Re: Did you watch Dr. Phil this am
There is no pressure to loan money for homes. The only law i know of is that bankers must loan money to credit worthy customers that want to buy in red line districts. For some reason some banks have an aversion to that. Your either credit worthy or you are not.
Unfortunately the newbanking policies is to bundle mortgages and rate them and sell them to unsuspecting investors. Many of those bundled portfolios were a crap sandwich as some readers like to say. Thus banks were not on the hook for loan failures. They sold the risk along with the mortgage. They didn't give a damn whether the consumer was credit worthy or not. They were selling the risk anyway.
Consumers always are wanting to better themselves. Who would ever suspect a bank willing to loan you money if you were unqualified? In fact most sellers would claim that inflation would assure that there is an advantage of buying now. The biggest problem was that investors became wary about the bundles they were selling. Thus the banks ended up with huge inventories of unsold bundles. And that sir caused the banking crisis. They made tons of money during the boom and spent much of it on bonuses for employees. They couldn't claw that money back when thing went bad.
Unfortunately that fiasco caused the banking crisis and the impact on the economy was a great deal of job loss and a collapse of home values. Laid off people living off their life savings to survive. It's terrible what has happened to millions of people. retirement funds spent to survive and retirement age approaching and the IRA is gone, kaput!
I know it is popular by some folks to blame consumers for buying home they could not afford. However, the lenders were supposed to be the grownups in the room and any reasonable search would have proven they were unqualified. I know my banker was always cautious about loaning me money for operating. Any sizable loan should have a significant examination to see if income and assets would qualify the borrower for the loan.
There was simply too much money to be made on those transaction. Not just the loans but the fees for processing the loans. The closing costs were a real money maker and they still are with $6000 fees and more to acquire a loan. Cash to the lender and often times added to the loan.