What Caused the current finanical crisis? Over the course of the past year, Obama has moved away from the true cause.

Editor's notes: why are "we" forgetting the number one cause of the current financial crisis ?? Hint: it ain't Wall Street or CEO bonuses or AIG profits or Bush.

Here are a number of causes effecting the recent financial collapse:

1. Wall Street greed.
2. Capitalism's failure.
3. Subprime lending.
4. Unsupervised Fannie and Freddie.
5. Bush spending.
6. Barney Frank and Chris Dodd (finance committee chairmen)
7. Obama spending (Bush x 4).
8. An Irresistible financial cycle.
9. Community Reinvestment Act.
10. Affordable Housing policies.
11. Misuse of hedge funds.
12. Repeal of the Glass-Steagall Act of 1933.
13. Devolving world economy.
14. A weakening dollar.
15. Mid-2008 record fuel costs.
16. Quest for increased bonus totals tied to mortgage sales volume.
17. A grossly inflated housing market as relates to property values - a "bubble" if you will.

The above list may be the most comprehensive list on the internet. Everything on the list contributed to the current problem. Several of the points were/are critical considerations. That being said, the list omits the single most important consideration -- the homebuyer's failure to act responsibly. Our readers will be hard pressed to find any list of root causes that includes the consumer. Understand that if the consumer was knowledgeable with regard to mortgage finance considerations and honest in his reporting, the home owner crisis could have been avoided or, at least, greatly neutralized in terms of effect.

"Consumer failure" has its own categories:

1. Inability to read and fully comprehend the mortgage contract.
2. Consumer trust in the "approval" process - if "approve," they must be qualified. Sadly, not always true.
3. Consumer envy and the willingness to lie about one's income.
4. The knowledge that if the mortgage became a problem, they could simply walk away from the home.
5. No down payment requirement.
6. The variable rate loan - we think this should be abandoned for residential home sales.

Suggested solutions to the above problematic issues:

As relates to the consumer:

1. A required two day course dealing with personal finance considerations, loan to debt ratios. budget to mortgage debt ratio, the need to be honest and responsible as a consumer and the penalties for a failure to act responsibly.

From LendingTree, we have these suggestion:

When you shop for a mortgage or other loan, one of the key factors a lender takes into consideration before granting approval is your debt-to-income ratio. This is the ratio between how much you owe each month on personal debt and how much you earn. This ratio calculates the percentage of debt you are carrying in relation to how much money you are making and gives lenders a good indication of how much debt you’ll be able to handle.

The arithmetic
In order to make the calculation, add up your fixed monthly expenses such as your car payments, minimum credit card payments and any other regular debt obligations such as monthly child support or student loans (you don’t have to include bills for things such as groceries or utilities). Add your expected housing payments (your mortgage payments plus, for example, private mortgage insurance, homeowner’s insurance and property taxes) and divide the total by your gross monthly income.

Standard rule of thumb
A common rule when shopping for a mortgage is that your debt-to-income ratio should be no higher than 36 percent. Anything above this could mean you will be denied credit or charged a higher mortgage interest rate on your loan. Lenders also like the total of your housing expenses alone to not exceed 28 percent of your monthly gross income.

Exceptions to the rule Some lenders will accept loans even if your ratio is above 40 percent, and there are certain mortgages that allow a higher percentage as well. Federal Housing Authority mortgages and Veterans Administration mortgages, for example, allow a debt-to-income ratio of up to 41 percent. With any loan, however, you need to be sure you are comfortable with the amount of debt you are accumulating. Keep in mind, the lower your debt-to-income ratio the better, so pay down as much debt as you can before starting the mortgage process.

2. Lending regulations that require at least a 10% down payment without government or outside assistance.

3. The purchase of a performance bond that would fund home repair due to vandalism by a terminated homeowner. This would be in addition to the homeowner insurance policy. Payments would cease after 5 years and/or the accumulation of 15% equity. (text by Midknight Review except where otherwise noted.)
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