Subprime Woes Reflect Lack Of Virtue
The other day, some journalists blamed the sub prime problems on the credit repair industry!
But really, consumers wanting incorrect and libelous information taken from their credit scores isn’t all of the problem or even most of the problem. In fact, the mortgage industry itself and Wall Street bears much of the blame because they found a way to offload potential foreclosures on suckers - i.e. “investors” who looked to Wall Street for “Good Deals” Ha!
Chuck Colson weighed in on the economy’s sub prime woes yesterday in his commentary called Sub Prime Folly
Lenders knew, or should have known, that many of these sub-prime loans were foreclosures waiting to happen. But they couldn’t care less, because they could offload these mortgages to the new secondary mortgage market on Wall Street.
And a lot of people who previously could not afford a home were taken in by offers of low interest rates for the first two years. Many figured that if interest rates rose sharply and they could not pay the mortgage, they could simply sell their house, because by then the value of the house would have appreciated dramatically. But folks forgot that if something seems too good to be true, it probably is.
It was like a gigantic game of musical chairs. Everything worked fine so long as the music kept playing. But once house prices started falling, the bubble burst. The market for sub-prime securities collapsed. Overnight, credit tightened around the world, and stock markets went into a tailspin.
Despite all the obvious risks, lenders lent, unqualified borrowers borrowed, and Wall Street and mortgage brokers made money. Now in the last year, nearly 150 mortgage companies have gone belly up.
Caught in this sub prime folly? Perhaps we can help in some small way…
