The Big Money Mystery of 2008 by Bill Roberts

Everybody has an opinion about the Mortgage Meltdown. Everybody has a suggestion about how to "fix" it or prevent another occurrence.

I have my doubts about all this.

My friend Bill Archambault writes extensively about all aspects of the mortgage industry. If you don't know him or read his blog, you should.

He recently posted about Why Are We Calling Lenders Predatory

This started as a comment on that post.

After "analyzing" the lending process Bill suggests that part of the problem is the federally mandated Truth in Lending disclosure (the TIL).

You can't legislate against stupidity. And disclosures only help the brokers and lenders by limiting their liability. Who can possibly read and understand an inch thick sheaf of contracts, addenda, and disclosures?

The real problem is that all these loans were made with the general thought that the market would continue to go up. Ask anybody if they would have done what they did if they had known that the bottom was about to fall out of the market.

The TIL is a worthless document anyway because the loan terms and costs aren't set until it is ready to fund. The final HUD-1 is the only disclosure that reflects reality and it comes a little too late for most people to make any changes in their plans.

The loan products that were sold were created with the idea that there were unlimited funds available and they (The Wall Street types) wanted/needed to make their product "competitive" in order to sell it.

Why? 

So the real question is "why did the market tank?" We need to look at the doings of the Federal Reserve in driving interest rates down and then driving then back up.

Also, was there a conspiracy to "transfer" wealth from other countries (the buyers of the "sliced and diced" mortgage backed securities also known as derivatives (Collateralized Mortgage Obligations (CMO's)) to the good old U.S. of A? Because that IS what happened. A lot of money was lost by European and Middle East investors. Where did it go? And yes, it is a zero sum game. That money ended up in our economy. Interesting.

This "event" will capture the imagination of economists and financial writers for a long time to come. All we can do is live through it.