re: Who/what entity would you say is most to blame for the 2007-2009 housing crisis/recession?

Community Reinvestment Act > Bakers > Subprime loans > Wall Street Investment Firms > Real Estate Derivatives > Mortgage Backed Securities > Credit Default Swaps > Investors > Pension Funds > 401ks > Federal Reserve > Bailouts > Tax Payer

Once the subprime borrowers couldn't make their monthly payments (usually because Adjustable Mortgages adjusted higher) the system collapsed.

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The Clinton administration had a large hand in it.

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This gets my vote. Clinton pushed hard for every American to own a home and be a part of the American dream. This resulted in the loosening of mortgage lender requirements, which in turn to led to the infamous NINJA loans. You can't just give houses and loans to everybody and expect it to work.

And then you had the whole mess with the banks and the syndication of loans that only exacerbated the problem. Lots of blame to go around, but I think the Clinton administration put the first dominoes down.

On this subject, if you've never seen The Big Short, I think it's an excellent movie that does a pretty good job of explaining in layman's terms how everything went to shite.

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Banks would offer crazy loan amounts that people were accepting. A ton of people foreclosed on homes and it created a bubble from so many houses being foreclosed on? Is that right?

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Banks would get a bunch of loans written to Fannie/Freddie guidance. The loans were packaged up and sold as bonds, with mortgage payments paying interest.

Risky loans had higher rates because they went bad more often

Less risky loans had low rates because people who make those loans rarely go to foreclosure

The problem was when they would mix risky loans in with the low risk loans. When those went bad the bonds failed.

That's a 10000 foot explanation that leaves a lot out, but should give you the general idea.

Bill Clinton - in 1999 we repealed Glass Steagall which separated banks and investment banks. During the years after that - securitization of home loans, credit card debt, and auto loans became a huge industry. That allowed banks to free up balance sheet and a huge new asset class was created for investors. Banks got more and more creative in lending and created new asset classes - as long as there were investors to buy it, then they created it. In 2006 and 2007 many broker dealers teamed up with mortgage companies - and basically said underwrite to these standards and we will buy everything you create -- fraud became very prevalent. It didn't matter at that time because as long as home prices were going up, it didn't matter - no losses. Then in February 2008 home prices dipped a bit and the route was on.

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100% financing is still around for rural development loans?

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I'm not not if they still offer them or not.

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50k for a 300k house isn’t that inconceivable without debt and a 20% down payment. What would they note be, like $1400-$1500. Someone makings 50k could afford it.

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It was pretty much 100% financing. And at the time I calculated, it was something like my entire paycheck. It wasn't leaving a lot of extra cash on hand, either way.

Bill Clinton

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100% financing is still around for rural development loans?

I'm not not if they still offer them or not.

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nearly everything that was available in the mid 2000s is available now - underwriting standards are just a little stricter and securitizations have to have more credit support than then -- a ton of the leverage in the system is gone as well

Fedgov pushed the banks to expand credit availability.

The banks responded by creating subprime mortgages.

The market wanted a piece of the action, thinking of course these loans are safe, and if they are not, we will make enough interest at the outset to make up for it.

Financial journalists fed the beast by constantly talking about how owning a home was the best and fastest way to wealth.

And homebuyers thought buying was better than renting, even if they had to stretch a bit.

And it all worked fine... until it didn't anymore.