Why did mortgage lenders give loans to people who they knew couldnt pay them back?

Years ago lenders were tightly regulated once it was lifted it allowed the lender to loose loan out funds. They now sell the bundled mortgages to the stock market. That's part of the reason the lenders are not able to reduce or make changes to the loans. They no longer own the money. They make money by closing costs and then sell to get the liquidity back to make more. If your loaning out someone Else's money and the more you loan out the more money you make. Well you'll be loaning to everyone and anyone who's willing to sign on the dotted line..........

Why did mortgage lenders give loans to people who they knew couldnt pay them back?

Maybe they were betting real estate going up and figured they'd get a more valuable house + some of the loan with interest

Why did mortgage lenders give loans to people who they knew couldnt pay them back?

Greed.

Why did mortgage lenders give loans to people who they knew couldnt pay them back?

they made lots of money off fees and did not have the customer best interest in mind

Why did mortgage lenders give loans to people who they knew couldnt pay them back?

You have to understand how mortgage bankers make their money and do business. The more deals they close, the more money they make. The borrowers are at fault. No one forced them to sign anything. They knew that during the real estate boom 2-3 years ago, they were paying mostly interest only and in 2 years time, there payment would skyrocketed. You'll find most foreclosures are a result of bad financial planners. Also, there was no way for mortgage brokers to know that during the present, home values would go down, 100% financing would just about dissapear, and credit quateria would tighten. That means people can't refinance when there isn't any equity in the property. Then the owners can't afford their payments, leading to foreclosure.

Why did mortgage lenders give loans to people who they knew couldnt pay them back?

To collect their fees, then bundle them up and get rid of them by selling them to the investors, then do it all over again.

Lenders never kept the loans they made.

They would sell them as soon as possible to recycle the money to lend again.

Lenders make money off:

1. The interest rate they charge you.

2. The processing fees and points they charge you.

Part of the problem we have today is that lenders were never required to keep any of the loans they made.

Therefore, they had NO incentive to ensure the borrowers could make the payments after the teaser rate expired.

Their attitude. Who cares what happens tho these homebuyer's as long as I can collect my garbage fees, package up the loan and get rid of it ASAP

Hope this helps.

Terry S.

http://www.Welcome2Arizona.com