Originally posted by: DealMonkey
People do dumb things every second of every day, so what? You also have to think about the underwriter on the opposite end of that loan. WTF was he thinking/smoking? Huh?
Why did the broker make a poor choice? They are not on the hook when the loan goes sour.
Here are some first-person scenarios for fun:
I'm an aspiring entrepreneur. I just left my steady job working for the man to become a mortgage broker. After a few weeks of classes, etc, I'm ready to go. My pay isn't actually based on the quality of the loans I originate, just the size and quantity. Basically, I reap rewards with no risk. If a maid claims she can pay the 800k mortgage on her salary, who am I to question it? If we have to fudge the app a bit, so be it. It's not like anyone is actually checking those things anyway. I make 3x what I did before and all I have to do is encourage people to buy their American dream while explaining to them how this market will continue forever. Who cares if it does, as long as I get mine?
Meanwhile, investors were buying them while the train was rolling because they were providing good returns and greedy people demanded abnormally high returns. People at the top could likely see what was coming but so what? If I'm a CEO, I take my millions in compensation and stick it in a bank. When (if) I get fired, I'll simply land a CEO position at some other corporation who's board is populated by people I play golf with every other Tuesday. I got mine.
If I'm a large stockholder in one of these banks then I'm either rich enough that it doesn't matter or I'm an institutional holder. If I'm representing an institution (pension fund, etc) then I'm just toying with other people's money. I'm likely making millions myself as I've shown such great returns over the last few years investing in banks buying crappy assets. When I get fired, I'll just land another director position elsewhere as I'm in the same golf party mentioned above. It's nice to decide each other's salaries. I got mine.
Now, I'm a recent buyer. There is real estate mania happening around me and I need to buy another Hummer and earn a 20% return for holding a home in Phoenix for 3 weeks. I'll lie on my application (no one checks it anyway) and get an IO or ARM mortgage for 100% or more of the home's appraised value. If by some miracle, homes can't appreciate 50% a year into eternity, then so what? I've got no skin in the game so I'll just mail the keys to the bank and tell them to have a nice day. I'll take a hit to my credit, so my score will be the same as 50% of the population's now, but I'll either stay in the home I'm in or move into a rental where it doesn't really matter anyway. Hey, can't make money without taking a few risks (again, with other people's money). As long as I get mine.
Now, I'm a politician. It doesn't really matter what I said to get elected as the single greatest determining factor in election campaigns is money spent. It matters how I raised money. Sure, I need to throw the constituents a bone or two every now and then. Maybe I'll pick on CEOs of banks for awhile, but not too much. After all, these people paid for my (re-)election campaign and I play golf with them on Tuesdays. It makes for good TV, but I don't want these people not inviting me to their plush villas for free wine and caviar. Yes, people may be suffering but my salary is guaranteed and when I leave here I'll be given a job at one the of companies that I inevitably vote to bail out. I get mine.
Then there's the rest of us. The suckers. We are renters, we are long term homeowners, we are taxpayers. We don't mingle with the elite as we're too busy working to pay the bills. More importantly, we are divided. We Republicans hate the lazy poor and we Democrats hate the cheating rich. In the end, it doesn't matter. Just like the circuses in Rome, the cheating rich give the lazy poor what they want on purpose. It's to distract us. If the lazy poor were genuinely poor and without TV and entertainment, they might question the position of the cheating rich. So while the elite have the average suckers pointing fingers at each other, they make off with our country and leave us with the bill. I guess we got our's too.
