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I bet you scored 100% and earned your "Doctorate of Bubblology".
OK, why is Fannie Mae so glum? They point to loose (Wewould say CRAZY) lending practices, like interest onlyloans and increase in loan approvals that are notbacked by full documentation of borrower's income andassets.
We imagine a borrower's conversation with a lender today goes something like this:
Borrower: "Will you give me a quarter of a million dollar mortgage loan." Lender: "Can you pay it back?" Borrower: "Probably." Lender: "Loan approved!"
Now you may be thinking that skyrocketing values arein an isolated number of big cities, right? That's true, but those cities are our major commerce centers. When things go bad there negative effect ripplesacross country. Here's bottom line: Our economy is always blowing bubbles. Some burst and some don't.
Only time will tell about this one, but I will keep my fingers in my ears just in case.
Mark Walters is an investor-entrepreneur helping other investors from his Web pages at http://www.Lease-Option-Sub2.com