You just mentioned the crux of the problem- none of these "affirmative action" mortgages required ANY down payment, or regular income, or citizenship in this country, or anything resembling a responsible buyer. However, you're missing the point that I'm trying to make- WITHOUT 20% down, PMI is (was) required.... why isn't this PMI insurance now liable for all this worthless paper? That was what it was insuring, if I understand it correctly.
The vast majority of loans originated in the last few years were 80/20 or “piggyback” loans, so the purchase money mortgage was technically only 80% of the FMV, hence no PMI required. In essence, a shady way to avoid having to pay pmi.
I saw your previous post, and have been trying to remember where I read that relaxing the requirement for PMI was part of the “Re write” during the Clinton assault on the Mortgage Industry later in his misAdministration. I cannot remember the title of the article now, but it was posted here within the past week IIRC.
Specifically the article (I’m Paraphrasing here of course) mentioned that the costs of insurance to the disadvantaged loan applicants was too much and had to be eliminated to allow the applicants to focus on the loan repayment.
I recall an uncontrollable facial contortion upon reading that.
The way this is structured for a low-income person is to give them a second-loan at about 12% for the down payment, and then the first mortgage has a low teaser rate for the rest of the 80% of the cost.
It's basically a bomb with a short fuse.