Tamara Draut makes the case for a new regulatory agency: As our nation's economic crisis spreads and trillions of dollars are disbursed to keep the banks afloat, it's easy to forget that the catastrophe began with the peddling of a toxic retail-credit product: adjustable-rate sub-prime mortgages. Fueled more by demand from Wall Street than by demand from homebuyers or homeowners, a vast army of unregulated mortgage brokers barreled through down-on-their-luck neighborhoods offering salvation via cash-out refinancing in the form of exploding adjustable-rate mortgages. Contrary to popular perception, the majority of these mortgages weren't taken out by speculative investors or even by middle-class families fulfilling their aspirations for ever-more home on an ever-shrinking income. In many cases, the mortgages were sold to existing homeowners, who were duped into trading their affordable fixed-rate mortgage for an ultimately unaffordable adjustable one. According to The Wall Street Journal, more than half of all sub-prime loans went to people with credit scores that could have qualified them for traditional mortgages. KEEP READING ...
