Banks got stupid, thinking that values would rise eternally, replacing sound underwriting with the belief that they were secured by the ever rising real estate.
In an effort to gain more market share, they came up with ever more creative ways of selling loans – lower start rates, easier qualifying, no documentation, no fees… And they offered huge incentives to their distribution channels, both their own retail branches and mortgage brokers, to sell their products. In their greed, they forgot reason, and made many loans that should not have been made.
The greater ease of buying created more demand for housing, putting upward pressure on the prices and creating artificially inflated values. So buyers paid too much for their homes, using loans Read the rest of this entry »
