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February 02, 2015


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I would change that quote to "the abusive peddling of mortgages to the uninformed." The truly poor probably would never have considered applying for a home loan. But gone were the days of banks scrutinizing your employment history, financial records, etc., and carefully judging your ability to pay off your mortgage in the years to come (assuming you had the 20% down payment to begin with). They were peddling loans to anyone ill-informed enough to sign up.

I was in the market myself at the time. A brand new spiffy condo complex was under construction just a mile from my son's home and I went in to look around. The builder offered me a special this-week-only, no-doc, 3% adjustable rate mortgage when the going rate on a conventional loan was 6.7%. With a three-day grace period to back out of the deal, I got carried away and signed. Later, with a little time alone and some distance between me and the slick saleswoman, I realized that of course I couldn't afford it. That low interest rate would go up considerably in 3 years, but my income certainly would not. So I canceled the contract.

With similar deals being offered everywhere, it's easy to see how people who'd never owned a home before, never qualified for a mortgage before, got sucked into deals they couldn't afford. Especially when the banks, which used to be so careful to check out an applicant's ability to pay, were instead eager to push loans onto any warm body they could find.


Yes, exactly. If Samuelson wants to argue that some responsible lenders did exist, I suppose he can't be entirely wrong. But they must have been a tiny minority.

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