Current home mortgage crisis explained: the shell game
Suppose you want to buy a home.
You go to a reputable lender, fill out a blank local phone book's worth of paperwork (sign in 47 places, initial in 20).
Go home and wait a few days.
Get info from lender that you forgot to pay the paperboy 6 yrs ago for the Sunday paper.
Track down paperboy. Pay the $1.75. Report back to lender.
Bring in every current bill you have and the last 3 yrs worth of bank deposit slips, along with your last 3 statements.
Go home and wait.
Meet with the lender. Find out you have to give up cable TV to qualify.
Cut off Cable TV. Deal with angry teenager.
Sign multi-page contract with reasonable interest rate for 30 years.
Celebrate being a Homeowner.
Meanwhile, back at the ranch....
Government goes to lender (FED) and requests a loan of it's own money.
No credit check, no debt to income ratio nonsense, no references.
Loan is granted at reasonable interest rate.
FED tells Treasury to start the printing press and release into the economy another Billion $ in the Government account.
A short while later on Wall street...
Lots of commodity buying takes place with the freshly printed money at the current exchange rates.
a month later at the neighborhood Superstore....
The price of Bread, milk, GASOLINE, and other daily necessities sees a marked increase in price to reflect the new exchange rate of the recently diluted dollar (that month old Billion $ finally ends up in consumers pockets)
After about 6 months and a depleted savings account....
You decide that after canceling the paper, giving away the dog, selling your kit car, and keeping the Air conditioning at a comfortable 79 degrees, you still are not going to be able to make the house note now that your expense to income ratio is so far out of whack.
The bank forecloses after refusing the short sell.
You are out the $ you spent on house notes, improvements, and deposits, your credit is wrecked, your dignity is gone, and your homeless.
The bank experiences many of these and goes to the government for help.
The Government agrees to bailout the big lender, covering all the outstanding debts with money they will eventually recover from the now homeless, broke, and shamed taxpayer.
The bank ends up with all the $ from the payments made, gets the rest of the $ on the note from the government in the bailout, and gets the property to resell to the next homebuyer.
The Government gets to keep it's cozy codependent relationship with the banks intact for another day.
You get to read about all the "irresponsible" borrowers that wrecked the economy in a day old paper your took from a trashcan near the underpass where you now live.
Now THAT'S FUNNY!