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Reasons for the ‘Mortgage Meltdown’
Depending on whom you talk to or what you read about this topic, it seems that there are common threads into why the mortgage industry took a major hit.
Here’s a few of my simple reasons for the ‘Mortgage Meltdown’
- Greed (on everyone’s part that knowingly participated)
- Corruption (for those in positions of power)
- Societal pressures (From “Keeping up with the ‘Jones’” to everyone should “Live the American Dream!”
- Stupidity (on anyone’s part that was taking advantage)
Let me break it down to different levels:
- Local Level
- State Level
- National Level
- Lesser Loan Regulations
It was amazing to see, hear and learn about all of the craziness that happened during these years. I remember clearly that there was a saying that was “if you were breathing and had a pulse you could get a mortgage” during this timeframe.
For folks that were self-employed, all they had to do was use a ‘stated-income’ approach and they could borrow almost anything that they qualified for, on paper.
I’m so happy that I didn’t get caught up in this HUGE mess myself! I definitely had the opportunity.
Over the years, I’ve learned that sometimes bad things need to happen to good people, for things to really sink in.
The goal for these ‘lessons’ should be that we don’t keep repeating them and that we learn enough from the experience to become better aware, equipped and prepared.
Wikipedia lists reasons for the ‘Mortgage Meltdown’ as:
- Boom and bust in the housing market
- High-risk mortgage loans and lending/borrowing practices (Adjustable Rate Mortgages, Interest Only)
- Securitization practices
- Inaccurate credit ratings
- Government policies
- Policies of central banks
- Financial institution debt levels and incentives
- Credit default swaps
- Investment in U.S. by foreigners of their proceeds from America’s net imports
- Boom and collapse of the shadow banking system
Question for you:
What are your thoughts on this? Were you affected?
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