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Originally Posted by seattleflamer
It is myth to think that if you had a pulse, you qualified for loan though. It was a relatively small percentage of buyers who fit within that category of obtaining a mortgage with little to no assets, little to no income and having nothing in the end either.
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This is true, a pulse was optional.
Check out this transcript from NPR's "This American Life" #355 (hosted by their international Business and Economics coorespondant, Adam Davidson.)
http://www.scribd.com/doc/6033267/Th...NPR-Transcript
He really did a great job explaining how the CDO/Housing bubble came to be and how ridiculous the mortgage markets were:
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And they sold so many mortgages that there came a point in 2003 where just about everybody who wanted a mortgage and was qualified to get one.... had gotten one. But the pool of money had just gotten started. They wanted more mortgage backed securities. So Wall Street had to find more people to take out mortgages. Which meant lending to people who never would’ve qualified before. And so Mike noticed that every month, the guidelines were getting a little looser. Something called a stated income, verified asset loan came out, which meant you didn't have to provide paycheck stubs and w-2 forms, as they had in the past. You could simply state your income, as long as you showed that you had money in the bank.
Mike Garner: Yeah, and loan officers would have an accountant they could call up and say “Can you write a statement saying a truck driver can make this much money?” Then the next one, came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don’t have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse.
Alex Blumberg: Actually that pulse thing. Also optional. Like the case in Ohio where 23 dead people were approved for mortgages.
(...)
Adam Davidson: An interesting fact, here. Mike Garner's bank did not care how risky these mortgages were. This was the new era: banks didn't have to hold on to these mortgages for 30 years. They didn’t have to wait and see if they’d be paid back. Bank's like Garner's just owned them for a month or two and then sold them on to Wall Street. Wall Street would sell them on to the global pool of money.
Alex Blumberg: Which is how we get half-million dollar, no income, no asset loans.
Adam Davidson: And loans to dead people.
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The fact that the whole CDO scheme sailed under the banner of "AAA" credit, and now it is the same people in charge of the same agencies who are now downgrading the US credit rating... it's just beyond ridiculous.