St. Petersburg Times, November 30, 2008. The Headlines on the front page tell about a house, in a run down area of Tampa. A tattoo parlor owner bought it for a $100 deed, then sold three months later for $300,000, with the help of a zero down loan from a subsidiary of Washington Mutual.
Isolated example? No, far from it! The tatoo parlor owner did some 90 deals like this during the housing boom.
Two questions immediately come to mind: 1) Who would pay $300,000 for this run down house? 2) How in the heck did loan ever get approved? The article provided answers.
Sellers, buyers, and brokerage offices were often in collusion on the deal. Everyone got a piece of the loan proceeds. Buyers were often drug dealers said the article, who (surprise) don’t really care about their credit being tarnished when they default.
Perhaps even more importantly: Why were these loans approved? The article says fraud was often involved. Banks were after the fees and totally dropped the ball in checking on loan details and property specifics. Since the loans were bundled as Mortgage Backed Securities (MBSs) and sold, everyone made out like bandits except the purchasers of the MBSs. Now that we, the taxpayers, are bailing out the MBS holders (banks and financial firms) we are the ones left holding the bag.
Isolated example? No, far from it! The tatoo parlor owner did some 90 deals like this during the housing boom.
Two questions immediately come to mind: 1) Who would pay $300,000 for this run down house? 2) How in the heck did loan ever get approved? The article provided answers.
Sellers, buyers, and brokerage offices were often in collusion on the deal. Everyone got a piece of the loan proceeds. Buyers were often drug dealers said the article, who (surprise) don’t really care about their credit being tarnished when they default.
Perhaps even more importantly: Why were these loans approved? The article says fraud was often involved. Banks were after the fees and totally dropped the ball in checking on loan details and property specifics. Since the loans were bundled as Mortgage Backed Securities (MBSs) and sold, everyone made out like bandits except the purchasers of the MBSs. Now that we, the taxpayers, are bailing out the MBS holders (banks and financial firms) we are the ones left holding the bag.
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