substantial profits dealing in subprime mortgages.
Because Fannie Mae and Freddie Mac made a market for subprime mortgages the lenders did not have to worry about of the soundness of the mortgage contract they wrote. Thus the lenders could write the mortgages as adjustable interest rate mortgages knowing full well that an upturn in the interest rates could easily throw the borrower into insolvency. For example, when the interest rate is 6 percent the mortgage payment for a 30-year $200,000 mortgage is $1199 per month. If the interest rate goes up to 7 percent the mortgage payment would increase by $131 per month, an 11 percent increase. For many of the subprime borrowers living on the edge of insolvency this would be enough to push them over the edge. The guilt for the subprime mortgage financial crisis lies both with the lenders who knowingly put borrowers into booby trapped mortgages and the management of Fannie Mae and Freddie Mac for making a market for such booby trapped mortgages thus giving the lenders the incentive for writing them. "
"Because Fannie Mae and Freddie Mac made a market for subprime mortgages the lenders did not have to worry about of the soundness of the mortgage contract they wrote."
This is why we have a financial crisis and dems own it 100%