Quote:
Originally Posted by PashaDawg
As these loans became more and more profitable (because there was *a lot* of money to be made), there was increased pressure from the free market to find more borrowers. After the sources of responsible, reliable borrowers were tapped out, the mortgage industry needed to lower their standards for qualifying borrowers for loans (e.g., shifting from documentary proof of income to no such requirement). Again, there was no concern for the loan originator, because they planned to sell the loan to Wall Street. They just wanted to collect their initial financing fees, which were substantial.
To keep the customers coming, the industry devised inventive types of loans to get less loan-worthy borrowers into higher priced homes (e.g., adjustable rate mortgages and interest-only mortgages) that eventually trapped borrowers who bought homes that they probably should never have purchased. For example, the adjustable rate mortgage would have a 2-year teaser rate that was more affordable, and when the rate eventually adjusted after 2 years, the monthly payments would jump up substantially. (I think it is a two way problem. The home borrower was not paying attention to what he/she could afford, and the loan originator was pushing to lend as much as possible (to get higher fees) while disregarding the likely ability of the borrower to repay.)
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I actually purchased a home based on "stated income". Both my brother and I were doing a lot of work as a private business, without documentation to prove that income. We jumped into the middle of the housing'mortgage boom with no problems, and great expectations.
2 years later, things were looking alright, and we wanted to consolidate outside debts into the mortgage, and at the same time refinance at a lower rate. We got duped into an ARM after a lot of talk that was getting us nowhere, and we were assured that our rate would likely go down slightly in 2 more years, or if it went up, that it couldn't go up enough to really matter.
2 years later, the ARM matured, and we saw a significant increase in mortgage payment. 6 months later, and they bumped it again. Total increase to our mortgage? 30%. I'm sorry, we were not irresponsible, nor were we unable to pay the mortgage that we signed. However, we were not able to pay a mortgage 30% larger than we signed - especially not as my health declined, and budgets tightened.
This was purely predatory economic behavior, and is indicative of the focal problem with free market capitalism. Those who have the money and power are largely incentivized to do -anything- in their power to maximize profits. The profit is all that matters at the end of their day, because it is a measure of the growth of their
personal power.
If you don't believe that the current administration has been all about the pursuit of wealth and power, then I can only encourage to look more closely at the issues. To stop, and actually do some hunting around on the internet to see what is currently going on, and who is scratching whose back. You may find yourself extremely surprised. Oh and for the record, Bush is an absolute moron, who is likely becoming senile. He didn't dupe anyone, he very poorly and clumsily repeated lies that were fed to him by much more intelligent and cunning players in the game - he was just a puppet, or a muppet, if you will.
