The bottom line is that government made the whole thing possible, and in some areas virtually required that the loans be made.
The NINJA (no income, no job, no assets) loan was just one manifestation of the greed, one vehicle by which money could be made. But the government made the rules which precluded turning someone down on the basis of where the property was located. The whole broader 'flipper' market resulted from the kiting values and the idea someone could turn a property for a profit in no time, often with little or no investment.
The whole 'it will be worth more tomorrow' bit has been done before on smaller scales (I have been through a couple of oil booms and the busts which followed, so this isn't the first time I have seen wild fluctuations in real estate values.). Sooner or later a few someone(s) are very rich, others get left holding the bag.
Joe,
Again, the government redline rules are and always were a red herring! Believe me, South Koreans weren’t buying up these things because of government policy. You can’t crash an entire economy by forced loans in redline districts... redline districts by their very nature are an incredibly small part of the housing stock. This line is good red meat for right wing ideologues but it was not the cause of the housing debacle.
Here’s the simple truth, if you took every red lined house in the country and gave them all loans that failed, it would not remotely have caused the problems that you saw over the last 7 years. The numbers don’t add up.
Now, were the red line polices smart? No, and we can discuss that all you would like, but the supposition that it caused or led to the housing debacle is just flat out nonsense.
Its a red herring, and its frankly moronic, there is no difference between that flat out lie that red line polices caused the housing crisis, than there is to the flat out lie that more welfare will fix the inner city. Both are flat out, complete and utter lies, the only difference is which side of the political spectrum created them and uses them to spin reality.
The reality is simply this, GREED created the housing crisis, pure and simple, not governmental policies around red line districts. The overwhelming majority of $$ lost in the debacle were not tied to red lined properties.. because housing bubble or no red line areas are naturally depressed. No one is going into a red line area and paying 800k for a 3 bedroom house, no one. Yet, a couple both working labor jobs making a combined income of 50 or 70k between them were going in and buying new construction homes at 800k and getting their loans approved, because it was GREED. You put these people into homes in interest only loans or even negative amortized loans with a 5 year balloon and guess what, they are going to fail. That’s what brought the on the housing crisis, not the fact that a banks were forced to loan in redline neighborhoods.
The facts do not support this lie, and its insulting and disingenuous that fools like Hannity continue to regurgitate it. There is no doubt that fed policies around red line districts were poorly thought out, and they deserve to be criticized. However, to take that issue and try to present it as the root cause of the housing crisis requires so either complete ignorance of facts by those espousing it, or a complete willingness to ignore the facts to gain ideological points.
Its a lie, pure and simple, and it needs to stop being espoused as gospel.