The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Skeeter Bug who wrote (177783)	1/19/2009 11:29:38 AM
From: GraceZ	Read Replies (1) of 306849

how come they changed the laws? the banks lobbied. why did the banks lobby? Back in 1987 I bought a house using 1:74 leverage with a government sponsored, government insured, lending program called FHA. Banks wanted the same leverage that ordinary people, like myself, could utilize in RE transactions. The thinking was if residential RE had such a low level of risk, that you would allow ordinary individuals these very high ratios of leverage, then the opposite side of the transaction (the securitization side) must also carry a similar very low level of risk! Well we all know the end of that story, all leverage, no matter who employs it, magnifies whatever risk is inherent.

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