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follow Patrick 2018 Mar 29, 11:42am
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Low interest rates. Easy credit. Poor regulation. Toxic mortgages.These were just a few reasons regulators gave for the collapse of the US housing market a decade ago. Since then, regulators have improved the standards that lenders use when Americans apply for mortgages.But today increasing danger lurks in the mortgage market, and economists say it could put the financial system at "even greater risk" when the next recession strikes or too many borrowers fall behind on their mortgage payments.A growing segment of the mortgage market is being financed by so-called non-bank lenders — financial institutions that offer loans to consumers but don't provide saving or checking accounts.Borrowers with poor credit have increasingly turned to these alternative lenders instead of traditional banks. The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up.
Time to disband Fannie and Freddie. Never should have been created because markets are perfect.If you can't pay for a house with cash, you deserve to be homeless, exactly as the Founding Fathers believed.
Problem is that Patrick is NOT paying for someone else's mortgage risk. He is paying for the risk inherent in Scrooge Moneybag's investment in Jason's overleveraged shit shack. The bank will kick Jason to the curb and bail out Scrooge. The risk is not truly socialized as intended--with some exceptions, generally only the 2b2f are bailed out.This lurking risk is great news for potential buyers.