America’s gummed-up housing market is a $45 trillion mess — a big old knot of economic forces smashing into a century’s worth of cultural conditioning about the value of homeownership.
The subprime crisis was way more than just fraud. It was many compounding levels of fraud. Assessors would essentially be bribed into justifying whatever value the agent wanted, now they don’t have direct contact and can’t just pick a number around the offer number. Brokers could get approval for someone either no verified income, assets, or even a job in some cases, this again is no longer actually possible for conventional mortgages. Insurance companies gave safety ratings on mortgage securities that were entirely made up, again this isn’t happening anymore. Mortgages were bought and sold so many times there wasn’t really a record of who actually owns many of them, again no longer possible and managing ownership with physical paper is required. Mortgage securities were also leveraged as safe assets to guarantee further loans, which once again isn’t actually allowed anymore.
Edit: I forga big one. Adjustable rate mortgages had no total cap on rate growth, so rate could increase each adjustment period indefinitely, now they are limited to a maximum increase usually 5%. So now if you get about ARM at 5%, it will never go above 10% for the interest rate.
The subprime crisis was way more than just fraud. It was many compounding levels of fraud. Assessors would essentially be bribed into justifying whatever value the agent wanted, now they don’t have direct contact and can’t just pick a number around the offer number. Brokers could get approval for someone either no verified income, assets, or even a job in some cases, this again is no longer actually possible for conventional mortgages. Insurance companies gave safety ratings on mortgage securities that were entirely made up, again this isn’t happening anymore. Mortgages were bought and sold so many times there wasn’t really a record of who actually owns many of them, again no longer possible and managing ownership with physical paper is required. Mortgage securities were also leveraged as safe assets to guarantee further loans, which once again isn’t actually allowed anymore.
Edit: I forga big one. Adjustable rate mortgages had no total cap on rate growth, so rate could increase each adjustment period indefinitely, now they are limited to a maximum increase usually 5%. So now if you get about ARM at 5%, it will never go above 10% for the interest rate.
Yup, it was fraud.