For non-income verification home loans to become an acceptable industry standard requires a blatant disregard of basic accounting and auditing fundamentals. Some of the largest US financial companies failed to recognize the risk of overlooking accounting fundamentals. On Feb 29, 2008, the US Bankruptcy Court for the District of Delaware released a mammoth court-commissioned report, authored by Bankruptcy Court Examiner Michael J. Missal, which detailed the failure of New Century Financial Corp, the second-largest originator of subprime loans. Losses due to subprime lending have led to an ever-expanding house of cards since 2007, although some would contend that mortgage securities are being valued at excessively discounted rates. The technology boom and bust of the late 1990s and the current subprime credit crisis are clear evidence of the importance of fundamental accounting information, concepts, and their professional implementation and monitoring.
Accounting Implications of the Subprime Meltdown William M VanDenburgh; Philip J Harmelink The CPA Journal; Dec 2008; 78, 12; Docstoc pg. 2
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