The real estate market has experienced a serious collapse, the stock market has destroyed trillions of dollars of wealth, and the economy has entered into the worst downturn since the 1930s. As a result, many Americans have lost trust in the companies and experts they were supposed to be able to trust. A number of real estate and financial experts played a role in the inflated bubble scam that was perpetrated on the American housing market over the past decade. Homeowners should be aware of the role of these private market experts in taking advantage of the artificial boom in housing values to impoverish borrowers. Local real estate agents who arranged sales between buyers and sellers were typically the first contacts that potential buyers had with the housing market. Depending on the associates the real estate agent may have recommended to home buyers, it may have been very easy to inflate the value of a property or refer a mortgage broker able to get fraudulent loans approved. Mortgage brokers or loan originators working for lending companies were also able to take advantage of a willing applicant. Brokers would often encourage homeowners to take out a loan for as much money as they were approved for, rather than a reasonable amount they could pay back. With the loose lending guidelines during the inflation period, getting approved for a large loan was all too common. Appraisers played a role in the housing bubble by estimating values of properties on the high side and finding any excuse in the book to justify market appreciations of 20% per year or higher. But even if they wanted to be honest, appraisers would often find themselves losing business from local Realtors or mortgage brokers if they did not inflate values. The mortgage lending companies that provided the funds for these loans also helped inflate the real estate bubble by seeking out mortgages anywhere they could be found. Underwriting guidelines disappeared in the quest for more mortgages to fund. Once the loans were made, they were packaged up and sold to the investment banking firms that mortgage lenders borrowed the money from to fund the purchases in the first place. The Wall Street investment giants played an enormous role in the housing boom by creating the credit lines to subprime and other lenders to make mortgages. Once the housing loans were closed, Wall Street would buy the loans, package them, slice them up, and sell the new asset backed securities to buyers around the world. The investors played a role by purchasing these MBSs and ABSs that everyone knew would go bad. Public, private, and international pension funds bought these securities believing they were safe. Hedge funds took on some of the greatest risk, using credit lines provided by Wall Street to purchase more mortgage securities with borrowed money. The media also helped to create the illusion that housing values never fell and that the boom was a great opportunity to get into the real estate market. Of course, none of this was true, but the news media promoted it anyway and too few homeowners examined the wild claims made by pundits or market analysts. The credit rating agencies, which get most of their money from the financial firms whose products they are trusted with rating, simply assumed that mortgage securities were safe and gave them the highest ratings possible. This made it much easier for Wall Street to sell the toxic assets around the world; after all, they were AAA rated. This does not even take into account the government bureaucrats and regulators who encouraged bad lending practices. As well, the Federal Reserve set the entire market up for malinvestment through artificially low interest rates during the years after the 2000 dot-com collapse and the 2001 mini-recession. The bubble in the housing market turned everyone into amateur speculators and allowed homeowners to believe in a fairy tale of always rising real estate prices. Now that it has collapsed, the result has been rampant foreclosures, the erosion of trust in government and the financial industry, and the worst depression the nation and world have experienced in decades.
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