Patient, I’m not sure that we disagree. I don’t understand your point. You mention “people involved in supplying the loans” and “alerting the buyers of the loans”
Perhaps you know the below already;
Loans are sold off in huge portfolios that were underwritten to the standards of the “buyers of the loans”
“People involved in supplying the loans” didn’t force the buyers to take them. Each lender knew what their available line was for funding on an ongoing basis and loans were delivered.
The problem with subprime lenders arose when payments weren’t made (defaults) in the first month or two after origination, and the buyer wanted to return the loan to the supplier and be reimbursed. Many times the lender hadn’t made much on the loan, only a tiny %, but was faced with the buyback of a $500,000 loan. Multiply that times dozens or hundreds and you see where the collapse comes in.
The ultimate buyer of these subprime loans was Wall Street.
If I understand you above, you say that the WS buyers should have taken the responsibility and I AGREE with you, however, they were able to return the quickly defaulting loans which triggered the collapse of subprime, so they really weren’t taking ALL the responsibility.
Anyone with a basic understanding of math should have known that loaning 100% freely was going to lead to defaults.
It’s EXACTLY what credit cards do. they loan 100%, but compensate for the risk by charging 15%-35% plus fees to the honest group, and write off the non performing loans.
