CRA – In the years from 1997 to 2006 the price of the average American house increased by over 124%. This rise in the value of people’s homes led to the highest increase in net worth of American households over an equivalent time period in American history. The equity in people’s homes quickly became their major net worth component. During this time many homeowners made the decision to refinance their homes and pull cash out by increasing the balance of their mortgages. They used the money obtained from their homes for just about any purpose. Lifestyle spending was the predominant use of the money from their homes. CRA.
Easy credit and the belief that home prices would continue to go up was driving real estate prices higher each month. The California real estate market was acting very much like the Wild West. No one thought about consequences and the potential risks they were taking. The thought by many homeowners that home prices would never go down was the word on the street. During this period the motto was “just about anything goes” and just about everyone got a loan. If you had a pulse and fogged a mirror then you could get a loan. If you had bad credit, no problem, there was a loan program for you. No income, no worry there was a loan for your situation too. No questions about credit, income or where the borrowers got the down payment. CRA