Freddie Mac what happened?

Would our current economic state be any different if banks had not been handing out mortgages like candy during the Fourth of July parade? It is nothing new to the American people to hear that the mortgage industry is a huge factor in our current economy downward spiral. But would things have been different if there had been more strict rules set in place with who could take out a mortgage and why? You want to be able to say “yes,” but not many can say it with full confidence.

Look at the “flipping” house craze that the average American thought they could just walk right into. They have devoted entire television shows to flipping houses. Many do so successfully, and others think it looks easy, so they go out and purchase a home, “flip,” and in the end they get flipped. When they can’t sell the house because they have not done their research on the market and do not understand the amount of time and effort it takes. Yes, it’s a nice paycheck at the end of the day and seems like quick money for the average American making 40,000 dollars a year. But, how many of those bad mortgages were given to individuals who just wanted to flip a house to get rich quick, not realizing that the average American holds on to a home for 7 years before selling and those television shows, have full time contractors helping them to finish on time.

American’s should want a home, not something you purchase on margin to turn around and sell a month, two months later. This modern day get rich quick scheme sounds very familiar to what happened during the crash of the market in 1929, everyone had bought on margin and when it was time to pay up, surprise; no one had the money to do so.

When the mortgage industry started to be hit hard, surprise again, they wanted their money and no one had any to give. Maybe we will never learn from our mistakes, or going back to the original question, maybe something will change drastically with the mortgage industry. Out of the 1929 crash came the FDIC, what will it take now in order to be able to get a home mortgage, not 2, 3, or even 4 in order to make a quick profit for yourself by fixing up a run down house.

It is scary now to think that you could take out a $100,000 mortgage and never put a dime down for it, people with no savings; nothing, got a home mortgage. And now minimum, you must put 20% down in order to get a mortgage, not many people have $20,000 sitting around to purchase a home. This is not a bad thing to not be able to give anyone who wants a mortgage one, but how many homes will sit empty because they are out of reach for the average person.

5 Responses

  1. That is an interesting graphic.

    Can you explain where it came from? What doe the different dominoes mean?

    You titled your post Freddie Mac. But you don’t actually discuss it. Maybe a better title?

    Short audio story about the problems in mortgage industry:

    Longer version (best hour you can spend on your ipod):

  2. The whole lending situation has had me thinking about your question of where would we be today if we had not given out those loans. On opposing side, I tend to think of those people who received loans even though they were not qualified. Not qualified probably means that they weren’t in good financial help at all. So what are these people to do without these loans? It seems some other legislation is needed to help these un-qualified loan seekers.

  3. Geoff in a way I do agree with you, if they were never able to get loans in the first place how can we help them so that they can. But most likely they had been defaulting on other financial parts of their lives and so, would it be a huge risk for the government to set something up so that they would be able to get a loan. We could be in this financial situation forever if we do things like that. Continually lending money out.

  4. I think that a lot of problems lie in the marketing with those shows as well. They seem to glorify the process to an extreme amount. Sure, you see buyers running into problems with contractors or not making deadlines, but in the end it always seems like everything works out and the house is flipped. TLC and HDTV are almost committing false advertising by only selecting certain episodes to air. The mortgage crisis created such a large problem and TV shows only seemed to make the issue worse.

  5. The domino’s show how one after another, the little mistakes that were made in real estate, creating the situation we are in today. If you click on the picture it increases the size.

    Blaire I really like how you mentioned that those TV shows are creating false advertising. I never thought of it that way, but when you think about it, it seems somewhat true. Problems do seem to be made worse by TV and the news at times.

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