[quote=livinincali][quote=CA renter]
Also, bankruptcy is NOT foreseeable in most cases. If it were, most lenders wouldn’t make these loans.

If people thought that the credit market was “tight” during the financial crisis, I can assure you that it would be even worse if we were to follow Brian’s advice.[/quote]

I’m pretty sure most of the underwriters during the housing crisis could see bankruptcy and default when they were loaning people 700K when they made 50K annual income. It’s just that they could risk shift it to somebody else with Credit Default Swaps. Credit should be tight, there’s no good reason for loose credit standards except that it helps inflate the costs of things. How much would college cost if you could declare bankruptcy and get rid of student loans? It wouldn’t be nearly as expensive as it is because nobody would be loaning 100K to a liberal arts major anymore.[/quote]

We’re very much in agreement about credit standards — credit should never be loose, and borrowers/lenders should never be encouraged to behave in irresponsible ways.

While I agree that the underwriters *should have known* about the default risks with those mortgages, they were encouraged by people up the chain of command to keep their mouths shut and process the loans. It’s this type of corruption that needs to be stopped. They did it because they knew they could rely on being bailed out (by the Fed, taxpayers, etc.); they knew it.