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[Saggitariutt Jefferspin (ith)]

I work for a major lender in the CCG division, aka equity products. We don't want to touch Maricopa county with a 100 foot pole. (the max CLTV we can do there is 75%).

[lpcalihawk]

Is it good business on the mortgage companies part to extend credit to people who they know can't afford it? If "poors" can't offer a down payment and have piss poor credit scores, why would you give them a loan?

Would you extend a loan to someone with a poor credit history that could not put anything down? If you went ahead with the loan, why would you be surprised when these folks can't make their payments?

[NOTTHOR]

May 8, 2008 13:40:18 GMT -6 lpcalihawk said:

Is it good business on the mortgage companies part to extend credit to people who they know can't afford it? If "poors" can't offer a down payment and have piss poor credit scores, why would you give them a loan?

Would you extend a loan to someone with a poor credit history that could not put anything down? If you went ahead with the loan, why would you be surprised when these folks can't make their payments?

The originators had no intention of holding the loans. They were selling them off so Goldman, Bear and Lehman could turn them into residential mortgage backed securities and sell them to investors looking for yield higher than treasuries, but with a AAA rating backed by phony bond insurance and fictitious credit ratings.

The end investors got 100-200 bps over treasuries and could show AAA paper on its balance sheet, the I-bank made a percent on the packaging and sale, the originator got 2% or so. The insurer made money insuring the bonds. The rating agencies got paid to bless them as AAA. Everybody in the chain was making out like bandits. Now the end investors are shocked that the AAA bonds they bought aren't really AAA.

The lack of ultimate prvity between the true lender (the investor in the bonds) and the homeowner is what screwed everything up - well that and the Fed's perpetual cheap money machine that led entities looking for AAA paper into the RMBS market. The originator could give two shits if the poors couldn't afford the loans, it ain't their skin in the game once they push the mortgage down the food chain. They have no fiduciary duty to the borrower. Before the mass securitization boom, they had to worry about credit quality because they would be stuck with the loan if it went shitty, but when the loans are pushed off on someone else, they didn't care.

Oh well, the giant clusterfuck is a boon for our firm and bonuses will be great next year thanks to all the litigation this has caused. This shit will be in the courts for years.