US Mortgage Crisis, Foreclosure and talk of a Government Bank Bail out.by Jp
FeedTheVillage.com - Tips and Advice: US Mortgage Crisis, Foreclosure and talk of a Government Bank Bail out.
Understanding The US Mortgage Crisis and the proposed Bail out by the Government! The problem as I see it is Runs VERY deep and lies in the "sins of the past" if you will in the US Mortgage market. I hear the chants that "Why should the government (and the taxpayer) bail out the banks or the borrowers on these loans? Why should the Government get involved?" The answer is Simple - The Government IS and has been involved from day one... Fannie & Freddie are the largest purchaser of Mortgages from lenders. They set the standards, acceptable default ratios and Played the Music that the lenders danced to the entire time. What most people do NOT understand is that The Largest lenders in the US - Made loans to the borrower, packaged them in huge loan pools (based on purchase criteria set by the Government Agencies) and then sold these loan pools off for the face value PLUS a small percentage to the END BUYER - Fannie and Freddie. For example: Countrywide would have brokers all over the US Selling loans to Borrowers and getting paid by the borrower in the form of fees and then would package these into Lets say an $800,000,000 pool of loans. They would then sell these to FNMA and get paid the $800,000,000 + .05% ($400,000) and would then start the cycle over. It is the system and INVOLVEMENT prior to the crash that is more than just a "little" responsible for the current situation. In short it's simple basic economics - The Government was the buyer and created the market. For those of you that are reading this Screaming at me and the computer that it is "just not fair" and that "we should not have to help those that got in over their heads" or "bail out the banks" - ALL I can say is this - The situation is WHAT IT IS and although you MAY wish that it were different... "Don't cut off your nose to spite your face" -
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