Five Questions About the Mortgage Crisis

In their eagerness to make and securitize loans, the banks devised ways of splitting a large mortgage into separate, smaller "piggyback" loans and packaging them as securities instead of selling them to the housing agencies. Cleverly, these tactics avoided the PMI as a requirement.

And now, those same banks are complaining about losses?

Where Was Congress?

Congress must have been aware of the PMI requirement, because it just voted to make PMI premiums deductible for 2007 through 2010.

That move is designed to help the mortgage industry convince new buyers to pay for insurance to protect their lenders -- albeit a bit late in the game. But the folks up on Capitol Hill haven't investigated the lenders for bypassing PMI in the past with their too-clever subprime loans.

Speaking of Congress, in 1998 it passed the Homeowner's Protection Act, which required that borrowers be notified and allowed to stop paying for PMI when they reached 20% equity.

It was a great name for a bill.

What a shame it didn't actually protect borrowers from unscrupulous brokers and lenders, who were just gearing up for the greatest consumer ripoff in our history.

One Last Question

Property-tax assessors, this one's for you.

You were quick to raise property taxes when home prices were soaring. Will you be equally quick to cut those property taxes in the midst of the huge price drops we've seen?

Just wondering.

And that's The Savage Truth.