Regulation. Starting in 1999 the government was urging banks and Fannie Mae to reduce qualifying standards for mortgages. Basically, they started to give out mortgages to people that couldn't afford them. Banks buy these mortgages from creditors, like Countrywide. The mortgagee then defaults and the mortgage agreement is worthless. That is why the banks started "writing off bad debt". People stopped paying their mortgages and they owned the debt. |||Your question is not clear. If you are asking about the negative impact of the crisis on the ordinary person, then the answer would be:
1. Not being able to get loans to buy cars and other items.
2. Losing employment as companies fail.
3. Stress from worrying about our financial future 鈥tc
If you are asking about what caused the crisis, then the answer would be (mainly) the sub-prime mortgage loan given to many homebuyers and speculators. The requirement was very relaxed and in some cases proof of income was not required. Most of the loans had a teaser rate with low fixed monthly payment for a short time (one, three or five years). After the fixed rate changed to adjustable, many homeowner were not able to pay the higher mortgage payments. When they attempted to refinance, they couldn鈥檛 because their homes dropped in value. As the result, they foreclosed.
Like many home buyers I made a mistake in purchasing a home at the height of the market (priced at 595k). While some of my coworkers have foreclosed on their homes, I managed to pay off my two mortgages on my two homes. If I had known about the government鈥檚 plan to help homeowners by lowering their principal on their mortgages, I could have postponed paying off my mortgage.
If you are curious about how I managed to pay off my two mortgages and for more money management techniques read my new book: How I Became a Millionaire Bushman (available at Amazon).
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