[jeltz]

This is a beginner mistake which I have a hard time believing the entire mortgage market failed to spot.

My personal belief is that they knew of the flaw of the models but did not care since their personal incentives were more profitable if the model was not fixed.

[hindsightbias]

As Michael Lewis found in the Big Short. His Liar's Poker (from the 80's) explains the mentality. As he says in the former, he thought the latter would be the be-all end-all.

But the kids in Business School would constantly write him and ask him for new ways to rig the game.