Credit Gone Wild
There were two articles today that basically crystallize what has been going on in the mortgage arena over the past 4 years. While I try to provide commentary and original content as much as possible, the two stories need to be read on their own. I strongly urge all readers to check out the full posts.
Story One: Perfect example of how far and deep the mortgage mess reached to find people to loan money to: http://blownmortgage.com/2007/11/26/why-2011-might-not-even-be-the-end/
Blown Mortgage does a wonderful job of exposing how a FICO score means nothing when you are not looking at a person's overall financial picture.
Story Two: Rampant fraud and a virtual cash machine in use in California:
Irvine Housing Blog really hits it out of the park. How banks were extending crazy HELOC loans like this is beyond understanding.
Reading the two articles above is very illuminating. I can accept the argument that there are a bunch of people that were mislead and/or tricked into risky mortgage products. I even have some empathy for those folks. The problem is that a ton of people getting into the housing market during the boom knew exactly what they were doing. They used leverage and financial vehicles offered by lenders to live the high life and get their hands on obscene amounts of cash. The problem with any kind of bailout proposal or loan modification scheme is that it will be difficult to isolate who deserves help and who deserves prison time. In the end, it is the responsibility of the lenders to make sound judgements about loans. That judgement took a back seat to profit chasing. I think the best thing to do right now is for someone like Ron Paul, at the next meeting with Boom Boom Bernanke, to go over the above stories line by line. I would love to see that, even if I have to watch CSPAN. If Bernanke or Paulson were confronted with these two clear examples of bank foolishness, it would be interesting to see their response.
Fraud and loaning money to someone that has no income to support paying it back was the backbone of the housing boom. The unsustainability of that is now clear. Stories of poor souls that were duped into whatever problems they have takes a back seat to the sheer bravado and corruption of the entire process.
Sorry, not much of a post tonight. I think the stories above will satisfy any one's financial appetite for the night. I will include a funny picture though:
Have a good night.