This American Life put together
the most concise and easy-to-digest explanation about how the housing mortgage crisis came about that I've yet heard. It's seriously worth a listen:
And so Mike noticed that every month, the guidelines were getting a little looser.Something called a stated income, verified asset loan came out, which meant you didn't have to provide paycheck stubs and w-2 forms, as they had in the past. You could simply state your income, as long as you showed that you had money in the bank.
Mike Garner: "The next guideline lower is just stated income, stated assets. Then you state what you make and state what’s in your bank account. They call and make sure you work where you say you work. Then an accountant has to say for your field it is possible to make what you said you make. But they don’t say what you make, just say it’s possible that they could make that."
Alex Blumberg: "It’s just so funny that instead of just asking people to prove what they make there’s this theater in place of you have to find an accountant sitting right in front of me who could very easily provide a W2, but we’re not asking for a W2 form, but we do want this accountant to say 'yeah, what they’re saying is plausible in some universe.'"
Mike Garner: "Yeah, and loan officers would have an accountant they could call up and say 'Can you write a statement saying a truck driver can make this much money?' Then the next one, came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don’t have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse."
Actually that pulse thing? Also optional. Like the case in Ohio where 23 dead people were approved for mortgages.
Shorter version here. For
those of us who rage at the public perception of this "crisis," it's nice to get confirmation of where the problems originated.
Labels: Adulthood, life interfering with fun, rabble, rampant capitalism, The Fall Of Western Civilization, The Incredible Shrinking Dollar
4 Comments:
I have a good friend who is involved in the loan biz and he -DAILY- has new stories of brokers STILL trying to get by already loose lending rules.
And the sad thing? With as bad as the economy is right now, he says that we have roughly another year to go before things can really start to heal.
I listen to the podcast every week. Good stuff, even if it is out of Chicago.
When I was in real estate school 18 months ago, one of our instructors said "between you and me and the fencepost, this whole thing is going to come tumbling down, because mortgage companies are writing bad loans to people who haven't the slightest ability to pay them back. If you can fog a mirror, you can get a mortgage today."
The REALLY bad part, to me, is all the asshats that will get away free and clear with MILLIONS of dollars in their golden parachutes and leave you and I holding the bag... Too bad they can't sue the CEOs for the millions they effectively stole from us...
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