I Finally Understand the Subprime Mortgage Crisis and I Want Blood

Do you understand the subprime mortgage crisis? Do you ask questions like, “Wouldn’t it just be better for these banks if they just cooperated with the homeowner and reduced their rates?” Ah, if only it were that simple. I have no economic education in my background, so I need to have it all spelled out for me. I finally get it! If you listen to this hour long podcast from NPR and This American Life (originally broadcast on May 9, 2008), you will finally understand the subprime mortgage crisis! However, like me, you will (and should) get very, very, very angry at the mess mortgage lenders, borrowers and Wall Street got us into.

You will hear about the guy who only make $45K a year, and was granted a loan for over $500K! The NINA loans stand for “No Income No Asset” loans. Virtually unheard of until recently, one could get such a loan w/out anyone ever checking to see if you had any income or any assets! This is so crazy to even think about. Who would EVER loan a stranger a large amount of money w/out checking out his/her assets and income? Well, as you will find out, Wall Street! Who are these risk takers? People who got very greedy and really raked it in for awhile. The mortgage broker who lied about his client’s income and made $18K on one mortgage transaction (and all those like him) should go to jail for fraud. Is anyone going to prosecute these liars? Gadget Man says “no” because “there are too many of them, and besides, what good will it do anyone now.” Oh yeah? How will we ever prevent this from happening again if we don’t go after these guys? It would be easy to go after them. All the fraudulent transactions are on paper in black and white. I say, get ’em!

I am really mad about all of this because good people like me and my husband are suffering. I say “good” in the sense that we have always lived w/in our means. When we purchased our home, we made sure we were not overextending ourselves in any way. We made sure we would be able to afford it if I eventually got pregnant and decided to stay home. We made sure we would be able to afford our home AND save for college tuition AND retirement. We have been saving and saving and saving. We NEVER buy more than we can afford and we NEVER carry a balance on our credit cards. Apparently, most Americans have been spending and spending and spending. Buying giant homes with giant amounts of space for all their giant TVs and giant gas guzzling cars. Sure, I would have liked a bigger house and a bigger TV and vacations. But we took a conservative path. What did we save it all for? Now the money we saved is worth less and less. I’m angry for two reasons. First, I’m angry because I’m going to suffer because others were out having a party. Second, I’m angry because I missed the party.

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4 Responses to “I Finally Understand the Subprime Mortgage Crisis and I Want Blood”

  1. feener Says:

    i will have to listen to this for sure. but off the top of my head i seem to get more angry at the people who lived beyond their means as opposed to the companies who helped them. like you guys we are conservative, but i know family who has not been and i really get mad at folks for being greedy. live in the 3 bedroom not the 4 bedroom till you can afford it ?? why does that seem so hard.

  2. Rick Says:

    Another problem is no one is thinking about tomorrow. People need to think what there actions today will do in 5, 10, or 30 years from now. When someone is handing out mortgages
    its hard for someone to think what its going to be like down the road all people care about is now. There’s a sucker born every minute

  3. moodymommy Says:

    Feener, I’m with ya. How could someone making $45K EVER think he could make good on a $500K loan? I would like to know what he spent it on.

  4. Felicia Says:

    I worked for those brokers as a processor and let me tell you 90% of the time the brokers showed the clients one papper with an amount and submitted another or put them in ARM mortgage and didn’t really explain to them that they rate would go up. Nor did they recommend for them to have a realestate lawyer with them at closing. If you remember your closer just tells you what is on the paper they don’t explain past that or at least not in Il. So people walked in being told by thier broker that they would be able to afford it. So, yes part of the blame belongs to the consumer for not being educated but I believe a larger part belongs to the brokers who didn’t educate when they should have. I left the industry because I couldn’t handle the lies they spoonfeed thier clients. And we did take advantange of the sub prime market. We purchased a home we could afford with an FHA loan. So, it saved us from not having the 20% down. We did the same thing, we made sure it was a home we could afford no matter what and it is. It isn’t in the city like we wanted but we like the burbs better now!
    I don’t know how people are going to bounce back or any one for that matter. To bad we can’t just get a do over. New credit history and all.


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