Busted by Edward Andrews reveals the Mortgage Meltdown

Economic reporter for the New York Times, Edward Andrews not only reported on the residential housing market boom but he also reported on the housing markets downfall. Andrews himself fell into financial disappear with his own mortgage crisis.

Andrews in his book Busted he had done a marvelous job of explaining the chaos’s surrounding the housing market. He reveals the deceptive mortgage professionals and practices that centered on subprime loans. He calls out the Bush Administration who permitted the chaos’s to continue and leaves no stone unturned when it comes to Wall Street investors who purchased pools of mortgage loans. He doesn’t forget the home buyer either in the mess; as without the homebuyer in quest of the American Dream they would not have over indulged in obtain mortgage loans that clearly were financially beyond the homebuyers’ budget.

Andrews details the new wave of easy credit that ignited the gas that set the housing market booming. He points out the mortgage programs that offered home buyers with risky or even bad credit to obtain a mortgage loan. The name of the game was the riskier the homebuyer the more beneficial the profits on Wall Street; after all you can pass the risk off on Wall Street to another investor to take the hit.

The government has had protections in place for years that have been laid in stone but were cast to the way side by mortgage lenders, banks and the federal government. Mortgage lenders with their new mortgage loan programs stop verifying income and no longer were requiring an initial investment from the homebuyer to purchase a mortgage. Bankruptcy and foreclosure in some mortgage loan programs didn’t seem to matter when underwriting the credit risk of the borrower.

Lenders in their quest to make billions on Wall Street began to target Blacks, Hispanics and single mothers with loans that were predatory in nature. The loans often had adjustable rates that initially start with an extremely low interest rate and were designed to balloon later. The loans often ballooned to a point that the monthly payments were impossible to maintain and the borrower was ultimately foreclosed on by the lender.

One subprime mortgage executive actually told Andrews that if you can fog a mirror with your breathe; you can obtain a mortgage loan. Mortgage loan lenders lowered industry standards based on the demand from Wall Street investors and the lowering of those standards resulted in more toxic loans; payment defaults by homeowners and the increase in foreclosures around the country. The credit underwriting risk was tossed out the window.

Mortgage loan lenders no longer required the high credit scores for homebuyers; limited or no income verification and limited to no documentation in regard to the homebuyers credit. Homebuyers no longer had to contribute to the purchase of their property purchase; they simply had to show up to close on the loan. What could possibly go a rye with this scenario? If the mortgage industry was questioning it they were too wrapped up in Wall Street profits to care.

Untimely, everything surrounding the loose credit underwriting guidelines came to a crashing cascade. Property values stalled and all that was promising tumbled down like bowling pins being struck by a twelve pound bowling ball. Mortgage lenders, banks, and homeowners went down and took the economy with them.

Andrews was also caught in this web of destruction like many of over four million homeowners’ facing foreclosure today. His personal mortgage of five hundred thousand dollars left him doing all he could to make the payments. He was down to paying for daily living needs such as food and utility payments with his credit cards. The card eventually reached their limits. His marriage to his wife Peggy became strained and when Peggy lost her position the family was threaten with foreclosure.

Andrews accuses Moody and S&P for their complete influence in promoting toxic loans. Moody and S&P were in charge of rating the risk involved with this mortgage loans. The ratings given were often triple A ratings and Andrews feels these rating were a complete lack of discipline in regard to risk assessment.

Open competition according to Andrews isn’t always self correcting and with no bylaws capitalism can be just as lethal as over-regulation.

Busted is an extremely intelligent look at the rise and fall of the mortgage market. Andrews in his reporting and personal account sheds a laser beam of light on the darkness created by the American Business Industry.

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