Some ofwhatyou say is true. But there is no possible way someone without a credit history and a low to no down payment like illegal aliens received loans. No mortgage lender would loan them money without the ability to track their past residential history much less credit history with no guarantees where they would be living in the future. Now sometimes legal family members may have purchased it in their names. But even at the high point of the lax lending streak no bank would have given hundreds of thousands of dollars to just anyone off the street who couldn’t even prove who they were.
Loreldan,, you don't seem to understand the mortgage dynamics of the past several years.
What happened was a scam, a con game, a swindle.
Specifically, it was a classic Pigeon Drop " in which a mark or "pigeon" is convinced to give up a sum of money in order to secure the rights to a larger sum of money, or more valuable object. In reality the scammers make off with the money and the mark is left with nothing."
The "pidgeon" of this scam was the mutual fund manager of your own 401K. Therefore, you, loreldan, by proxy, were the pidgeon.
The illegal aliens, the deadbeats without jobs or very low paying jobs or the middle class guy with a middle class job borrowing three times more than he could afford to repay were merely the tools of the scam.
The mortgage mess was created by loan brokers who were not lending their own money. They were just creating phony Pidgeon Drop mortgages to sell to gullible investors. Let's be clear here. That "gullible investor" was NOT the house "buyer". It was a mutual fund manager in maybe your own 401K or a foreign investor wanting to invest in the U.S.
At the time, the stock market was not red hot like it was during the Tech Bubble and interest rates on CD's were pretty low.
However, Americans were lining up for big mortgages that they promised to repay at a good interest rate after a few years at an introductoray "teaser" rate.
As a long term investment, those mortgage loans seemed pretty good and Wall Street's customers wanted to buy them up.
So, loan brokers would write up mortgages, they would be bundled up in financial instruments and would them be sold off to your 401K manager or to that foreign investor.
Everytime that happened, the loan broker would get a good commission.
Life was good for a loan broker.
There was one problem, however. Although there was a high demand for that product and investor wanted to buy more and more of those mortgage loans, the supply of credit-worthy borrowers was running out.
What to do?
Simple.
Just sign up borrowers without a snowball's chance in hell of repaying the loans. Mix those loans up with better loans in a package and they will still buy them up like hot cakes on Wall Street.
So, the loan brokers started creating mortgages by getting anybody, ANYBODY with a pulse (and even some dead people without pulses, as investigators discovered) to get their names on mortgages. The worthless mortgages were then sold to eager Wall Street investors, maybe the manager of your own 401K.
As the demand for these "great investments" grew, illegal aliens, native born Americans without jobs or good credit, people with good credit wanting to borrow three times what they could actually repay to buy a house at three times the price a real market could actually bear and even dead people had their names put on these Pidgeon Drop mortgages.
And Wall Street's customers just kept buying that worthless paper up.
For the loan brokers, it was just like writing a commision check to themselves, having a drunk downtown sign it, taking the check to your 401K manager than then having your 401K manager give him your 401K money in exchange for that check.
That is why loan brokers were getting filthy rich.
Every time such a worthless Pidgeon Drop mortgage was sold on Wall Street to a 401K mutual fund manager ....KA-CHING..... the loan brokers got richer with commissions.
The loan brokers who rounded up illegals and dead people's names to put on the dotted line for "loans" they could never hope to repay knew exactly what they were doing: They was swindling YOUR mutual fund manager out of YOUR money and they knew it.
How's your 401K doing lately?
The mutual fund managers and investors around the world, plus the legions of Freepers who used to argue that there was no such thing as the Housing Bubble all swallowed the loan broker's Pidgeon Drop swindle hook, line and sinker.
The loan brokers who left the game early got filthy rich. The ones who stayed in the game too long are now in deep kimchee because the "pidgeons" wised up and are no longer buying their worthless product.
That SHOULD be the case, I certainly agree.
However "liar loans" or "no doc" (no documentation) loans were in fact given out. In some cases all the illegal had to show were say, a few utility bills.
As you know, loan originators get paid up front, when the mortgage is signed and delivered; and there were many cases where for example, Spanish-speaking reps would get illegals to sign up for a loan that no normal person would approve. However, once the loan is sold, the risk is transferred to someone other than the loan originator.
Don't believe me? Do a Google search on "no doc loan" or "no doc mortgage" and spend a few minutes reading...