Why Mortgage Lenders Didn't Care About a Borrower's Ability to Pay

"With defaults at record levels, people have begun to question why underwriting standards became so lax during the housing boom. The answer is relatively simple: mortgage lenders were looking at the bottom line, not the borrower."

original article


OneHungMan said...

Kind of like when a marketing person says they helped raise a company's revenue by $100,000 and the accountant chimes in that it didn't matter because it cost them $175,000 to do it?

That One Guy said...

exactly like that... or like when the "C" level management has compensation plans tied to quarterly stock price targets... they flush the future in order to get their target short term numbers, make the giant performance incentive hit their bank account, then leave the company (exercising their massive platinum parachute option) and buy a small island somewhere.

Next year's number are somebody else's problem, not theirs.

Memphis Steve said...

I was working at a major US bank when this whole mortgage debacle was brewing. It was obvious from the inside that a disaster was on the horizon. And looking at the people in charge of that bank, and watching them leave to become leaders at other large banks, I was amazed that we haven't had a bigger disaster than this, and much sooner. They are mostly incompetent narcissists and crooks who care more about how expensive a person's wristwatch is than about ability to pay. As for regulations limiting the percentage of bad mortgages a bank is allowed before being nailed, they ignored that. And Fannie Mae and Freddy Mac didn't do jack crap about it. They didn't want to know. It's all a big network of buddies, winking and nodding at one another.