Fraud is possible, even in a full doc loan.
The lenders know this.
If you were told that you had a million dollars to loan out,and your income depended on loaning it out, would you only loan to perfect borrowers a penny at a time ?
(And by the way, when the first million is gone, we will give you more) Didn’t think so.
YES, the crazy financing fueled the speculation. It was a mania. I KNEW the housing market would crash, I just didn’t know when. It wasn’t a difficult decision for me to sell all my rentals. I’m no genius.
What we all have to realize is that the govt (in theory) has the best and brightest working for and advising them, ala Greenspan, et al. If you and I knew the housing would collapse, don’t you think they did too ?
Regardless of the “official” statements, they KNEW there was a problem, but ignored it.
In ECON 101 you learn that extending credit is a risk. extending 100% financing is suicide, unless you compensate for that risk. Easy margin financing also contributed to 1929 stock margin crash. (Like 5% or 10% down) History PROVES that it’s only a matter of WHEN the collapse happens, not IF it will happen.
When you buy something using a credit card, you are financing 100%. When you pay in full, you don’t owe a penny in interest, very convenient. However, the compenstaing factor for the risk is charging 15%-30% interest instead of 8% on a home. You have nothing invested except your credit score on either.
With a mortgage, charging 8% instead of 6% was never worth the risk, but because of mania & marketing average people got swept up, and bid the price of the underlying product up.
In economic theory, loaning 100% today is no more risky than it was 5 years ago, except that consumer sentiment has changed and prices are dropping, not rising.
There are 5 fingers to point blame with. Govt, Wall Street, Lender, Broker, and Consumer. Whose fault is it really ?
I never bought a home 100%, that option didn’t exist. I did get some easy no qualifying assumables, and owner carrybacks though. I survived the 90’s and had my wide eyes open a few years ago, shaking my head all the way up and now nodding my head on the way down.
In my younger days, I could have been easily tempted by 100% financing. I understand the lure.
Robert Allen had a famous book, Nothing Down For the 90’s. I never made any offers like that, but I knew what they were. Never went to his seminars either, I think that he still is doing them, pumping people up and collecting fees.
What are Carlton Sheets and John Beck doing these days ?
Wade Cook went BK.
