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This doesn't really have anything to do with competition or more regulation of free enterprise, imo.
It has to do with fraud.
If there were NO regulations, but also no fraud, this would not have happened. Remember, there are banks involved here funding these loans. No lending source can go throwing money around with no or bad due diligence forever. Those that behave foolishly like that would go under, and those that are careful, and exercise proper due dilgence before funding loans, would flourish.
The home lending market would work just fine with either the current level of regulation, as long as the outright fraud was taken out, or even less regulation.
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