What caused the mortgage crisis? If you ask most consumers they will say: "Greedy mortgage brokers that made bad loans to good people." Maybe he played a role in the chain of destruction that America is today, but they were only a link in a very long chain. The truth is that had the mortgage crisis by consumer demand, ignorant politicians, spineless banks, and yes, facilitates small brokers and lenders. All these institutions do not seem to hang on the "moxy"Signature of the principles in a tough competition from rising property prices and a good economic boost.
I'll give you the anatomy of a mortgage. Previously there were three types of mortgages: Government (FHA) Second (Fannie Mae and Freddie Mac) and private subprime lenders, which were mainly owned and funded by big banks with a different name. Each of these lenders as the guidelines that the terms in which "buy" the loan must be definedfrom the small brokers after the loan closed. Each program has a different set of guidelines which ensured a different market segment. That market included people with good evidence or bad credit and consumers that could or could not, on their income.
Chase Mortgage
Once the loan is closed with the smaller brokers, big banks (ie Chase, Bank of America and Countrywide) would buy these loans. They would then arrange these loans in the portfolio by risk class and were made available for sale onWall Street. Once these portfolios reached a certain amount in dollars of the big banks sold them to investors so that they can replenish their capital loan. Each of these portfolios was priced according to their perceived performance and default rates, and sold.
Portfolios, not by Fannie Mae, Freddie Mac or FHA insured, were the sub-prime loans that have the lowest prices on the market would bring, that because of their high failure rates. The problem is that subprime portfoliosbeen overstated, because their value depended on land prices skyrocketing. Meaning, if the big banks had borrowed money to avoid a house and it is likely that the house was more than the money they borrowed on the value of the house. Therefore, the portfolios were considered a lower risk, and therefore, too expensive.
Here's the catch ...
Investors on Wall Street treated these portfolios to be used as an asset, the capital (borrowed money) for other investments with the hope of selling theMortgage portfolio in the future for a profit. When the proverbial bubble burst in the housing market, houses stopped increasing the value and depreciation began. This meant the mortgage portfolio, which was once worth $ 10 million now only worth $ 8 million, has slowed because of rising default rates and a market. If the market slows down, investors stopped buying mortgage portfolios and keep the remaining companies were in deep water. Not only could not sell their portfolios, havecould not afford to take the loss on them if they did.
Welcome to the subprime crisis.
Now that the "big" on Wall Street could not sell their portfolios of mortgages, the cash flow came to a screeching halt. This meant that the big banks to lend money. Which in turn required smaller lenders to sell their loans to large banks. This failure of smaller lenders and brokers for dried fodder aggravating already fragile resourcesMortgage market.
With all this, Fannie and Freddie (former government programs that privatized) were big hits among the loans were insured, because of market conditions. Unlike FHA, which is supported by the government to let Freddie and Fannie heavily on the ability to push and pull money on their portfolio in the market, so that the bail-out.
So the next time you hear an "expert" on TV (which probably does not explain mortgage), the fault of the broker and smallLender for the mortgage mess, just remember this chain of events:
The property values drove investors. Investors demanded money. Large banks supplied the money. The great demand for money at lower prices. Lowest rates encouraged builders. Builders borrowed money from big banks. Builders employed architects, surveyors, lumber companies, paint companies, suppliers and real estate companies to build and sell their products.
Estate agents aimed at providers of small andBrokers to finance their customers due to inefficiency of the large end retail banks. Small brokers began to compete for market share. This has increased the demand for "money to the detail" for which he saw the big banks. So the race was among the big banks for retail money market.
This competition caused each of the major banks on niche products, less the underwriting guidelines for brokers and small lenders, their de facto branches had to create. Thislower standards are what created the subprime market, which was mainly the large banks. Then look at the big banks paid lobbyists to pay politicians to burn in the opposite direction, which were essentially fiddling while Rome.
Analysis of the mortgage crisis - what's causing the mortgage crisis?
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