Pre-2008 Mortgage Origination is originators paid on volume, not on default rates, fueled the subprime collapse. It sits in the Incentives dimension (INC) of the Human Behavior Taxonomy™ as element HBT-INC-0212, within the Finance Perverse Pattern family. The core principle: originators paid on volume, not on default rates, fueled the subprime collapse. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
Scientific Definition
Originators paid on volume, not on default rates, fueled the subprime collapse.
Plain-English Definition
Originators paid on volume, not on default rates, fueled the subprime collapse.
Feynman Explanation
If the loss is downstream, the loan looks great.
Core Principle
Originators paid on volume, not on default rates, fueled the subprime collapse.
Mechanisms
Pending editorial review.
Originators paid on volume, not on default rates, fueled the subprime collapse.
Pending editorial review.
Pending editorial review.
Risk passed downstream creates markets for bad loans.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
If the loss is downstream, the loan looks great.
Examples
- Liar loans during the subprime boom.
- Risk passed downstream creates markets for bad loans.
Pending editorial review.
Original analysis from The Incentives Lab — how this element behaves inside real payoff structures.
Why this element matters to incentive design
Most organizations meet this element as a personnel problem. It is not one. The mechanism underneath it is straightforward: originators paid on volume, not on default rates, fueled the subprime collapse. You can recognize it in the field by its signature: if the loss is downstream, the loan looks great. Every element in the Incentives dimension changes the perceived payoff of an action before the action happens, which is exactly where incentive design has leverage.
How it gets exploited
Left undesigned, risk passed downstream creates markets for bad loans. It is amplified whenever risk passed downstream creates markets for bad loans. Inside organizations that shows up as risk passed downstream creates markets for bad loans. The pattern is the same one Goodhart's Law describes: the measurable proxy attracts the effort, and the purpose behind it quietly loses funding.
How the Lab designs around it
The redesign move is to originator skin-in-the-game. Risk retention rules. Watch for it at the boundaries: handoffs, promotions, incident reviews, and budget cycles are where this element gets its power.
Famous Experiments
Pending editorial review.
Design Principles
- Originator skin-in-the-game. Risk retention rules.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Originator skin-in-the-game. Risk retention rules.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Originators paid on volume, not on default rates.
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Quarterly bonuses create end-of-quarter behavior changes.
Government rescues of failing institutions privatize gains and socialize losses.
Issuers pay raters who compete for the highest ratings.
Quarterly earnings drive quarterly behavior.
Percentage-of-AUM fees reward gathering assets regardless of net performance.
EPS-targeted comp incentivizes buybacks even when reinvestment yields more.
Candidates dependent on large donors become structurally responsive to donor priorities over voter priorities.
Discount framing nudges people to buy things they wouldn't otherwise want.
Productivity targets compress visits, raising misdiagnosis and burnout.
Where Pre-2008 Mortgage Origination is cited in the corpus
Essays, field guides, and diagnostics from The Incentives Lab that apply this element.
- Field guideIncentives: definition, types, examples
The parent field guide for this element.
- ReferenceThe laws of incentives
Goodhart, Campbell, and the Cobra Effect.
- ReferenceThe incentive glossary
Definitions for every mental model, bias, and fallacy in the corpus.
- ReferenceThe Periodic Table of Human Behavior
The full 1,267-element map this page belongs to.
Questions about Pre-2008 Mortgage Origination
- What is Pre-2008 Mortgage Origination?
- Pre-2008 Mortgage Origination is originators paid on volume, not on default rates, fueled the subprime collapse. It sits in the Incentives dimension (INC) of the Human Behavior Taxonomy™ as element HBT-INC-0212, within the Finance Perverse Pattern family. The core principle: originators paid on volume, not on default rates, fueled the subprime collapse. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
- What is an example of Pre-2008 Mortgage Origination?
- Risk passed downstream creates markets for bad loans. The Incentives Lab catalogs everyday, organizational, and historical instances of this element on its Human Behavior Taxonomy™ page (HBT-INC-0212).
- How is Pre-2008 Mortgage Origination exploited?
- Risk passed downstream creates markets for bad loans.
- How do you design around Pre-2008 Mortgage Origination?
- Originator skin-in-the-game. Risk retention rules.
- Which behavioral dimension does Pre-2008 Mortgage Origination belong to?
- Pre-2008 Mortgage Origination is classified in the Incentives dimension (INC) of the Human Behavior Taxonomy™, family "Finance Perverse Pattern", class "Perverse Incentive". Its permanent identifier is HBT-INC-0212 and its evidence grade is C.