Mortgage crisis question?

I am confused about the mess these mortgage companies have made. Why did they even loan money to people who they knew were a credit risk, knowing full and well these people would not be able to afford an adjustable rate mortgage and would have to foreclose. Did the mortgage companies make that much money on these loans to be able to risk foreclosure?

Mortgage crisis question?

Because there was money to be made. Each one of those bad credit risks paid thousands and thousands of dollars in closing costs which was split between the lender and the loan officer. The traditional thinking was the housing market would continue to go up, and if the house foreclosed, the lender would make money again.

People that had no business getting a mortgage and certainly not such big loans were lined up to buy houses and these lenders were all too happy to oblige.

Greed works in mysterious ways.

Mortgage crisis question?

I%26#039;m sure they make some money off of people even upon foreclosure. At some point a company has to stop holding peoples hands though. Read some of these frantic questions on Y/A from desperate people that would do *anything* to own a home even though they have bad credit and no money. People are just begging for loans, SOMEONE is going to say yes when they shouldn%26#039;t. That doesn%26#039;t mean the new home owner can claim ignorance. They tell you exactly how ARM%26#039;s work and what%26#039;s going to happen if you don%26#039;t fix your credit and refinance before the rate adjusts. Ignorance isn%26#039;t always bliss.

Buying a house is a great thing unless you have no money or lousy credit, then it%26#039;s the worst mistake you could ever make. It%26#039;s an investment that shouldn%26#039;t be taken lightly. If you haven%26#039;t done enough research to know what your payment is going to be jacked up to when the interest rate adjusts, then you shouldn%26#039;t own a home, sorry.

Mortgage crisis question?

first- just because a person%26#039;s credit report may reflect that they are a credit risk doesnt necessary make them unfit to purchase. The idea was that the rates would go up as high as they have. Also there are a lot of people who are in ARM that had and have great credit and cant still afford their payments and are going into foreclosure. Yes, these mortgage companies did makie a lot of money- but all that mony doesnt go to them. Mortgage investing is a long term investment for investors so they are looking at a long term payout. What else needs to be considered is that the economy has taking a down ward turn- automotive industry her Michigan isnt what it used to be 6-7 years ago when overtime was abundant, which was also used to determine someones affordablity- not on paper but in their head- a lot of jobs are over seas and we cant do much about it. Have you notice that when you call customer service the person on the other end has an accent-if you asked where to reach they say India- the fustration in the mortgage business is hard to predict- but one thing for sure is that if anyone has an ARM that currently they got screwed.

Mortgage crisis question?

Oh well. Sometimes people need to think before reacting so fast. Good luck to those who are trying to pull outta those mortgage issues. But for those of us who have a chance to get a home without a problem, THE MARKET IS GOING LOWER, CHEAPER HOUSES!! For others with bad credit, build your credit before trying to do what you obviously can%26#039;t. You%26#039;re only going to make it worst for yourself and mess up the market again.

(Sorry so harsh, it%26#039;s the mood)

Mortgage crisis question?

Yes in fact they did make a ton of money on these poor saps that took the bait.

But why?

Greed pure and simple.

In the old days you went to the bank and actually sat down and met with the banker.

Here is where the game changed.

The bank was keeping the loan on their books. They were not going to lend money on a home without.

1. Proof of ability to pay.

2. 20% down.

3. Fixed Rate for 30 years.

Fast forward 20 years

Now most mortgage companies sell the loan ASAP.

Their motivation to lend to people who have no business borrowing and no hope of paying off the loan are.

1. Collect garbage fee and sell the paper ASAP.

They DO NOT hold the loan, so they DO NOT care if the loan is foreclosed on.

Who%26#039;s to blame? Banking regulators who let this whole thing get out of control in the first place.

Hope this helps!

Terry

http://www.ScottsdaleRealEstateAdvisor.c...