Another factor contributing to the mess was the urging of the mortgage industry by the Feds to engage in 'creative financing' to accommodate almost anyone who was able to sign the documents.
Why did the Feds do this? They did so at the urging of the administration that wanted a robust economy. They created a false prosperity with all the wild spending of HELOC money, outrageous profits from 'flipping', builders laughing all the way to the bank and retailers not being able to stock the shelves fast enough.
Yep, our administration proved to be "all hat and no cattle" or more appropriately "all mortgage and no equity"
The biggest problem was the mortgage funds that were used to finance these loans. Banks would take the risk of these types of loans, so they packaged them up into funds and sold them to investors as safe investments backed by mortgages with high yields. Of course, these subprime borrowers were anything but safe.
The ground work for these loans was layed by congress long before Bush II came to office. Congress complained that minorities weren’t getting their fair share of home ownership. So they demanded the rules be changed so it was easier for people to qualify... Hence “sub prime”...
At least that’s how I remember it...
Please. Like you or I didn’t enjoy the last few years of prosperity. We ate well, have great homes. The Fed tinkered with the economy so we didn’t have a depression after 911, we had a short recession instead. The Bush tax cuts actually fueled a lot of this economic boom. That and low interest rates which are a good thing for consumers. I don’t like where we are headed because it means we will have to spend time making lots of financial choices as we tighten our belts. This is not as fun as eating out and having fun with friends on my platinum card.