U.S. Charges 530 in Mortgage Probe With $1 Billion in Losses

[freshwest]

17. I didn't go for it, but I remember the intense advertising for those loan deals.

They were reading like, 'No money down! Buy a home, it's cheaper than rent! It's time for you to do the right thing for your family's future and invest in a home!'

It was really deceptive about the huge risk being taken by all parties. In years gone by, a good sized down payment was required, calculations done to determine the ratio of annual income to the cost of the house, and the loan, computed.

Because just being able to make a note payment wasn't going to sufficient, insurance, repairs, community fees, etc., also needed to be taken into account. A mortgage is a risk to begin with, for all parties and predicated on the assumption that the borrower's income will e steady, not take a drastic cut through layoff, health or down sizing hours, corporate bankruptcy, or many other factors that are out of both the lender and the borrower's control. I remember when a down of from 10% to 30% was not unheard of.

Also a lot of questions were asked, even asking childless working couples, if they intended to have any and would one of them be staying home for childcare. In addition to credit histories, work and employer questions, other family members vouching for them, etc.

I'm not saying that a great many of them were in over their heads, and as Warren said, the crooks are the ones who knew very well the loans would fail and expected the federal government to bail out the bad loans like the S & L mess during RR's term, when they de-regulated.

In the eighties, they adverstised 'balloon note' mortgages, once again, based on the assumption of stable income, not only that, but rising income. The major problem in this was the failure of income to keep to to the cost of housing. I read a book years back that said a housing bubble was inevitable because of the inflation caused by Nixon changing the basis of US currency. IDK.

I don't blame the homeowners, though. The people who signed those loans may have been ignorant or impractical, but I'll bet the majority were being as responsible as they could, but were just overwhelmed. And they signed loans written by bad actors who knew better.

It's amazing that this one lawsuit against the banks and this is one of several, has finally made it to court with the number of people involved. This is now a criminal case, bigger than most class action lawsuits and I think it will proceed quickly.