I used to work in the mortgage industry and there's a simple way to deal with bad quality loans. Make it mandatory for financial institutions that originate loans to service them for one year before they can sell them on the secondary market. The complete removal of loan origination from servicing has directly led to a lack of incentive to make loans based on traditional measures of creditworthiness. Make the originating lender bear some risk up front. Some poorer quality loans souldn't even be eligible for the secondary market.