One of the arguments for the wholesale mortgage trade – that’s where mortgage brokers originate the loans – is that it affords the regulated lending institutions with some plausible deniability. Since they didn’t originate the loan themselves they can say they didn’t know the documentation was dummied up the day before at the MBs office or that there were 3 appraisals ordered on the same property until one came in at the right value.
There are some efficiency benefits, too; but as they say, “the ability to look innocent – priceless”.