Saturday, March 01, 2008

My Chosen Line Of Work

How we got into the sub-prime mortgage mess, demonstrated by stick figures.
Anyone in the industry who acts surprised by this debacle is either stupid, lying or both. As the stick figures show, a major assumption in the underwriting of these loans and the securities that back them, was that real estate prices would continue to rise. I'm no economist but it seems that when you make credit super available and relatively inexpensive, the price of the commodity being purchased will rise based on the excessive demand alone.
Last October the sub-prime house of sand began to collapse as lenders either closed their doors or stopped doing ALT A and sub-prime deals. All of a sudden homes that had three or four buyers bidding against each other only had one. Or none. Who would have though it possible?
Hat Tip Jonah Goldberg

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