due diligence is one of those terms in english - another example is 'gold standard' - that has come to mean the opposite of what it actually means.

people think that 'due diligence' refers to some kind of broad concept of upholding responsibility. so, they may use it to refer to a property owner upkeeping their property, or perhaps an employee following best practices. but, this is completely wrong.

due diligence refers to the responsibility of a lender to ensure that the person they're lending money to can pay it back. it's a 'reasonable person' abstraction: would a reasonable person foresee that an individual may be unable to pay back a loan?

and, here's the twist nobody knows: the law says that if a lender lends to somebody without doing this research, that is without performing their due diligence, then it's their own stupid fault when they get defaulted on. what the law actually says is that if you give a loan to a crack addict and that crack addict never pays you back then it's your own stupid fault for being dumb enough to give a loan to a crack addict - and, further, that it's your own responsibility to make sure you're not lending to crack addicts.

there is only one exception to this rule: student loans.