Can the most hated industry of 2008 be one of the safest bets of 2025?

Let’s talk about the mortgage industry for this article.

Read on to better understand what Professor Litman is saying about this subject.

Can the most hated industry of 2008 be one of the safest bets of 2025?

In the world of finance and investing, some calamities start not with fire and brimstone, but with  ambition.

A desire to be the best.

A relentless push toward growth.

The pursuit of market dominance at all costs.

In the early 2000s, that pursuit quietly laid the groundwork for one of the most devastating economic collapses in modern history.

Fast forward 15 years, and according to  Professor Joel Litman —Chairman and CEO of  Valens Research  and Chief Investment Officer at  Altimetry Financial Research —the very same sector that once helped spark the Great Recession may be quietly transforming into an attractive opportunity for investors bold enough to take another look.

… but first, to understand the potential, Professor Litman insists we revisit the chaos that started it all.

The Man Who Chased Market Share—No Matter the Cost

Angelo Mozilo, founder of  Countrywide Financial, had a singular vision: For his company to dominate the mortgage industry.

That’s why when he briefly lost the number one spot in the 1990s, he vowed to never come in second again.

Here’s what he did…

At a high-profile Lehman Brothers conference, Mozilo declared his ambition to capture at least 30% of the U.S. mortgage market—a target more than double the share any lender had ever achieved.

To accomplish this, he turned to his right-hand man, David Sambol, who issued a chilling internal directive:

“Price any loan.”

Its translation?

Sell to anyone, approve everything, and worry about the details later.

Thus began Countrywide’s descent into recklessness.

Under Mozilo and Sambol, Countrywide pioneered practices that would come to define the 2008 financial crisis. They issued loans without verifying income, employment, or assets—infamously called NINJA loans (“No Income, No Job, No Assets”).

These were followed by adjustable-rate mortgages and interest-only loans that seemed manageable… until they weren’t.

Basically, it was financial engineering on steroids.

By 2006, Countrywide’s loan volume skyrocketed from USD 62 billion to over USD 463 billion, transforming the company into a MASSIVE machine—not just originating loans but also securitizing them.

Through mortgage-backed securities (MBS), risky mortgages were bundled, packaged, and sold to investors as  safe.

The illusion was complete… but behind the façade, the assets were fundamentally  flawed.

When the truth surfaced in 2007, the entire system began to unravel.

A Historic Collapse and a Price Paid in Billions

Countrywide’s empire crumbled as quickly as it had expanded. Liquidity vanished. Banks refused further credit. The company booked a USD 1.2 billion loss—its first in a quarter-century.

In a fateful move,  Bank of America  acquired Countrywide’s massive loan portfolio—nearly USD 500 billion worth—for a mere USD 4 billion.

Uh-oh…

It was supposed to be a bargain. Instead, it turned into a USD 50 billion legal and financial nightmare.

Mortgage insurers refused to cover the fraudulent loans, and Bank of America found itself liable for buybacks and lawsuits that dragged on for more than a decade.

The final payments related to the Countrywide debacle weren’t made until 2022.

So… why is Professor Litman bringing this back into focus now?

Because where most see failure, he sees  transformation.

According to Professor Litman, while Countrywide and others fueled the crisis, mortgage insurers—paradoxically—escaped the worst of the fallout.

In many cases, they avoided massive payouts by pointing to borrower fraud.

However, relying on technicalities isn’t sustainable. In the years since the Great Recession, Litman notes the industry has undergone a quiet revolution.

Simply said, today’s mortgage insurers are not yesterday’s enablers.

They’ve dramatically tightened underwriting standards. Credit score transparency is now the norm. Risk models have improved. Regulation has increased. The businesses are leaner, smarter, and most importantly, far more cautious about which mortgages they back.

That’s why for Professor Litman, this new rigor has created an overlooked opportunity for savvy investors.

It’s been more than 15 years since the financial system cracked under the weight of bad loans. Since then, investors have remained understandably wary of anything remotely connected to that collapse.

… but that caution has also led to an underappreciation of the transformation within the mortgage insurance sector.

Professor Litman states investors may now be able to dip their toes back in—  carefully , of course.

The key?

Focus on insurers that serve borrowers with the highest credit scores!

These companies tend to publish their borrower data transparently, and those with the best underwriting discipline represent a new class of financial safety that didn’t exist in 2008.

While the industry may never shake the shadow of the past entirely, its fundamentals have never looked more promising.

A Lesson for Investors: History Doesn’t Repeat, but It Often Rhymes

For investors seeking long-term value, Professor Litman’s insight offers a powerful reminder:

The seeds of opportunity are often planted in the ashes of crisis.

The mortgage insurance sector, once seen as toxic, may now represent a safer, leaner, and more disciplined corner of the financial markets—one poised for steady growth as the broader economy stabilizes.

However, as always, the difference between success and failure lies in  discernment.

It’s not just about getting back in; it’s also about knowing where, how, and with whom.

For those willing to look past the scars of the past and into the finer details of today’s data, Professor Litman believes there just might be something worth warming up to.

Hope you’ve found this week’s insights interesting and helpful.

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