I'm going to make an attempt to explain some of this but I'm not too sure how good of a job I'm going to do.
Financial advice from a realtor before I get started. When you want a home and you go to the bank they will look at your income and assets. They will then say great! we preapprove you for a loan of 200,000$. What many people do is start looking for homes in the 220,000 range thinking they can talk them down to 200,000 and be happy thinking they got a deal. The problem is the bank is really telling you that you can barely afford something 200,000$ and that is the absolute max they are willing to trust you with. The better option is to look for something in the 150,000 range because that is something you can easily afford and build equity in faster. When you are maxed out at 200,000 at a 4% rate, a 4.5% rate might ruin you. When you are 3/4s of the way maxed out an adjustment won't matter as much.
Your first home isn't supposed to be your dream home it is supposed to show the bank you can handle a mortgage. Once you can handle a mortgage you can pay off a house or atleast build equity sell that house (hopefully when the markets high) Then buy your dream house (hopefully when the markets low).
Quote:I am guessing the "easy to get" mortgages you are referring to are adjustable rate mortgages
Two names that often came up in the news were Fannie Mae and Freddie Mac. I had never heard of those agencies before the housing crisis began, but understood this much: they were largely at fault for the real estate crap going on.
As far as easy to get loans being ARM loans that is only partially true. Think more along the lines of a person hasn't had a job for 2 years but for the last month they have been working. They bank says sure you make money I can see your pay stub have a loan. Another type of loan is called a balloon mortgage where you pay a minimal amount until a certain date a lot is due. You had a job and figured in 5 years when the balloon payment was do you would be making more money. However the economy did not proceed endlessly upward like people either hoped, or believed was happening.
From wikipedia
Fannie Mae created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators
to issue more housing loans, primarily by buying Federal Housing Administration (FHA) insured mortgages. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. Other considerations may have motivated the New Deal focus on the housing market:
about a third of the nation's unemployed were in the building trade, and the government had a vested interest in getting them back to work by giving them homes to build.
Mae and Mack are somewhat similar in they help people who are higher risk or unwilling to get traditional loans and lack money. The second problem is that when it was first initiated it was mostly to put people back to work. That problem spirals out of control when those workers run out of houses to build to keep them employed which pays the mortgage. This housing crisis began when banks were allowed to give just about anyone a loan.
Mae and Mack are in place to allow more people to own homes which is fine. What is not fine is to allow anyone to buy a home, regardless of their ability to afford the home.
Quote:This is what I want to know: Why do people think a Republican Congress and President will fix the economy knowing that combination caused the worst financial crises in American history?
this is not what it looks like. Yes the collapse did happen with a republican congress and president. However typically in politics the effects of of a presidency are not often felt until after the presidency is over. Many of the laws put in during the Bill Clinton administration set up the ability for the banks to give people loans who probably should not have gotten loans. Meaning when the effect took place a republican was in office, the cause took place long before that.
When looking at history do not just look at the dates the history took place, look at the years that preceded them and that will show what got the wheel rolling.