If loans had been restricted to people who could actually make the payments, home prices would not have skyrocketed like they did and we would be much better off all around.

But no, the mortgage, financial and real-estate interests structured everything so they could take their commissions, and pass the default risk on to someone else by severing all connection with the long-term performance of the loan. This to me is the fundamental problem of all of this mortgage securitization scheme. Each party in the lending process needs to retain some liability in case the mortgage payments are not made. That way they would have something to counter their greed motivation that dominated the last 5-6 years or so.

What does buying into a bubble matter if you live in your home long enough to pay off the mortgage? Those intending to flip got what they deserved, but a bubble doesn’t matter to a long-term homeowner.

Not All Financial Woes Are Created Equal
The failure of Indymac Bank – according to The New York Times the largest lender to fail in more than two decades – can be laid squarely at the feet of the lax (or nearly non-existent) underwriting that is part of (a big part of) the sub-prime mess. The chickens simply came home to roost.

The troubles of Fannie Mae and Freddie Mac are quite different. Freddie and Fannie underwrote loans carefully; their difficulties are a result of the unprecedented decline of home values.

In 2006, going against the conventional wisdom that single-family home prices never decline (they might stop rising for awhile, but they never decline), we predicted that single-family prices could decrease 10 to 20 percent. Painfully, that forecast turned out to be very correct – but also optimistic. We’re in a cycle now in which housing declines already are greater than at any time since the Great Depression of the 30s. And we’re not at the bottom yet.

If you don’t want to be disappointed by housing performance in the near term, disregard forecasts that the bottom is just around the corner – unless that corner is in Timbuktu. The bottom is NOT coming soon. And when it does arrive, it will not be obvious, like the bottom in the chart of the DJIA. The housing “bottom” will become apparent only in the rear-view mirror, when you realize that prices have stopped falling. Don’t expect a sharp rebound.

We will stay at the bottom for quite a while. How long that lasts will vary, as always, market-by-market.

The article’s protagonist should have been a renter these last several years. You gotta live somewhere, but that doesn’t mean you have to buy.

And the American dream is still there. It’s about opportunity and freedom, and it’s still around today. For all of us, including the lady in the article. It’s too bad she used that freedom to make serious mistakes, but that’s the price of freedom (that and vigilance).

This below is coming from a very liberal and very NON prejudice person..
I am only using the (SHE) to refer to the example of race, class and or sex in the article. I don’t reallt care if it were he or she or it.

SHE probably got suckered into a bogus lone from the start that SHE could NOT really afford!

SHE had a basic human instinct called WANT and probably jumped through hoops to get the original loan.

SHE had access to mortgage calculators and consumer counselors the whole time and 10 minutes could have given her a clear picture of the risks.

SHE had wants and desires and CHOOSE to RE FINANCE several times BECAUSE the HOME APPRECIATED and BECAME HER BANK!

SHE saw a GIANT credit card with a minimum payment required and like ALL HER FRIENDS around her, SHE JUMPED ALL OVER the chance to pull as much CASH out as often as possible.

I just don’t buy how this or any person working 3 jobs was able to afford and buy these homes in the first place and make it, but when EQUITY came into play and LOANS were a plenty, ALL these people suddenly and DESPERATELY “needed” access to CASH? Up to 115% of market value????

I think this FALSE EQUITY became like CRACK COCAINE and man, woman or whatever, PEOPLE are tempted by material things and MORE things. Sure for people who had lower incomes and never had much, the PIGGY BANK was perhaps just way to tempting.