Smalltownbanker

Leverage 101: The Real Cause of the Financial Crisis

Oversimplification is a dangerous thing. You completely ignored marketing costs in each scenario for the homebuyer which are typically 7-10% or more when a home is sold. This is why the buyer who financed 100% of the purchase and has no liquid assets is simply SOL when values stop rising.

The problem is Fannie Mae, Freddie Mac, AIG and Wall Street all knew this but ignored it. They should have been smarter than the individual entering into this type of transaction for the first time in his life who is more worried about Clay Aiken being gay than he is about leverage and economic principles.