Tell me why they are telling anyone to make bogus loans in the first place.
I almost didn't try to answer , this is a very tough question.
I think that people like Congressman Frank are trying to lower the standard for approval of loans so that more poor people can live in a decent house and use the real estate investment to improve their wealth.
However sincere this urge may be , when indulged with no study of consequence it tended to produce taxpayer backing for loans that had little colateral and little repayment strength.
They were trying to prevent "greenlining" and trying to make loans as accessable as possible , but when the taxpayer is really garunteeing the loan why should the bank that makes the loan care about the borrowers strength?
When a loan was made to someone who does not really understand the loan , has little downpayment , has insuficient income or no really dependable employment , why should the bank worry about the quality of the loan? As soon as possible the loan will be bundled with a dozen or an hundred other simular such loans and sold to Fannie May, whether it lasts through the repayment period or not has no bering therefore on the profit made by the origionating bank.
Banks that required a big downpayment , or required a lot of proof of income , or tryed to keep as many loans as possible in their own house were outgrown by banks that churned through a huge number of loans , harvesting early profit and fees , then reinvesting in more loans in the same way.
This can't happen now?
