I will never forget going to a loan officer sales seminar in late 2006 and listening to a renowned mortgage speaker talk about how there was no bubble in the real estate market because unemployment was so low. Historically, strong employment numbers support a healthy real estate market.
I am not naming the speaker because he was dead wrong about the bubble that began to lose air quickly in April 2007, when lenders across the nation stopped doing risky stated income ARM loans. I was angry from 2008 to 2012 because of this speaker and so many big Wall Street CEOs sat back from 2003 to 2007 and kept their mouths shut while a few trillion dollars worth of risky ARM loans were done across the country.
Unemployment was low because Americans were buying tons of homes and many existing homeowners were using the huge amount of equity they suddenly had in 2005 and 2006 to buy boats, planes, trains and automobiles. This money stimulated the economy.
In 2006, people with 640 FICO scores could refinance and pull out 100% of their home’s artificially inflated value to pay off all their credit cards and buy a Winnebago. The reason there were no foreclosures in 2006 was because every time a homeowner had a financial problem or felt they were not going to be able to make their next house payment, they could escape by selling their home or do what most did and get another refinance before they fell behind.
People could do a refinance big enough to…
