- Jun 12, 2001
A good ol' fashioned market boom with irresponsible lending practices fueled mostly by Wall Street, foreign banks, and independent subprime mortgage lenders. The last part is important because the "subprime" offered by Fannie/Freddie was only subprime in the sense that its underwriting guidelines were just slightly looser than Fannie/Freddie's conforming prime programs. While, what the independent subprime mortgage lenders offered was the real deal subprime that would approve anyone with a pulse. And none of them were ever forced to make a bad loan. Not a single one. Quite the opposite, you couldn't get them not to do one.Originally posted by: Atreus21
Well why did the subprime market crash?
Look, I've worked mortgage for 15 years. In my professional opinion, the notion that Fannie/Freddie or the CRA caused the housing bust is so ridiculous as to be laughable. Laughable.
What really happened is that as long as home prices kept going up at a record pace, no one could lose. So the attitude became, Why not do the deal? Unfortunately, home prices couldn't keep going up forever.