Why Mortgages Blew Up
More importantly, some borrowers previously priced out of the real estate market could qualify for a loan at the lower payment, but not at the higher one.
That's a factor at least some observers want to change. In a recent analysis of the housing crisis (summary here), Michael Larsen, an analyst with Weiss Research, lays out a nine-point plan to reform the industry, including a recommendation that lenders only qualify borrowers for loans at the larger "fully amortizing payment," thus reducing the risk of default.
Although the report lays much of the blame with lenders and regulators, it also takes aim at borrowers who blindly bought in to the rally, leveraging themselves "to the hilt," picking the "most aggressive" types of financing, he says.
"In the perfect world,
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts