The rest of the story: The reason the banks were handing out substandard loans was that Congress insisted they do so, and through Fanny Mae and Freddy Mac guaranteed that the lenders would be able to keep any profit but that taxpayers would shoulder any loss. If you were a banker, Stamper, what would you do?
Yes.
To enlarge on this further it was the brainchild of Bill Clinton and a great example of utopian socialist economics.
Clinton guaranteed, apparently, that the taxpayer would shoulder the risk of sub-prime mortgage loans.
But before this there was the thought that this would not be a problem since anyone in mortgage stress in the USA is allowed to hand the keys back with no further financial obligation on the loan.
Everyone thought that this was great - many people with no means signed up because the initial terms of these loans provided for miniscule repayments.
Later on though the repayments ramp up to become much more than normal mortgage loans.
At this point people began handing back the keys to the banks.
The banks began putting these houses back onto the market.
According to the theory the banks would not lose since they would just resell the house to recoup.
However supply soon began to outstrip demand and house prices fell.
More and more people found themselves paying off houses worth a fraction of the costs of the (non-subprime) mortgages they were holding.
They handed the keys back to the bank.
House prices continued falling.
The banks could not meet their costs as a result.
Financial armageddon loomed.
All the banks began calling in their loans between themselves and other financial institutions....
We all know what happened after that!
So much for Bill Clinton's utopian socialist view of the world.
So Stamper this is the result of your desire for government meddling in economics to 'level the playing field'.
Tony Jay