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Posted By: boxingcardman

"The "sub-prime" mortgage crises is primarily the blame of Congress insinuating themselves into the Bank Lending industry in order to provide risky mortgages to people who really could not afford the loans."

Piffle (as my favorite baseball writer might exclaim). Congress NOT insinuating itself into the mortgage market allowed the wild west mentality to take hold among brokers, lenders and securities firms and led to these ridiculously risky loans. I am on front lines of this issue in my practice. You cannot believe the things I've seen: people who make $10 an hour granted mortgages with payments in excess of their gross earnings, loans granted with no investigation of income, complex loan docs signed by functional illiterates on the hoods of cars (no joke), loans granted to people who hadn't even gotten title to the property, etc. All of this because of the deregulation of the industry as a whole and especially the uncoupling of risk from rewards when the loans were bundled and turned into securities with zero oversight or intervention. In the past the banks would have to eat the loans so they made sure that the property was decent and the borrower sound, but deregulation killed that safety net. No sane underwriter would have made most of these bad loans unless the lax regulatory environment and the resulting market demand for these loans allowed for it. We saw the same garbage in the 1980s S & L scandals where loans were made on appraisals that were predicated on falsified valuations created by shared equity transactions (I once sued a developer who offered every low income buyer a shared equity deal where he would front the downpayment on an inflated property value just so he could get 100% of the real sales price financed and cash out that way). If we had strong regulations and active enforcement in place, we'd all be better off. Now, we're going to eat some of this loss in the form of bailouts and reduced economic activity. We need more regulation, not less, if we are to avoid another fiasco like this, especially regulations that flatly prohibit underwriting of "liar loans," 80-10-10 financing, and similar risky deals.

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