Last year, my wife abandoned a sinking ship of an investment firm for a more (and surprisingly still) stable mortgage broker. Why?
The firm specialized in “innovative” products such as the “No income verification loan” and its twin, the “No asset verification loan.”
I’ve taken out two loans in the last two years, both standard mortgages. The first mortgage broker I dealt with mentioned these types of loans, along with the ever-popular “Interest only loan,” and said, “These have to be the stupidest damn ideas anyone has ever come up with in this business.”
When Nita left the brokerage last year to work for her current employer, she said, “I thought those were the dumbest ideas anyone’s ever come up with.”
Now who’s stupid? The lenders? The borrowers? The government?
Answer: D, All of the above.
If you want to understand why John McCain (never mind Barack Obama) will raise your taxes if elected in order to pay off our newly acquired $700 billion debt, you need only to look at this scenario.
This is Bob. Bob makes a lot of money working for the makers of Enzyte. However, Bob has no assets, and while he makes a lot of money working for the makers of Enzyte, Bob doesn’t make THAT much money.
This is Bob’s wife. If Bob buys an overpriced, oversized McMansion in Blue Ash, she’ll deep kiss his big boost of confidence until he’s satisfied.
So Bob visits Hugh Jazz, mortgage broker. Hugh looks at Bob’s assets, credit, and income. Well, Citigroup, Fifth Third, and Bank of America all send back Bob’s mortgage app with attached sound files of the underwriters laughing hysterically. Not to worry, says Hugh. He whips out a no-income verification app and says to Bob, “So how much would you make if you were paid what you were worth.”
Bob writes himself another big boost of confidence for his salary. The bank likes this number better and floats him a loan at higher interest.
Except that the loan is based on what Bob wrote down, not what Bob actually makes. Soon, it becomes apparent that Bob can’t make his payments. Worse, he’s out of a job when the feds close down the makers of Enzyte. Bob tries to sell his house, but Hugh Jazz has written so many of these types of loans that the house isn’t worth what it once was. So Bob defaults.
Now Hugh’s hemorhaging business because no one can get credit anymore. Why? Because there are millions of Bobs in this country, and most of them are fucktards. Well, so’s Hugh for pitching this idea in the first place. But if you think that’s bad, the bank is run by fucktards who somehow forgot that the first rule of lending is to make sure the borrower can pay you back. Even loan sharks know this. (Kneecapping is not profitable. Getting paid back is.) Then again, who came up with no-income and no-asset verification loans anyway?
The banks, however, did this because it was legal and they thought they’d make a ton of money on the raised interest. Cute. So if you let people be stupid and shoot themselves in the foot, they’ll likely do it. Now, I think warning labels are an affront to God and Darwin as it interferes with natural selection, but in this case…
The government was a bunch of fucktards for not stepping in in the first place and saying, “Hey! You can’t do that! Everyone will go broke if you do that!” Instead, they wait until a repeat of 1929 before stepping up. (Upside: Unlike Herbert Hoover, Bush didn’t wait four years. Score 1 for W, not that it matters now.)
And that, friends and neighbors, is why you’re on the hook for $700 billion. You’re paying for a broad range of fucktards.
For those of you who can’t handle turning the mortgage meltdown into an extended dick joke (Why? You’re being screwed, so it fits. Sorta.), I suggest you read this explanation from CNN’s Glenn Beck, possibly one of the smartest and funniest wingnuts around.