José May 22, 2008 Real estate Visits: 32 View Comments Print this post Send this post Copyright Jose Ramirez

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I urge all this excellent and very entertaining podcast of This American Life , where interviews tell the story of the subprime crisis from the point of view of participants. Here I summarize the highlights of the story.

It all started with 73 trillion dollars held in reserve money world (global pool of money) from the International Monetary Fund . These, which are global savings for retirement pension funds, insurance companies and national bank reserves among others, were paying very low interest in 2001 when the "prime rate" of the U.S. Treasury was in a %.

Investors IMF desando better return for its 73 trillion, sought help from their counterparts on Wall Street. They advised to invest in mortgage-backed securities (MBS) which were then low-risk investments and so, like every day thing, trillions of dollars are made available to stock market investors to buy mortgages.

Many mortgages were needed to invest that amount of money. At first there were no problems, it was sufficient to traditional mortgages. But in 2003, leaving trillion to invest, and anyone who qualified for a mortgage was. It was then that new products were created to facilitate the purchase of properties, to create more mortgages and quench the infinite thirst of capital on Wall Street.

• First they created the SIVA (Stated Income Verified Assets) where there was no need to provide income verificacipón although goods.
• Then the SISA (Stated Income Stated Asset) where there is neither checked that and it was only necessary that a CPA in the profession of the applicant was very possible to win both.
• Then came the NIVA (not verified asset incoime) where there was no need to verify income, only to have money in the bank.
• To end the NINA (No Income No Asset) loans. A product to finance mortgages which did not require verification or income or assets.

In short, by 2005, was being provided to people who never before had cualifiacado. These loans were called "liars loans" , liars loans, or mortgages NINJA , ie killer.

For banks, from the standpoint of business, that was not a problem because they are not left with mortgages as investors bought all the property values increased and creditors met their payments.

Everything was pink.

In 2007 the housing market was found saturated. There were more properties that need them and property values fell. Then something never seen before, delinquency in mortgage payments rose to levels that broke all the schemes and that was enough for Wall Street investors lost their appetite for mortgage-backed securities. The banks were no longer buyers for their loans and likewise had no money to lend. He had started the credit crisis .

But it was worse. Wall Street to retire, many banks were left holding mortgages already granted and having lowered property values, they now had not only delinquent mortgages, but mortgages greater than the warranty. These banks faced huge losses. The snowball grew.

How could this monumental disaster?

During this period, personal income increased. The purchasing power, this influx, the excessive valuation of the buildings, was founded on credit. People took to pay their property equity to borrow against their property was up year after year. When deflated real estate values could no longer borrow money and take more as their income was never enough simply could not pay your mortgage or your credit cards, ect. Investors say they never saw this, that their data for risk assessment was based on loans under traditional criteria of crime where the risk is 3%. They simply did not know (say) that many of the loans had a risk factor of up to 50%. The demonstrated ability to make up packages of mortgages, and to create a high commission-bearing mechanism, evaporated when it came to assessing the consequences of their actions.

Thus we now have a credit crisis ... and the next few years will be paralyzed because there is no money to lend.