I found my way to this typical yet sickening mortgage broker's site today, pretty standard stuff I'd imagine. But it really amazes me how easy it is to go out and borrow say $500,000 today, with no income, no job, no credit, no ability to pay back the loan, and no oversight.
A classic trait of any financial bubble is the over-use of credit and leverage:
The abundance of credit, coupled with leverage (buying with borrowed money), accelerates this process and buying leads to more buying. Then comes the panic: some event shakes confidence and wakes up investors to the mania that has clouded their judgment. This panic leads to a crash: borrowed money needs to be repaid and investors will sell anything at any price to meet the bankers' needs.
This bubble folks saw credit and leverage amounts never before seen in the history of humanity. The series of events that led to this point is just amazing - the commoditization of loans, the growth of the unregulated "mortgage broker" channel, the complete lack of oversight by local banks, the no-cap-gains law written by a corrupted Congress, and the willingness of millions to break the law and lie on mortgage applications.
This easy money led to the bubble, period. Without this access to credit and lack of oversight, prices never would have been able to get to the point they did.
But here's a scary thought - it's not over. I could still go out today and lie on a loan, get $500,00, and buy a condo. The bubble will be dead only when this system is fully put down. And that'll take Congressional hearings, new laws, and new oversight. So stay tuned...
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No Asset, No Income, No Employment Verification Loans
FICO Scores all the way down to 500 accepted
1% "pick-a-pay", 40 year amortization loans and 125% LTV loans available
September 27, 2006
Classic Bubble: Money just raining down from the sky - buckets-full for anyone and everyone to use in the biggest Ponzi Scheme of all time
Posted by blogger at 9/27/2006