causes of subprime crisis

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Subject Author Date causes of subprime crisis Beliavsky 10-30-2007  Re: causes of subprime crisis bondguy1824 10-31-2007
Posted by Beliavsky on October 30, 2007, 9:26 am http://jewishworldreview.com/cols/sowell103007.php3 Jewish World Review Oct. 30, 2007 Political 'solutions' by Thomas Sowell 'Why were borrowers taking out risky loans in the first place? And why were lenders willing to lend to risky borrowers? In both cases, the government was a prime factor in "subprime" loans. Many people took out risky mortgage loans to buy a house because housing prices were so high that this was the only way they could own a home. Where housing prices were highest, the most people took out risky loans. In the San Francisco Bay Area, where housing prices are the highest in the nation, risky interest-only loans went from being 11 percent of all new mortgages in 2002 to being 66 percent of all new mortgages in 2005. Study after study has shown that housing prices are highest where government restrictions on building are the most severe. That is the ugly result of pretty words like "open space." Why were lenders lending to people whose prospects of repaying the loans were below average - that is, "subprime"? Government laws and policies, especially the Community Reinvestment Act, pressured lenders to invest in people and places where they would not invest otherwise. Government also created the temporarily very low interest rates that made the mortgages seem affordable for the moment.' Posted by bondguy1824 on October 31, 2007, 5:15 pm > http://jewishworldreview.com/cols/sowell103007.php3 > Jewish World Review Oct. 30, 2007 > Political 'solutions' > by Thomas Sowell > > 'Why were borrowers taking out risky loans in the first place? And why > were lenders willing to lend to risky borrowers? In both cases, the > government was a prime factor in "subprime" loans. > You can say that the government is primarily responsible for what is going on, but let's face it. There were people out there getting mortgages they couldn't afford to buy property that was too expensive for them or speculators bidding up properties on the unrealistic expectation that property prices were on a one way ticket to the moon. This is a classic bubble. Mortgagee and mortgagors alike have to pay the price. Restructure these mortgages to reflect the reality of today's market and move on Similar Threads Posted what's the fuss about subprime crisis? August 11, 2007, 3:59 am deregulation and the current credit crisis September 22, 2008, 1:00 pm Money Markets and the Current Financial Crisis July 15, 2008, 12:05 pm A Good Look at the Subprime Mess October 27, 2007, 1:52 pm Finding info on bank's subprime exposure? January 9, 2008, 3:04 pm