A Real Estate expert explained this to me this way:
“Not too many years ago, if you borrowed money to buy a house or a car, you visited your local bank. Assuming you were approved, the money came from your bank and the follow-up (the “servicing”) was handled by that same bank. If you had a problem, you knew who you could speak with and where to find him or her. The system worked pretty well. But only greed could cause a seemingly good system to go awry. And the heart of all greediness is Wall Street, of course.
Realizing that these loans were a good investment for the banks, Wall Street decided to figure out how to take a piece of the pie.
Translation: this unnamed "real estate expert" is angry because real estate lending was once a largely-closed shop with little competition. He enjoyed having a near-monopoly in which customers had few choices in borrowing. He loved selling 15% mortgages back in the 1970s.
Then evil Wall Street types got involved, confused consumers with all these different options, and the fat mortgage margins he enjoyed fell as consumers were deceived into paying only 6 or 7 or 8% on their mortgage instead of twice as much.
My take is that this article would be about Free Silver or some other populist crap if published 100 years ago.
A good post and a good tagline.
Great post. The packaging of mortgages has pushed borrowing costs down for borrowers, which is a good thing. Was subprime crap packaged and sold? Absolutely, but that doesn’t mean such packaging is inherently bad.
Reading columns like this just reinforces my opinion that most “journalists” can’t be trusted to either understand the issue they are writing about or to give an accurate assessment if they do understand.