WRONG:
All banks expected a payback of thier loans. Nobody loans money to people and then doesnt care if it is paid back?
Now, that does not mean that some of the loan programs offered were “smart” in a business sense because many were not.
The “no doc” loan in therory is a good loan for some people. For instance, many business owners make lots of money but cannot prove all their income because of tax deduction allowance, depreciation of assets, etc. These loans were designed for such people. Also, you had to prove that the income was reasonable for someone in the same career or line of work.
However, over time, the “no doc” loan was used to give anybody a mortgage.
No doc loans were common, but made up only a small percentage of the mortgage market.
The biggest default rates are in the GOVERNMENT sponsored loans such as FHA, which still to this day has the some of the loosest qualifying criteria.
All the CRA loans had federal backing. The banks had to loan the money, and were guaranteed the backing of U.S. tax dollars in case of default. The banks complied, not only because they had no choice, but didn't fight back because every bad loan would be paid by U.S. tax dollars anyway. They had nothing to lose.
Once they got too many bad loans, they shipped them back to the feds, i.e., Fanny and Freddie. F&F had to bury them, because the tax payers were on the hook (not good for democrats if people found out about all this), so F&F (the Feds) dumped them on the market, thinking out of sight is out of mind. BUT, their plan crashed, and international investors wanted their money.
We had to pay it. The democrats promised the banks the tax payers had their backs. The banks got their "promised" money back through the bail out.
>>All banks expected a payback of thier loans.
>> Nobody loans money to people and then doesnt care if it is paid back?
LOL. Argent mortgage wasn’t a Bank, yet they claimed to have “revolutionized” the mortgage industry.
How’s all that AAA A$$Paper they originated and then sold up the securitized river floating these days?