Mortgage Timeline Show Who is Most Responsible for Mortgage Mess

Placing blame for the mortgage crisis isn’t going to fix anything right now, but if we don’t understand how we got to where we are right now, we are doomed to repeat it.

Mother Jones magazine, in their latest issue, shows a timeline of events going back to 1913 that contributed to the recent sub-prime mortgage crisis. The most telling statement to me is:

“April 22, 2002: Georgia’s new anti-predatory law signed; Ameriquest helps lead campaign against it and announces that it won’t do business in Georgia until law is changed. Standard & Poor’s refuses to rate Georgia mortgage securities, choking credit supply to state’s home buyers; law gutted within a year.”

When Georgia tried, at the State level, to protect borrowers from predatory lenders, they were “blackmailed” into re-writing the law to satifsy Ameriquest and Standard & Poors.

Reading this timeline made me really mad. Basically over a period of about 15 years, legislation was changed to allow lenders to lend money to anyone whether they were qualified or not. The lenders then put these loans into securities that were backed by the poor loans. These securities were bought by investors including retirement plans and government pension plans. The crisis we are experiencing now appears to have occurred when these investors realized that the securities were very low grade and stopped buying. Only then did ratings agencies change the rating on these securities.

Many Daytona Beach home owners and other communities around the country are losing their homes. Many of us have experienced loss in the value of our homes because cheap money forced prices up. Artificial demand was created because more people, who really would never be able to make their mortgage payments, were chasing the available homes.

Now, people who can make payments, can’t get a loan. Why? One reason I read recently is that banks will not loan to other banks because they don’t trust the assets of the other banks. In other words, the banks are not a good credit risk.

After reading through this timeline, I have little faith that politicians will be able to solve a problem that they, probably unwittingly for most of them, created. The market will adjust eventually and banks are cleaning up their balance sheets and writing off bad loans and assets. It just going to take a while.

Read the Mother Jones Timeline.

So it will take some time for us to get out of this mess. Tight money is making it hard for people, who really are qualified to make payments, get a loan. So even if they want to buy, they can’t. Meanwhile sales are slow and values are impacted.

Yes, time will heal, but, will we learn? I have faith in the resilient American people, but when we are fighting greed and political foolishness, it makes it very hard.

Technorati Tags Daytona Beach Homes, Mortgage Crisis, Sub-Prime Mortgage Crisis

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