Would you pay $103,000 for this fixer-upper? WSJ story illustrates the many causes of housing crisis

Via Liz Benson
on Jan 7, 2009
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Michael Phillips/The Wall Street Journal 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


About Liz Benson

Liz Benson is a Realtor/EcoBroker with Colorado Landmark Realtors based in Boulder, CO. She is also Mom to a lovely teenage daughter and an energetic border collie. When not juggling those duties, she enjoys travel, riding her vintage cruiser and DIY home improvements.


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