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Originally Posted by Wagner
The bank sells the loan (hence the sub-prime crisis on Wallstreet). It isn't as if the bank just holds on to it an hope the interest they collect is enough  They single handedly overstate the value of their portfolio to make money...which is fine, but then don't turn to the government when the costs don't go the way you expected. |
Yes, in many cases they do package and sell these loans and it is completely wrong to inflate the portfolios value when doing so. That is sort of a different issue than the bank guaranteeing the price of your home.
The other problem is that most of these sub-prime loans should have never been made in the first place, but that is not all the fault of the bank. As Quicksilver said, many buyers falsified documents or simply used no-doc stated income loans and lied about how much they made. Once again, a lot of blame falls back on the buyers.