It was a scam, on all fronts. Lenders, brokers (mortgage and real estate) and borrowers all knew that the borrowers weren't actually qualified. But, if prices had continued to go up (paid for by whom, no one has answered), then the system would have remained solvant. We are dealing with the last lenders and last buyers in line and bam, the house of cards is coming down.
Folks have long predicted that sooner or later this would happen. The miracle is that it continued for so long. The other wonder is how fast it is all unraveling.
So it is all a case of greed on the lenders part and stupidity for trusting what the sales person/lender is spinning on how the borrower can pay for the Brooklyn Bridge.
[We are dealing with the last lenders and last buyers in line and bam, the house of cards is coming down]
Say, doesn't someone normally get arrested and go to jail when their Ponzi Scheme falls apart?
Strange, why haven't we been reading about any arrests?
You have detailed one type of person being foreclosed upon — those who could never have afforded a home without loans that are or border on fraud. They got teaser rates that expired and now they cannot afford the true cost of the loans on the homes they cannot afford.
Type 2 is the investors who were certain a “greater fool” would buy their overpriced investment home for an even more insane price. They too got interest-only loans since they planned to keep the home very briefly — just long enough to flip it for profit. Many of these investors are now caught with their pants down because they are way upside-down on their interest-only loan, or their teaser arms they thought they would only need one year, are now resetting at high rates. While many occupants are completely trashing their homes upon eviction, many of these investors never set foot in their new homes, or did nothing but refresh their older homes. Many are in immaculate shape. I laugh at these people and enjoy their misery.
Type 3 are all of the righteous buyers — some who even had their homes for decades and even paid for with no mortgages — who found themselves suddenly wealthy by extracting equity from their homes over and over and over again, until they pulled most or all of it out, got caught in that trap, and not cannot afford to keep their home. I laugh at these people too. They should have known what they were doing. They are idiots.
I’m sure there are more types beyond just these 3 being foreclosed on. So, what is type 4?
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig von Mises