What Really Caused the Housing

Collapse and Mortgage Meltdown?

Here is a hint, it was definitely NOT VA Hybrid Arms.

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What caused the Housing Crash?• We are going to stick to the facts

• Loose borrowing/lending standards

• Cheap money/low interest rates

• Greed by both Wall Street and Main Street (that is you and I)

• Subprime Loans

• Option ARM loans (the furthest thing from a VA hybrid loan possible)

What was the state of mind 25

yrs or so ago?• When our parents were buying homes things were way

different

• You had to have no less than 20% down payment to get into a home

• You were not entitled to a home, but you saved and saved and earned the privilege to buy a home

• You bought a small house within your means and then tried to move up later

• You tried to borrow as little as possible and tried to pay your home off as soon as you could

• You got one type of loan. Everyone had the same rules and loan types

Current state of mind (at least

prior to the housing crash)• Here is what we and our kids are likely to think

• No money down loans are expected and the way to go

• I live in America and owning a home is a right or entitlement

• We want to keep up with the Jones’

• Who cares how much my loan is as long as I can afford the monthly payment

• There is a loan for us all. We can always find a way to get approved

Borrowing standards got way too

loose or easy• Credit scores did not matter any longer. You

could get a $1,000,000 loan with a credit score of 520

• Employment was not important or even verified many times

• You could make up how much money you made/earned

• Banks did not care what your home was worth and were willing to lend 125% of your home’s appraised value

• Down payments were a thing of the past

How does loose lending affect

housing?• As more and more people bought homes prices

went higher and higher

• As prices went higher and higher people borrowed more and more

• Prices then went higher still (due to easy loans)

• Fake home appreciation due to artificially inflated home prices

• Most importantly people that had no business buying or ability to repay the loan or intention even in repaying it were now all able to purchase homes

How does cheap money or low

interest rates affect us?• On top of loose mortgage guidelines we had very low

interest rates

• Low rates was like adding gas to an already burning fire

• Low rates allowed you to buy even bigger home or pay higher prices due to such low rates making payments so much lower

• When we first saw signs of the falling housing/mortgage market our government slashed rates even further to try and prop us up

• Most importantly people that had no business buying or ability to repay the loan or intention even in repaying it were now all able to purchase homes

Greed is good, right?

• Most of the greed came from Wall Street

• Wall Street knew they were selling or offering loans that had little to no chance of survival, but they were making so much money they did not care

• Wall Street was just like Madoff. These loans were a deck of cards or ponzi just waiting to fall

• We all gobbled it up! Most of knew we were buying more than we could afford and we did not care, it was fun and you could not lose.

• Lots of people knowingly lied on loan applications and thought they could sell the house for a gain and win

• TV shows were popping up everywhere teaching us how to be more greedy

What really caused the CRASH?

• Short answer and true – ALL LOANS other than VA

• FHA loans – No down payment required, credit score did not matter. FHA increased the loan limits they would allow to keep up with the Greed wave

• Conventional loans- By now we all know how bad Fannie and Freddie turned out during the crash. Some conventional loans were ok with no down payment, no income, no proof of job and very low credit scores

What really caused the CRASH?

• Subprime Loans were the worst

• Credit score was pointless

• BK one day ago, who cares

• Not employed, hey we don’t care

• Not a US citizen? Ok by us!

Option Arm Loans - HORRIBLE

• Not as loose on the standards as Subprime

• You could make a payment that did not even cover your interest and it caused your balance to go up each month

• Imagine making payments each month all while going farther and farther into debt

• It did not matter as long as the house would be worth more tomorrow. The house was like an ATM machine

• Very volatile index for the rate to be tied to

• The margin was as high as 5% or more

VA Hybrid Arm Loan

• Do your research after watching this video

• Youtube.com/LowVARates

• Google “VA Hbyrid Truth” look for www.vahybridtruth.com

• VA Hybrid has NEVER ALLOWED:

• NO verification of credit history

• NO verification of job or income

• You to buy more than you can afford

VA Hybrid Arm Loan

• The VA Hybrid Arm is:

• Tied to a stable US treasury index

• Has low margins under 2.0% in some

cases

• Pays down your principal and is fully

amortized. Can pay down faster than

a 30 yr fixed too

What did you learn?

• The VA hybrid did NOT cause the

housing crisis

• Feelings are not right or wrong, they

just are

• You are able to make an educated

decision now that you have learned

the truth

• What really caused the housing crash

-Larry D.

"I would like to my representative for

his outstanding commitment to

ensure my loan process. Thanks you

for all your hard work. God bless!"

Thank you for watching.