There are plenty of places to place blame for the mortgage crisis that triggered the current economic recession, according to the executive who manages Trustmark National Bank’s Mortgage Division.
“It’s everybody’s fault,” including government officials, lenders, brokers, Wall Street and consumers who bought more house than they could afford, Breck Tyler told the McComb Rotary Club on Wednesday.
Tyler, whose Jackson-based bank operates in Florida, Tennessee and Texas, as well as Mississippi, reviewed the history of the now-collapsed real estate bubble. He said he was speaking from personal observation, not as a spokesman for Trustmark.
From 1999 until 2003, both the Clinton and Bush administrations, with Congress agreeing, started pushing home ownership.
Lending standards were lowered and rules were implemented to provide loans for consumers who previously had been unable to secure them.
Mortgages, many of them subprime or risky, were being packaged and sold for what later proved to be more than they were worth. In some cases there was fraud and brokers taking advantage of borrowers “who could not have understood” what they were doing, Tyler said.
People were receiving variable-rate mortgages with low interest rates on the front end on the expectations that real estate values would continue to climb when the interest rates went up or the principle was due.
From 2003 until 2006, subprime loans were rampant, with brokers making money handling them and Wall Street buying mortgage packages and flipping them to someone else. Credit rating agencies were inflating values, paying little — if any — attention to collateral.
Meanwhile, real estate developers were overbuilding to meet perceived demand. But by 2007, the bubble had burst, real estate values started going down and many of the loans went sour.
At the same time loan payments on the variable-interest loans started going up, the job market became stressed and people started losing their homes, many of which weren’t affordable in the first place.
As for pulling out of the crisis, Tyler made no predictions. But he said, “I still think we have a ways to go.”
