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Originally Posted by oklavol  |
If that's correct, why is the bubble not screaming larger today with mortgage rates bottomed out? The issue of spreads against alternative investments and investment risk is something you're clearly missing in the commentary. Mortgages were perceived to be of very low risk, when in actuality, the new underwriting standards massively undervalued that risk.
Low mortgage rates are fine in the event that underwriting standards are upheld.
The lower rates certainly moved real estate pricing to an unsustainable level, but mortgage underwriting should still have precluded this enormous wave of foreclosures. The bottom line is that you can't lend money to folks walking a razor's edge to pay it back. It wasn't a presidential or Fed chair induced problem. They each played a role, but the investors in mortgages shoulder the biggest blame, and appropriately, the biggest losses.