It amazes me how our "leaders" think. "Leaders"... I couldn't follow some of them if the other choice was the doorway to Hell!
They sit on their pompous asses and question the lending institutions as to how they could have done what they did to all these poor mortgage applicants... Many years ago, when we had a pure free enterprise system, banks decided who they could loan money to when someone wanted to buy a house. They knew they had to be careful, though, because it really wasn't "their" money... it belonged to the depositors. And they took that concept very seriously. So they were very careful by making sure the borrowers had real jobs. They were careful to make sure that the borrowers had exhibited an ability to save money. They were careful to investigate what the likelihood of repayment would be. In the process of their "carefulness", they, as a result, turned people down for loans. Often, telling them to save more money, or get more established, nonsense like that.
So not EVERYONE qualified for loans. The banks had executive committees that would review applications and collectively decide on whether or not to extend credit. Sure, they wanted to loan money, because they figured out it was a good way to make money, but still, it was not their money. So if they sensed that this applicant was a bad risk, they would reject the loan.
Enter our government. Our government decided that more people should have the right to get a loan. So the government imposed quotas and regulations that would require lending institutions to "loosen the purse strings". EVERYONE should be able to get a mortgage! "What about qualifications?", the bank would ask. Don't worry about that, just make sure a broader segment of our society gets loans... in fact, make sure you can document that more "low-income" persons are getting loans. Wait... "low income"... so that means that they don't make as much money as most people, but they should be extended credit... Even if that means getting them into a situation that most bankers would agree they would not be able to handle? Yup. Give em all loans.
The government, so much believed that this should be done, that they went into the banking business to compete with the privately owned banks. Not only to compete with the banks, but they decided they could use the money we all paid them in taxes to sell money to the banks.... And then all hell broke loose. The private banks could not compete with the government, and if they wanted to stay in the mortgage business, they would have to buy money from the Feds... And of course the Feds said if you want to buy money from us, we have the right to regulate and restrict and tell you what percentage of borrowers have to be "low to moderate income". And at first it seemed to work. Until these low to moderate income person got into their homes for a few years, and used other "easy money" (read: credit cards) and started to have trouble paying their bills.
The AMERICAN DREAM (owning your own home) became the American Nightmare. There were people buying homes that had no business buying homes. Get this... it even became popular for buyers to pay thousands of dollars more than the asking price. Why? So the sellers would turn around and give the "overage" back to the purchaser for the purpose of a down payment and closing costs! The buyers wanted to buy a home, but they haven't saved enough money for down payment and closing costs! Should that be a red flag if you are thinking about loaning someone money?!!!! Wait, you have NOT exhibited the ability to live on a budget and save for a rainy day, more so to buy a house, yet you still think you should go get a loan??!!!
So, when the interest rates, which by the way are now pretty much controlled by the Feds, got too high, the adjustable interest rate was invented... We'll start you out at a low rate and worst case scenario it will increase 2 percentage points a year and now more than say 5 percentage points over the lifetime of this note... It's all mapped out in a worst case scenario here... and if you agree, just sign this and we're off... you just bought a house! Then in a couple years after what they told you could happen actually happens, you bail out.... stop paying... go broke... declare bankruptcy! Used to be bankruptcy was the LAST THING YOU WOULD DO! Not any more. There is no shame in it. In fact, it's encouraged! There are companies that will "Help" you with it! Call us! Consolidate you loans... we'll get those creditors off your backs! Yeah, you remember them.... the folks that were nice enough to give you money to buy something you could not, at the time, afford! The nerve of them! Wanting us to play by the rules we had agreed to!
I want to sell houses! I really do. And I want every person in this country to be able to own their own home. But I don't want it to break them financially... and I don't want the government controlling the process. Monitor it ? OK. Control it? They can't even control their own show!
So today, I got some stuff off my chest! I might remove this post later, but I typed what was, and has been, going through my mind for a long time!
Be smart. Live within your means. Don't put undue pressure on yourself. And don't let others sucker you into that kind of situation!