“Are we all stupid? Or are the investors still lending at 10% down all stupid? It’s one or the other. Even 20% down seems borderline crazy today, outside of Temecula and other places where prices have already dropped by 40% or more.”
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Current lending standards inevitably dovetail into past loans, don’t they? This is probably an oversimplification, but if all lenders stuck their available credit in a lockbox and froze the market, the result may exacerbate already falling values, thus putting their existing portfolio at greater risk. By continuing to loan money (although clearly not as easily), they act to protect their existing loans. The rub is that they need to avoid making more loans that are likely to go sour and therefore just piling on to their existing shaky loans on the books.