Originally posted by: Yoxxy
don't act like the consumer is not to blame in this purchasing more house they could afford.
Actually yes, I can act that way. Why? Because they should never have been ALLOWED to purchase more home than they could afford. That's the whole idea behind rules, regulations, and lending practices.
When I bought my first home back in the 90's I had to come up with 20% down to get rid of PMI, I had to document all my sources of income and the balances in my accounts. I had to go back 3 months to prove that I hadn't gotten the money for my down payment from loans from my folks, etc, etc.
What caused alot of this issue in the mortgage business is the fact that they relaxed all that and allowed people to walk in to a mortgage broker and say "Oh I make $250k/yr" and the mortgage broker was ALLOWED to just take their word for it! No verification of income, no tax records, nothing!
As one poster here in AT said before (my apologies because I don't remember who), the American Dream is and should be just a dream for some people. We should have to save up for a down payment, we should have to work a second job if necessary to come up with the money for that down payment. We should have to tighten our belts and not buy all the Wii, cars, boats, big screen TV's, etc to save up for that down payment. The fact that they relaxed that idea and those rules is part of the problem.
Of course the rest of the problem is then allowing the mortgage investors to leverage those already bad loans into other investments as if they were guaranteed money but that's another topic completely ...