The actual start of this mess was when Republicans refused to raise the FHA loan limit past $417,000. They actually had a good reason, which was to try to hold down the prices of homes, so people could afford to buy them.
It turns out that there is a LOT of money in selling expensive loans to people who want to buy a home.
Soon there were seminars on "How to Make a Killing in the Real Estate Market". And it worked. People made a LOT of money.
In order to keep this profitable loan scam (sorry, helpful loans so we could buy houses) going, all that was required was to refuse to keep the FHA loan amount from going up.
People who wanted just a nice, normal home signed loan papers they knew could cost them dearly if interest rates went up. If they wanted a house, there was no other choice.
But the greed increased and soon there were seminars on "How to Use the Equity in YOUR HOME to Make Money as a Day Trader". I actually think the people who spent their equity on gold jewelry made a better choice.
The insurance idea was a last ditch effort to keep all of this going because people with brains started to get concerned about investing in these risky mortgages.
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