Trust me Countrywide was one of the big ones who did give out loans to practically anyone, our firm did tons of appraisals for that company!

We purchased our home 2 years ago and we had to show proof of everything. Income, bank statements, savings reserves, 2 years of tax returns, all sorts of things….. and this is through countrywide who supposedly gave loans to anyone with a pulse….. ?????

Not all the problem stemmed from that, though. I think the bigger problem was the role of Fannie Mae and Freddie Mac in creating a market for unsafe loans.

I imagine you appreciate that your bank accounts and CDs are FDIC insured. It saves you a lot of effort in having to figure out the financial stability of the bank, and moving funds around as the bank’s circumstances change. In the same way, lenders who knew that there was a guaranteed market for their new loans could afford to be less careful with the qualifications of their lenders.

And, by the way, lenders probably would have gone out of business if they HAD done as you suggest and held their borrowers to higher standards. The bad borrowers would have been weeded out, but so would the good ones.

I’ve done about a half-dozen refinancings in the last decade, and not one of them has required ANY documentation by me of my income. (Also no loan fees and excellent interest rates.) Since I hate paperwork, I would have always chosen the no-documentation loan over the fully documented one, costs and rates being equal. Other borrowers preferred no-documentation loans because they intended to lie to their lenders. Either way, a careful bank would have simply had no business.

No bank has lost any money on me, but that’s because I don’t borrow more than I can afford to pay and I pay my bills, not because the bank did a thorough job of qualifying me. In other words, they got lucky on me. Not so lucky on others.

@Feng: same as @LAL, although I will restate that the process isn’t the cause for illegal immigration, it is financial consumption. california made a decision not to enforce and deport illegals and instead to give them access to everything. you can also blame illegal immigration for why there is a backlog. reform is needed in enforcement, not necessarily on the illegals but on the consumers.

I agree with LAL, only 5% were subprime. The rest were over extended credit. that was the market. then you had MBS’s and insurance magnifying the bubble exponentially.

But were these banks FORCED to do this? I mean, were there consequnces if they didn’t? Could they think for themselves and say, no, we better not do this, too risky. No, they didn’t. They processed the loans, collected their closing costs and sold the loans. Sounds like a good deal for them…… we all want someone to blame, and want a bailout, and refuse to accept blame and responsibility for making poor, risky, and greedy decisions.

I wasn’t including property taxes in my figure. If I did, that would raise it up another $4.2K…… So, if you look at the taxes that I’ve paid and the fact that I don’t get a return, is what I based that number from. The “deductions” are supposed to give you a “break”, correct? I suppose that if I didn’t get a break from deducting mortgage interest, then I’d being paying even more. Yuk. But I will take a look at that link that Kristi provided.

As far as the immigration, well there is a nasty backlog, and it is only getting worse. Then people’s applications get kicked back for the dumbest reason, like they can prove that they are immune to measles, but were still supposed to get an MMR vaccine, even though they didn’t need it, so the application gets kicked back, and shuffled around on someone’s desk for 6 months. People have been waiting for years to become citizens. And then we deport people with graduate degrees or refuse to give someone with a student visa, a work visa and keep educated people here, but then let in unskilled illegal immigrants who then have several children and use MA. I just don’t get it. And yet, we ALL have to pay for it. Look at Cali and how MediCal is practically bankrupting the state. REFORM NEEDED.

In a nutshell, the causes of the S&L crisis were:

1. Inflation. Only the federal government can cause inflation – a general rise in the level of prices – because only the federal government has control over the money supply. Inflation meant that S&Ls, whose primary business was fixed rate mortgages, had huge loan portfolios that were declining in value as the low rates on the loans were outstripped by inflation. I remember signing a 90-day loan lock on a small commercial building I was buying in 1979. When I locked the rate, it was 11.5%. By the time the loan closed, the going rate for that type loan was about 15%. The bank that lent me the money, of course, took a beating on that loan, but not as bad as the S&Ls did on home loans. Many home loans from the 1960s and early 1970s were 30-year fixed at far lower rates and people didn’t move as often. Regulations also prevented banks from enforcing “due on sale” clauses, so new buyers of a home could easily assume an old lower rate mortgage and the lender could do nothing about it. I bought my first house in 1973 by assuming a 3.5% loan and giving the seller a contract for the rest at about 6% (if I remember correctly). Within a year or two, rates were 8 or 9%, and those lenders took a beating. Adjustable rate home mortgages first grew out of that inflationary period.

2. Increase of the FDIC limit from $40,000 to $100,000 and from 70% coverage to 100% coverage. Depositors had far less reason to be careful that they were depositing funds in soundly managed institutions, since they were well protected against loss, and therefore could chase higher rates. These were usually offered by the S&Ls that had the riskiest (and temporarily most profitable) loan portfolios. The ancient wisdom of “If it sounds too good to be true, it probably isn’t,” got thrown out the window.

I remember seeing an ad for one S&L in my neighborhood that was offering CD rates nearly 1.5% higher than anyone else and thinking, how can they afford to do that? I was tempted, but decided it was “too good to be true,” and gave it a pass, not out of fear of loss, since it was fully FDIC insured, but just because I was concerned about how long a collapse might tie up my money. Sure enough, a year or two later it collapsed.

3. A huge expansion of the number of FDIC insured institutions by changing the minimum required number of shareholders from 400 to 1, dramatically increasing the risk of fraud and subservient boards of directors.

4. Incompetence and probably corruption in the governmental investigatory and regulatory staffs, who did not adequately enforce the numerous regulations that did exist.

5. A cyclical collapse in oil prices that devastated the housing markets in oil states like Texas, Alaska, Oklahoma & Louisiana, causing massive foreclosures. (Oh, yes, there is nothing really new under the sun!)

6. Tax code changes that dramatically reduced the value of multi-family and commercial real estate projects, causing loan losses for S&Ls that had, due to regulatory changes, just recently expanded into that lending area and were already hampered by lack of experience.

While it is true that S&L regulations had been loosened to allow them to expand their businesses, which left them far more vulnerable to the effects of all the above, to claim that “de-regulation” caused the crisis is simply substituting a political sound-bite for real analysis.

I consider it a “regulation” for the federal government to guarantee the downside risk of bad lending practices as the federal government did with Fannie Mae and Freddie Mac (and Sallie Mae, too, although that is smaller numbers). Maybe you don’t.

I also consider it a “regulation” that the tax code now makes unsecured interest non-deductible and home-secured interest deductible. That didn’t used to be the case; I remember years ago when all interest used to be deductible, and there was therefore a much smaller market for home equity lines of credit (HELOCs).

Anyway, the issue isn’t regulation or de-regulation. That’s just a political talking point. The issue is good versus bad regulation.

A good regulation is: clear, of limited and carefully designed purpose, does not try to choose or create lottery-type winners and losers. It basically tries to prevent fraud and compulsion, and avoids distorting the rewards and punishments of the market place. Federal guarantees by definition distort the punishments of the market.

Since most regulations are designed by politicians trying to reward their key constituencies and are INTENDED to distort or conceal market realities, it’s darned hard to get a “good” regulation out of them.

People warned of the dangers of these bad regulatory moves and of Fannie Mae and Freddie Mac, but their warnings were ignored and ridiculed by the very people who are now proposing to design the next ill-advised scheme for trying to distort or ignore reality. It’s ridiculous watching people like Barney Frank and Chris Dodd, probably the two single individuals most responsible for our current crisis, preen for the cameras and position themselves as solvers of the problem they created.

We now seem to be embarking on a national program of massive distortions of the marketplace. Like Fannie Mae and Freddie Mac did, we are going to guarantee people against the bad consequences of their bad decisions. The outcome is inevitable. You get what you pay for. Pay for bad decisions and you will get more of them.

http://swz.salary.com/salarywizard/layouthtmls/swzl_narrowbrief_FA05.html

I started out as a Chemist making $36,000 a year, 8 years ago. Plus I had overtime. But the company I was with had no room for advancement and I ended up disliking the job anyway, met my husband and we moved. Then I got into appraising, which I see as more lucrative in the long term. I can make as much as I want to work, if there’s work. I can also start my own company one day as well. Plus my current position offers lots of flexibility which is essential when you have children, IMO.