How Do You Explain Todays Foreclosure Crisis?
According to a report by the Congressional Oversight Program “the rate of foreclosure in the United States is now three times higher than at any other time in recorded history”. How did we get ourselves into this foreclosure crisis? Believe it or not, according to Professor Kirby Cochran (University of Utah), today’s foreclosure crisis has roots dating all the way back to the dot com era of the 1990’s when that bubble burst. Investors bailed out of the stock market in droves and went looking for safer alternatives for their money. A new investment instrument called “Collateralized Mortgage Obligations” (CMOs) became the rage. These were securities backed by residential real estate mortgages. At the time, virtually everyone was comfortable with real estate due to its historical stability and steady growth. So, most investors were comfortable putting their money in CMOs and they did it in droves. The amount of money that flowed into Collateralized Mortgage Obligations was enormous. The d
