What is one significant cause of the housing crisis? Read on...
I deal with many prospects, clients or potential prospects still facing problems with either (or both) selling their home or a significant drop in their home valuation. The same thing has happened in the Greater Columbia area and even to my home value (fortunately, not as significant home value decrease as in many parts of the country). While I don't need to sell or want to sell, certainly my home value is down today as compared to the value in 2006-2007.
What was a big cause of the real estate/housing meltdown? Significantly loosened credit requirements.... so that people getting approved for loans to buy whereas in the past would never get a loan based on their ability or willingness to repay (i.e. subprime mortgages). Result? Dramatically higher foreclosures and short sales. Another result? Significantly higher inventory of homes for sale. Another result? Lower home prices and much higher average time to sell a home. (Remember that old economic principle: Supply and Demand)
Read this:
Just yesterday, The Daily Caller website revealed some previously unpublished court information about a
landmark case that many consider the fuse that set off the subprime mortgage
boom and eventually, the economic meltdown. It was a 1995 discrimination lawsuit
against Citibank, on behalf of a group of African-Americans who claimed they
couldn’t get loans because of their race. It was part of a coordinated effort at
the time by progressive groups. The banks
didn’t want to be sued or accused of
racism, so they loosened requirements for credit history and down payments (they just gave in). What
the Daily Caller discovered is that among the original plaintiffs in that case,
there was a
startling loan failure rate. Out of about 186 homebuyers, roughly
half have since gone bankrupt or received one or more foreclosure notices.
As
few as 19 still own homes with clean credit ratings. Even some of the plaintiffs
now say the banks never should’ve made those loans.
And here’s the kicker: the lead attorney on that case that prompted banks to
start making home loans to people who couldn’t qualify for them was a young
Chicago community activist named Barack Obama.
