Subprime revisited

He's a liar.

Now that we know the huge percentage of subprime loans originated for refinance and cashouts, instead of home purchase, the self-serving nonsense about "helping people into homes" has finally been exposed as a total fraud.

"Subprime and Alt-A lenders exposed the market demand,"

Liar.

Subprime, Alt-A, and other shoddy loans created the market demand. Demand is not the same as "desire." There may be enormous desire for 50-carat diamonds, but demand is something different, as it depends on people having the cash to buy such huge rocks, and the willingness to part with it. Subprime and other irresponsible lenders created the demand themselves.

the housing industry, where the belief is prevalent that the best way out of the current problems is to restore a flow of money that will sustain prices at or near current levels.

Yes, I'm sure belief is prevalent that the U.S. taxpayer should step in and hand them money. They are talking their book, and no one believes them anymore.

Who on earth would want to step up and "meet this demand" when it's clear that people were borrowing far more than they could afford? Why would you lend to people who do not have the ability to pay you back? Of course those in the industry want to keep prices in the stratosphere - that is hardly the best way out for everybody else, though.

There's only one way to meet the "demand" as Mr Hills says and it's called hyperinflation. And with the Fed's inflatinary policies and idiot populists on both sides of the aisle, looks like we're going to get it. God why are there so many idiots in charge?

He makes a good point. Everybody (well, most people anyway) wants more than they can afford. Subprime provided a method for people to attain more than they could afford. Thus, it met a demand. Maybe it was a terrible demand to meet, and was done unethically, and will result in long-lasting economic problems, but that is besides the point for the moment.. The article premise is correct - the consumer had a demand to borrow more than they were able to (should have been able to), and subprime met that demand.

All this mess looks for me like a Theatre of the Absurd. Especially with the ongoing FBI investigation into the subprime mortgage crisis that focusing on 14 companies suspected of accounting fraud, improperly securing loans and insider trading. If this was a fraud of the nation wide spead, then how comes this was outside of the autorieties scop? Does it mean that the FBI was closing their eyes on what's going on, instead of preventing it?

He has the whole thing turned on its head. He is purporting that the high prices are fixed, and that demand must be created to keep this system working. Economics 101 teaches us that the balance between supply and demand determines price. It is the availability of credit that drove prices to where they are today.The more credit that is provided, the more money is available for purchases (ie. demand goes up), the higher prices go.

He says we need a revolutionary new mortgage product to allow people to afford houses at their current high prices. What we really need is an old mortgage product: Prime or near-prime borrowers who put down 20% of the price and have a 30 year fixed rate mortgage, whose payments do not exceed 28% of their income.

This higher standard for borrowing will reduce the amount of money available to buy houses, and thus force prices down to affordable levels.

He has the whole thing turned on its head. He is purporting that the high prices are fixed, and that demand must be created to keep this system working. Economics 101 teaches us that the balance between supply and demand determines price. It is the availability of credit that drove prices to where they are today.The more credit that is provided, the more money is available for purchases (ie. demand goes up), the higher prices go.

He says we need a revolutionary new mortgage product to allow people to afford houses at their current high prices. What we really need is an old mortgage product: Prime or near-prime borrowers who put down 20% of the price and have a 30 year fixed rate mortgage, whose payments do not exceed 28% of their income.

This higher standard for borrowing will reduce the amount of money available to buy houses, and thus force prices down to affordable levels.

Yes! We need a new product to allow prices to hyper-inflate even more! Can I have a 60yr fixed rate mortgage so I can afford an 800k home?

I also have the desire for Ferrari's... can I have one of those too?