There is an old saying, "It was the straw that broke the camel's back." That was the first thing that came to my mind as I analyzed the current financial crisis affecting this country. Many of our financial institutions were out of control and now the straw (sub-prime mortgage lending) has broken the back of our Wall Street economy (the camel).
When I first heard of low-doc/no-doc loans, 125% loan-to-value, and interest-only loans, each one screamed "Nonsense!" Why would you loan money to someone who produces very few documents? Who among you would want to work your butt off to buy and own a home only to have the neighborhood filled with folks who don't have the same commitment to the process? Or how about being able to take out a loan on a house and get money in the process?
Yes, there were people who bought a house for, say, $100,000 and left the closing with $25,000, thus ending up owing $125,000 or more in total for the property. Lastly, if you buy a house and only pay the interest and the value of the house drops, then you end up owing more on the house than the house was worth.
Those three components of the straw are part of the reason this country is in the current economic mess. When you add to the mix mortgage brokers and lenders whose only purpose was to sell the initial loan; make huge commissions by doing so, and then make even more money by selling bad loans to Fannie Mae and Freddie Mac, the straw breaking the camel's back was more of a log that our politicians helped create.
You see, a huge reason for the sub-prime market surge was because the American dream of a house, car and two kids wasn't what all politicians could claim their constituents possessed. Homeownership has always been the benchmark by which success in America was measured.
Yet for black people, homeownership eluded many of us. So the government made it easier for home loans to be made. And, of course, the greedy soon found a way to make lots of money by putting ill-qualified folks into houses. Nothing was learned when areas such as Roseland became financially depressed neighborhoods where HUD home after HUD home was foreclosed on by lenders.
Now back in the 1970s and 80s when this was occurring, many of the lenders were quick to foreclose because the loans were guaranteed by the government and therefore the lender didn't get stuck holding the bag.
But fast-forward to today and there has been another significant but seldom talked about phenomenon taking place that few politicians want to discuss: the significant number of illegal aliens who were given NINJA (no income, no job or assets) loans.
According to Michelle Malkin of the Washington Times, a lot of illegal aliens were used as "straw" buyers for phony mortgage purchases to flip houses that no one actually lived in or fixed up. When mortgage companies, because of political correctness, were encouraged to lend money to anyone who found a house-citizenship, social security numbers and credit history be damned-then our mortgage system was crying to be ripped off. Deny a loan to someone who can't produce any ID and you will be called "racist" or "xenophobe." When banks weren't making enough profits to make their shareholders happy, they offered credit cards and bank accounts to anyone showing up with a foreign government's ID card.
If you look at a map of where the most money was lost because of this type of subprime lending and areas that had huge illegal alien populations, they match. Even more interesting is that the National Council of La Raza almost got a $10-million earmark to "counsel" people on getting mortgages with little to no money down. One example cited was in Las Vegas where 233 FHA loans, valued at $25 million, went bad. Those loans were given to people who lied about their identities, income and turned out to be illegal immigrants. Now U.S. taxpayers are expected to bail out the problem.
As Bernie Mack would say, "Pay Attention, America!"
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