[quote=eavesdropper][quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]

For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.

These lenders must have been two jokers short of a full deck.[/quote]

I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?[/quote]

I don’t think the personel at the retail outlets of the banks are the cause – they’re the symptoms. What triggered the lower underwriting standards was the money being generated by writing loans, selling them to the secondary market, bundling them into mortgage backed securities and selling them as investment grade vehicles… Profits were taken at every step – and they wanted more mortgages to feed the MBS beast… pretty soon you barely needed a pulse to get a loan and downpayments… pppht… who needs that. There was little risk to the banks originating the loans since they were sold off as soon as they were written and the borrower only had to make payments for the first 2 years… so underwriting standards looked for 2 years worth of solvency on a 30 year loan.

The khaki/polo clad folks at the bank were a symptom, not the cause. The underwriting standards were lowered by the corporate officers, not the clerks in comfortable attire.