Sub Prime Graveyard Part 1

During the real estate boom that hit its pinnacle in 2006 the banking system was swayed by Fanny Mae and Freddie Mac to loosen its lending practices and lower home loans. The Clinton and Bush administrations made it very clear that they wanted to put as many families into homes as possible. These loose lender practices and adjustable rate mortgages would contribute to the housing bubble and housing collapse that would almost bring the world to complete economic collapse and chaos.

The loose lending guidelines, zero down financing and adjustable rate mortgages would lure people into home ownership that probably were far better off renting. Lending guidelines allowed bowers to to stretch themselves way too far out with debt. Debt to income ratios were too high. Home buyers were allowed to purchase homes with very little “Rainy day” Money or reserves setting them up for failure when a major repair were to occur, or a major life event would affect their income. Banks did “Stated income loans” or liar loans where the buyer could state their income which would stretch the buyer out even further on a financial plank with no safety net. All this added up to a recipe for disaster when the economy took a turn for the worse.


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