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Liar loans and options arms: they are not the issues deepening the recession

response to a comment at WSJ online
Those with adjustable rates and "liar loans" the worst of the worst have already been foreclosed. The resets were long time ago. Now people who have survived job loss or under employment are running out of reserves as prices continue to decline. Even if 40 % re default it leaves 60 % that stay off the market. If prices keep going down there will be more incentive to default, so letting everyone fall is going to prolong the crash. People who can pay will not stay in their home if it falls to 170% LTV. Most of the people who are being foreclosed on now are people who lost their jobs or lost most of their business. These are not liars, cheats or thieves. If I you are so worried about someone getting help, why don't you just go to the bank and renegotiate your loan. Now is the perfect time, if your house is underwater or if your rate is higher go to the bank, they don't want more defaults and if you are a great borrower and payer you could talk them in to a better rate for yourself.

People act like most people who have lost a job bought homes they couldn't afford, but they could afford it when they were working. if they were working in housing, construction, mortgages etc, they might be unemployed or making half of what they made at their last job when they qualified for their mortgage. If the market would not have been pillaged by the big players, people who needed to downsize could sell their home at a minimal loss or breaking even. The worst case would be needing a few thousand added on to their new loan for a lower cost home.
What do people expect anyone to do if they bought a house when they had a great job and were making great money? If they can't sell their home how do you expect them to pay for it if they took salary cuts or job cuts altogether. People can't possible believe that with unemployment so high and the economy obviously in a major recession, that everyone who bought a home could find a job with the same income quickly enough to not fall behind on their mortgage.
A little thought and common sense would go a long way before blanketing everyone who is falling behind as a liar or deadbeat. This recession didn't start yesterday.
Liar loans are not the problem.  Banking fraud is at the core of the recession. 

From Washington's Blog via Naked Capitalism
"Even Alan Greenspan is confirming what William Black, James Galbraith, Joseph Stiglitz, George Akerlof and many other economists and financial experts have been saying for a long time: the economy cannot recover if fraud is not prosecuted and if the big banks know that government will bail them out every time they get in trouble."

read the full story here:

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