Posted on 02/08/2016 11:32:21 AM PST by Citizen Zed
There was a myth following the subprime crisis that low-income earners who put only a few percentage points down on a mortgage simply should never have been homeowners, and that this was the fundamental lesson we should have taken away. But research shows it's not that simple -- Americans who defaulted on their mortgages in the wake of the subprime crisis came from a wide swath of the socioeconomic spectrum. And a number of reports have found that policies aimed at increasing affordable housing had little to do with speculative lending, which would have happened regardless. (This has been documented by any number of Federal Reserve research papers, not to mention Senator Elizabeth Warren, who chronicles the story and the research in her book A Fighting Chance.)
(Excerpt) Read more at time.com ...
Stocks are down bigtime today...
It wasn’t the reckless lending that caused the financial meltdown, it was bundling the reckless lending into derivatives that should have been rated as junk, but weren’t.
How anyone could value a portfolio "AAA" that consisted of at least 70% subprime loans is beyond me. To me, that's a good definition of "fraud".
Most of the people that I know who walked away from their mortgages did it for financial reasons that had little to do with their ability to pay. Most of them got away with transferring all of their consumer debt into their homes, walking away and saddling the rest of us with the cost of their new cars, expensive clothes, extravagant lifestyles, etc. etc. etc... The consequences to many people who did this were negligible.
I sure hope not. Normally, we get to enjoy a “boom” period before a financial collapse. The past 8 years have been pure misery.
There were people on the radio encouraging homeowners to default, claiming that their credit ratings would only take a hit for a few short years even with a foreclosure on their records.
You can live on cash.
Easier to live within your means.
Yep, greedy bundlers and the the greedy Europeans that wanted in on the action.
I didn’t put a dime down on my home and actually got 3,000 closing. I haven’t defaulted.
That is exactly what people who did it told me, and I have to say if it is still affecting their credit there are few outward signs. Personally, I still feel like it reflects poorly on them that they took advantage of the system.
That, and easy cheap money drove the pricing through the roof...
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