The Mortgage Crisis, a view from the trenches

At least supposedly. It is a comment from a reader of AOL.com who is responding to Jon Stewart's rant against John Santelli and CNBC. Here it is in its entirely:

I worked as a mortgage underwriter for over a decade. I can assure you that in the best of companies, fewer than 5 and often as few as Zero people ever "look over" a loan for credit worthiness. A reputable loan officer might pay attention to these details, a processor should and the underwriter specializes in it. Unfortunately there is no required training or educational level required for any of these positions. With a bachelors degree from an Ivy League University I was grossly overqualified. I was the sole signature required to lend approximately a quarter billion dollars annually on behalf of a major US Bank. Most in my position had no more than a high school education. Even that level of education and human review was removed as more and more loans were approved not by humans, but by automated underwriting systems. As an underwriter I watched the computer approve hundreds of loans whose credit or income were beyond what any human would even consider approving. Perhaps you will have some luck in collecting the lost funds from a computer. I doubt it. I firmly believe that the crisis, in large part, was caused by this abandoning of human review in favor of flawed computer models.

There you have it. What really caused the mortgage crisis.

It was a computer error.

what worries me is this actually makes some sense.

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Why I voted Republican

Ha! Thought that would get your attention. But I did vote Republican in two local races. One was a fellow Episcopalian I see at church and at the Y. The other one ... well, there's an interesting story there.

Awhile back Jack and I were writing about the housing implosion. Jack made this comment that I agreed with :

I'd like to see the blame spread a little more, and more thickly. Real estate developers for a long time built giant houses and cooperated with the banks in selling them to people who couldn't afford them.

This certainly struck a chord. Around here, a county where the economy has been a serious problem for years, and where most people are lower middle class or working class, the only new houses Carmen and I have seen being built have been huge things that must cost $250k minimum. Except one.

When we were looking for a house I went to an open house for a small, modest, but well designed, well built and attractive home going for $115K. And the builder was there to explain his work. He told me that like autos it was nearly as much expense, time and trouble to build a small home as a modest one but that you make more money on the big expensive home. He felt, however, that every now and then for the health of the community he should build a smaller, cheaper house and that was what this house represented.

I believed him. And the last two times he has run for local office both Carmen and I have voted for him.

Snapshot of despair

I think you should watch this video. All of it. It was a bit harder to watch than I expected when I started. This is the real face of the housing markets implosion.

A number of people have pointed out, and I assume it is true, that part of the problem was the federal gov't (Barney Frank is usually presented as the poster boy) that forced lenders to push more and more suspect loans on the economically marginal. Perhaps. But I have now watched or listened to several overviews of cleaning up the debris once homes are foreclosed and the neighborhoods and accouterments are not those of even lower middle class folks. These are people that had some money.

Watch very carefully. One homeowner admits he is paying $31oo a month for his house, and it is now worth $1000 a month. If he is (or was) able to afford house payments of over $37,000 a year, what must he be making per annum?

Any comments would be appreciated. It is a sad and disturbing little piece.