Desp lets go this route.
US Mortgages total 36 trillion outstanding (not real figure)
GDP is 11 trillion..
it was actually only 5.3% of mortgages in default that figure say accounted for 2 trillion in total outstanding loans, How much is JPM currently worth (905b) not even near better add GS Citigroup and Bof A and you might get close., 90% of these were related to CRA because of the 0-3% downpayment allowed for low-income and first time hombuyers. This created no "real interest" in the property the person purchased.
If I was making $14 an hour and my mortgage was $800 per month and gas in summer of 2007 reached as high as $4.50 PG and I was faced with putting gas in the car or keeping the home I have no real interest in, what am I going to chose. I can always just leave the home and go rent an apartment for $500. Scenario played out over and over and over again, until it overwhelmed the banks balance sheets and started a snow-ball effect of banks not lending to each other. If the bank was not forced by way of the government under the FHA plan, they would not have exposed themselves to such a risk. When it came time to figure out who actually owned the loan that was in default, the banks couldn't figure it out, because the clearing house (Fannie or Freddie) had packaged it up in some instrument and sold it to Sweden or some other investment country firm or bank. Now as for the 2nd mortgages, because they were govt insured they were very popular and also bought up and packaged by fan fred. Sold off, but if you had negative equity after the real estate market collapsed, then what could or would it hurt to walk away from a "losing investment." 95% of all mortgages in this country are still in good standing, It only took 5% over a 1 year period to screw everything up. This is not good. You had groups like Acorn running around strong arming bankers into making loans (ones that knew were risky) in low-income communities for the good of the neighborhood. Prez Obama trained them and still will not own up to it. He was part of the problem, one of the ones always saying we owe it to the low-income [black] communities of Chicago and other inner-cities. The only way any bank would ever make those loans is if they were government backed.
So when Countrywide was out there making loans to home builders through Indymac that required the builder not put down a dime, the equity in the project would allow for the loan to collateralized in a 5 step payment system. Any builder with a credit score of 640 or higher was able to get an advance loan of up to 5 projects (through the Home Depot) project. Once the economy.real estate markets started to collapse in late 2007, many builders who had been advanced the funds in HOT markets such as Phoenix, Vegas, California, and Florida simply walked away from projects taking the initial down payments on construction loans with them. Why not it didn't hurt anything but their credit. The BK rules would allow them to fix it all in 7 years, Not bad for what they eneded up doing. This happened all over the country, because the government backed the loans through Fan Fred in regards to CRA.. Case Closed !!
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