EVERYONE is to blame for the mortgage crisis and this rant may be a little of topic, but there are really only a few innocent parties here. Guilty people include, but are not limited to, mortgage brokers putting people in loans they could not afford, the mortgage industry developing poor products (no doc loans, 0% down loans, etc), investment bankers securitizing mortgages the way they did, greedy homeowners buying way more than they could afford, the government for pushing officials to make loans and homes easier to get for unqualified people who should have never been able to buy, the federal reserve for keeping rates so low for all those years, and many more others reasons. Rant over.

I wish they listed dates of service at CW and WAMU as CRO. That would be telling.

Sorry, but "everyone" is NOT to blame. Renters did nothing to cause this, yet the increase in property values caused rents to double in less than 10 years, so they paid for the party while it was going on. Yet NO ONE has offered them anything to help them--just help to everyone who did cause the mess. And some of the renters are now homeless, not simply "houseless."

Erin,

Agree that renters who did not overextend themselves with credit cards to buy expensive HDTV's and bling bling and auto loans to buy showy-offy gas guzzlers and personal loans to vacation at an all-you-can-eat Jamaican paradisio are certainly the victims who had their blood sucked by the hybrid Dracula/Bernie Madoff system.

My point is, it was not just a mortgage crisis - it was a credit crisis.

Repeat until blue in face: Credit is debt...credit is debt...credit is debt...

The pond really looked great for a while but as soon as it started draining the tires, cans and bottles were readily apparent.

Lots of blame to go around but the main driver of this mess is simply senior management at various entities refusing to accept the cyclical nature of markets. To keep the party going and the attendant compensation derived therefrom risk levels were overlooked or ignored.

Obviously this does not even begin to address the outright criminality of some businesses and individuals.

I still cannot believe senior Fed officials did not derive through simple behaviors evident in the marketplace, well known to many, that things were going wrong.

In a similar article as Jamie was published in DSNews.com written by Carrie Bay she states “According to a study released Wednesday by the trade group (MBA), poor risk management habits, including insufficient data and incomplete performance metrics, coupled with a short-term focus and unrealistic optimism among senior business managers were all factors that contributed to the collapse of the U.S. housing and mortgage markets”.

We all know the reason for the housing collapse and almost our entire financial system, it was simply greed. Americans convinced themselves that housing prices would never go down, just like the .com bubble, creating a huge housing demand. Fannie Mae, Freddie Mae, HUD, the US Congress, MBA, NAMB and mortgage lenders wanted to give home buyers the ability to purchase no matter their ability or willingness to repay. With the help of Wall Street’s best and brightest we found ways to turn pools of low credit quality, high loan to value mortgages into an AAA rated senior tranches with default insurance. To complete the greed scenario investors throughout the world invested in these so called AAA rated senior tranches to get the extra 1/2% or many times more return on their investment.

Everyone was happy with income money flowing like water out of a faucet until events burst the water pipe requiring real cash to be put back into the system. I think Warren Buffett sums it up best, you never know who swimming naked until the tide goes out.

Let’s get to the cast of characters in this report.

First we have the MBA, Mortgage Banker Association, a lending trade association that in a January 2007 press release proclaimed that "it is only right that the national association for the commercial and residential real estate finance industry owns its property". Remember our financial meltdown started in mid to late 2007.

Just to make the point of the of how well informed they were of current financial markets the MBA in June of 2008 issued another press release stating “we came to the inescapable conclusion last year that owning our own building was the smartest long term investment for the Association".

Now we get to February of 2010 when the MBA sold their new building for $41.3 million some $37 million less than it paid just a few years before. Their loan package was for $75 million, yes this is what is called a short sale only a mere $33.7 million short. At the same time the MBA is trying to encourage homeowners to stay in their underwater property. This seems to be a classic case of “do what I say not as I do”.

As Jamie pointed out in her article Professor Rossi who conducted the study for MBA was once Chief Credit Officer at Washington Mutual and Chief Risk Officer at Countywide Home Loans. In case you forgot Washington Mutual was the largest bank failure in America and Countrywide now part of Bank of America is involved in so many lawsuits for its lending practices that the courts may never see an end to the cases. Does anyone think Professor Rossi didn’t have input to the credit risk at these institutions for Pay Option ARMs, Subprime or Stated Income / Assets loans.

This report “Anatomy of Risk Management Practices in the Mortgage Industry” by Professor Rossi and the MBA should read we got greedy for the money and all parties worked together to find a way to originate loans while passing the risk around the world.

In an "nutshell" it was simply greed - unbridled, uncontrolled greed. Risk management policies, officers, and organizations simply chose to look the other way so that the mortgage and investment industry would not be incovenienced by obvious problems.

Risk management is not "rocket science". Rossi's conclusion that better risk management is necessary is so elementary and obvious I wonder why the MBA had to pay some to figure that out.

Actually, Rossi is wrong. Better risk management is not the answer. The problem was that already existing risk management practices were just being ignored, cancelled, or removed. Simply exercising common sense risk management on all types of mortgage loan applications would have prevented most problems.

The bottom line is that greed won out over rational thinking. Who is to blame? I blame all the greedy and incompetent people that we allowed to be in charge of our private and public institutions. That doesn't include me or most of us who read this article.

All true, unfortunately the people who caused the mess are still employed, and they are being told to recoup the lost money any way possible. These same people know only one way - try to sell all these defaulted assets as close to the housing bubble price as possible thereby prolonging the mortgage crisis. But there is some real fun here for the beat up mortgage companies sitting around licking their wounds, feeling bad about losing all that money for being so stupid. At least
they can try to squeeze consumers by holding back their selling inventories of houses to maintain high house prices as close to the pre-bubble burst as possible. It won't work. They just have to take their losses, go home and cry about how good it felt to be so rich, and there is nothing they can do to get out of it. They have no money and have lost all that power - a hard bitter pill to swallow. They are angry and bitter, and are going to prolong the mortgage problem for a long time - years...stealing money back and forth amongst themselves. But at least they can beat up the little guy and make him feel bad along the way for some satisfaction and temporary relief of their misery.

I have been in the mortgage and real estate finance industry for 25+ years. It sure is screwed up. It's not new legislation that's needed, it is enforcement. Every time new legislation is written, it decreases competition and further complicates the "flow."

I also have written an entirely new architecture for the mortgage industry moving forward. Take control back away from the government. They are now touching 96.5% of the residntial mortgages done today.

I agree 100% Rocky... I work for a Sarasota Mortgage Company in Florida, and when some clients call to gather information as to what options they have to obtain a lower rate and payment, it's hard to understand how they got their existing loan. The Pay Option ARM was a very popular Sarasota Mortgage program, but as we can see it's a dangerous program. It's no wonder we have so many foreclosures. Too many homeowners have the "strategic default" mentality when faced with the lack of equity in today’s real estate market. This seems like a never ending cycle. Hopefully they government will do something to help, like create a principle reduction program. Taxpayers bailed out the banks, why not a bail out for homeowners that are under water?