This Business Week article attempts to answer a question that I’ve wondered about:

One of the more puzzling aspects of the current housing boom is that mortgage lenders have been offering ever-sweeter deals on loans. These days it’s increasingly easy to qualify for a loan with little or no money down. . . Why have lenders been so liberal when they run the risk that many of their marginal customers will go into default?

The answer, according to the article, is just shortsighted greed:

Many lenders are just plain desperate for business, according to some experts. In a bid for market share, mortgage lenders are offering highly favorable terms to borrowers. That’s forcing the rest of the industry to match their terms or lose customers.

I find this answer believable, but incomplete. Still searching…

Categories: Economics