Mar 05 2009

Can we please learn from our mistakes?


Ten years ago, experts recognized that sub-prime mortgages were extremely risky.

One of my husband’s relatives forwarded me this news article from the New York Times. Called “Fannie Mae Eases Credit to Aid Mortgage Lending,” it was published in September 1999.

Some things in the article really jumped out at me:

Fannie Mae hoped to ease credit requirements for folks trying to get a mortgage, and “will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.”

“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”

“These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.”

OK — so if they couldn’t get a conventional loan because their finances weren’t good enough, then why on earth would they be able to afford paying an even higher interest rate?

“Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”

O RLY? Ya rly.

Even 10 years ago, when this was just getting started, the experts realized they were taking on a huge risk by dealing with these sub-prime mortgages. They saw this coming. And yet, it happened.

I just hope we as a nation can learn from this, so we don’t repeat our mistakes. But we probably will.

It’s in our best interests to be prepared for the next recession by keeping out of debt, having emergency funds, and living within our means.

Posted under Uncategorized | 5 Comments »

5 Responses to “Can we please learn from our mistakes?”

  1. Sad, sad, sad. :( I think a lot of this mess we are in is because people just don’t have the same morals they used to. :(

    Mrs Money’s last blog post..Bloggy Giveaway! Something Handmade

  2. Yes Kacey I did! Thank you!!!! I needed this! :-)

    Rachel’s last blog post..Keep it Simple

  3. We also learned our less about massive deregulation and twisty, hard to understand investments just prior to the Great Depression. Two lessons that we already had learned, disregarded, resulted in this mess.

    Miranda’s last blog post..Lending Club: $100 Giveaway and Review

  4. Sorry Kacie! I have a student who spells it Kacey, so I just automatically spell it that way! :-) I always hate it when people spell my name wrong… like add an a in there or something. :-)

    Rachel’s last blog post..Keep it Simple

  1. 1 Trackback(s)

  2. Great Minds Think Alike!

Sorry, comments for this entry are closed at this time.

Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

Keep in Touch!
Like me on Facebook Follow Me on Twitter RSS Feed

Subscribe to my email updates:
  • Ebates Coupons and Cash Back

Web Statistics