Who Is To Blame For The Mortgage Mess?

Well actually many home buyers foolishly believed they could buy a home with little or nothing down and some how afford the payments even after the interest rates adjusted upwards.  The banks accepted the applications and the real estate broker told them “don’t worry.” So those buyers went forward with those home purchases on blind faith.

The banks and mortgage brokers didn’t care because they sold the loans to Fannie Mae and Freddie Mac.  Those two government sponsored companies apparently did not review many of the loans that were made by the banks and mortgage brokers.  The consequence is that “a record 9 percent, were either behind on their payments or in foreclosure at the end of June.”  To believe that the people managing these enterprises did not realize the folly of their ways is equivalent to adults believing there really is a Santa Claus.  To make matters worse the Federal Reserve did nothing to interfere with Fannie Mae and Freddie Mac.

Where were our congressmen?  The Financial Services Committee of Congress headed by Barney Frank of Massachusetts has a web site that advises its responsibilities.

The Committee oversees all components of the nation’s housing and financial services sectors including banking, insurance, real estate, public and assisted housing, and securities. The Committee continually reviews the laws and programs relating to the U.S. Department of Housing and Urban Development, the Federal Reserve Bank, the Federal Deposit Insurance Corporation, Fannie Mae and Freddie Mac, and international development and finance agencies such as the World Bank and the International Monetary Fund. The Committee also ensures enforcement of housing and consumer protection laws such as the U.S. Housing Act, the Truth In Lending Act, the Housing and Community Development Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, the Community Reinvestment Act, and financial privacy laws. 

Actually this mess goes back to a Republican lead Congress as this situation came to light about two years ago.  So what have the Democrats done to prevent the meltdown of Fannie Mae and Freddie Mac?  Apparently the answer is nothing.  The cost to taxpayers will be in the billons.  Who made money on this situation? The real estate brokers, banks, and mortgage brokers.  I foresee new laws and regulations but they are coming after the animals have left the barn.