Final answer:
Portfolio or direct lenders typically lend their own money, carefully vetting borrowers, while some institutions engaged in the securitization of mortgages have sold riskier loans, including subprime and NINJA loans, contributing to the mid-2000s financial crisis.
Step-by-step explanation:
The lenders that usually lend their own money so they can originate, finance, and close first trust deeds or mortgages secured by real estate are often referred to as portfolio lenders or direct lenders. These entities tend to scrutinize borrowers more carefully than lenders who plan to sell the loans on the secondary market. In contrast, some institutions participated in the securitization of mortgage loans, a process that allowed them to off-load the risk to investors through mortgage-backed securities. This led to a proliferation of subprime loans, including those characterized by low down-payments, less scrutiny of borrower income, and NINJA loans, where borrowers demonstrated No Income, No Job, or Assets. These risky lending practices, lacking in diligent borrower vetting, were a contributing factor to the financial crisis of the mid-2000s.