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.
Very wise words Polybius. I will have to follow your posts closely. Credit was so easy to qualify the only requirement was to fog the mirror. So homebuilders (Houston) did not require SS number or any credit to purchase (15% down payment).
The scammers in South FLA got busted for creating credit history and charging folks for each line they made up. The fed played their game, the bankers bought the myth, builders raked it in, and house flippers thought they could play real estate tycoon.
This article reads like an infomercial: "I bought my first house for X, and I made thousands..."
Great explaination. It will be frightening to see what the long-term consequences are if now taxpayers' money will be spent to bail out people from the consequences of this scam and no doubt future scams.
I don’t know where this happened then. I am in real estate and even been involved in some “no doc” loans. But as you know, I’m sure, even in these “no doc” loans there was some documentation required just not the typical pay stubs, etc. 1040’s were required but not given as much weight. Maybe some illegals got around it somehow but not nearly as important a number as you seem to be assigning them.