Remember that the Community Redevelopment Act and allied legislation commanded the lenders to make loans to people who weren't creditworthy, accepting declarations instead of verifying income and circumstances, and prohibiting inquiry into legal residency and the like.
Of course, since the individual agendas of lenders were served, once they recognized this as a cornucopia, they zealously participated.
But who profited? Why the real estate agents, the loan packagers, developers, builders, people working in the building trades, and the remainder of the community that profited from the "up times," and the accompanying euphoria. The money was flowing everywhere. It was boom time.
Of course, it was no secret that the loans were only partially secured with the situation eventually becoming wilder and wilder, and people acquiring properties with what was euphemistically called "negative equity."
Some of the people acquiring properties were speculators, who rode a long wave. Others were people with insufficient intelligence to figure out that their income and anticipated future income, was insufficient to service the debt. When the non-performing loans reached a critical point, and with the Enron accounting reforms, the assets of the lenders were realistically valued at their current sales price, and the reserves of the institutions evancesced upon restatement.
The property markets follow an overall upward trend. But within the inflationery trend, they are cyclical, and there are periodic adjustments to reesablish equilibrium. These "adjustments" today are just compounded because of the lax lending practices that the government commanded to benefit minorities by enabling them to participate in home ownership. The benefit proved elusive and transitory, and the motivated people in lending and allied industries, who benefited from volume regardless of the a ability of the borrower to service the debt, were the actual beneficiaries. Unanticipated and unintended consequences. But everyone was "living high."
The institutions that bundled the loans proceeded with government sanction to represent the bundles of loans as worth far more than they were. But Wall Street has never hesitated in foisting misrepresented IPOs on unsupsecting investors.
The absence of equity in these mortgage loans was well-known within the industry. Google "Dr. Chris Cagan," who reports on such matters, and you can access a 2006 report in pdf format that details the dire equity situation in 2004 and 2005, and the steep increase in loans with negative equity.
The clamor the Democrat Party functionaries are making is ludicrous considering their complicity in forcing these revised lending practices on the country in their mindless effort to serve minorities and letting the Devil take the hindmost insofar as the rest of the country and eventually the ill-served minorities were concerned. Parenthetically, most of the big-time beneficiaries of these practices including the Wall Street fat-cats, are affiliated with the Democrat Party.
