I’m not talking about minority loans, which in itself is a whole topic. I am talking about making loans on properties that were never worth the price, such as making loans at $250/foot when the property was recently built at $75/foot.
Banks use a ridiculous system of measurement of price. They use recently closed prices. That means everything goes up for every purchase. They failed to use such metrics as actual costing models; meaning, if a home was built for $45 to $75 per square foot, and many are, how the Hell does it wind up being a $250 to $400 a square foot property? How does an average home both in size and finish become 5 times the average income in cost when the 30 year previous market has only been 2.5 times?
Banks are filled with just as many uneducated illiterates as any other corporation. They know nothing of math or science or business.
The reason banks underwrite these loans I because they sell them to the government. As long as the paper work is good the loans are purchased. The government is as much to blame as the buyers or bank.
Yep, same difference with subprime loans. If Fannie Mae is willing to buy them from banks then banks will make those loans. The common denominator here is that the federal government is tinkering with the free market and screwing it up.