I worked at a bank. We introduced “real time approval” for Home Equity Loans in 1997. We were one of the first to do it over the phone. I had no idea how any of this stuff worked.
A couple years later I went to the President of the Bank and told him how people wanted 100%-125% (of equity) loans because home prices were exploding. Other banks were offering them, but we stuck with 80% loans. We were losing business.
He looked at me and said, “This is all going to end badly. We probably shouldn’t be doing 80%, but here we are.” And then he went on to explain how all of this stuff was going to caused a bubble in all of the markets.
At the time, publicly traded banks were under significant pressure to keep earnings very high—and this was one way to do it: Write a mortgage, collect all the fees, and sell them before you had to service it. Rinse and repeat.
We couldn’t keep up and remain “sane.” We were sold in 2003. But I watched the failures of 2008 and thanked God I had moved most of my investments into more secure products.
I have the same feeling today. I’ve seen the value of my home increase about 25% in the last couple of years. And even now, when the market is easing…it is up about 10% this year alone.
We are approaching another “winter season” financially. The same number of people are ignoring the “screams.”
I am starting to worry also. This time the explosion of illegals are a major reason for the rise in prices.
As we deport and make more leave, it should put some downward pressure on the market. Whether it crashes or not remains to be seen.
Your boss was a very smart man. He could see where it was heading way before many of the rest of us.
What secure products today?