Mortgage Crisis - The Government Did It!
Friday March 14, 2008
I feel so much better after reading comments by Freddie Mac Chief Executive Richard Syron. It seems that he believes government programs placed too many people in homes they couldn't afford. I thought that the lenders and real estate brokers were going to take all the blame.
He was commenting mostly on low to middle income buyers. As jumbo loan amounts are increased, should we assume that those lower income buyers are now out of favor, while better-heeled borrowers can get even larger loans? As various government and quasi-government entities struggle to prop up the housing market, we can wait and see if even larger problems result down the road.
The government did not create the real estate problems we are facing now.
Good old fashion greed is the problem!
After 9/11/2001 those who got burned in the stock market decided to give up on it and to put money in homes as home values did not drop when the stock market did.
Real estate speculator sold to real estate speculator. The news media fed the frenzy with information about how home values had to rise.
Mortgage companies and bond rating agencies got into the real estate frenzy because there was money to be made.
Bond rating companies rated mortgage backed bonds A or better all the while knowing the borrowers were not at all A types as they borrowed more than they could ever afford to pay back and were not likely to be able to make payments once interest rates rose.
Realtors did their job, they sold houses. Appraisers gave “market value” what willing buyers were willing to pay willing sellers.
One day there were no more willing buyers. People could not pay their adjustable rate loans as their payments went up by hundreds or thousands of dollars a month. Then the whole deck of cards started to fall.