This article from the Wall Street Journal illustrates how the greed of many different industries and individuals was involved in creating the current housing crisis. It begins with a homeowner in Arizona who owned a distressed property and received a questionable loan, but the mistakes (at best) continue:
- Mortgage lender never saw the house
- Appraiser overvalues the property
- Lender collects over $9000 in fees and sells the loan to Wells Fargo
- Wells Fargo sells the loan to a firm in London which packages it with over $4000 other loans and issues the package as a security containing 85% sub-prime loans (meaning that 85% of the loans were made to borrowers with poor credit)
- Credit rating firms Standard &Poor’s and Moody’s give the security a AAA rating
- Security is bought by many investors including a teachers retirement fund in Oklahoma
- Home is foreclosed on and is eventually sold for $15,000
Multiply this story by a couple million homes and you can see how things could have spiraled so far out of control.
Read the full article
blog by elephant’s realtor Liz Benson
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