In order for the Mortgage Brokers to make money they have to sell loans. The more the loans are worth, the more money they make on commision. When the loans go bad, and the person recieving the loan is unable to pay the loan in a reasonable amount of time the more money the broker will make. Unfortunately, because the broker will make more money through bad loans the broker will be willing to give out loans to freely for their own benefit. Many brokers were willing to give out more loans and people over borrowed because of the low-cost rates. They planned to refinance as soon as the loan became unmanageable to pay.
One person considered to be responsible for the current economic condition we are in occording to Time Magazine is John Devaney. He said that "The consumer has to be an idiot to take on one of those loans, bit it has been one of out best-performing investments." He and other hedge fund managers encouraged brokers to continue handing out unreasonable and questionable loans because the brokers would make money. Buying the morgage bonds, allowed brokers to continute making unwise choices. He was willing to buy these bonds because he would make a large profit from the intrerest that will be given on the bond. The loans that were given that he was purchasing bonds from were bad for consumers. He had $600 million set aside to buying risky loans. Which only continued to encorage and support the bad choices made from the brokers.
Home owners felt that they should trust the mortgage brokers when they are offered one of the good deals. Because of mortgage brokers that mislead their customers the constomers are now blaming the mortgage companies. Companies would trage mortgages like commodies in the market in places such as wall street. The brokers would willingly and freely give out loans just to make some money. When the economy was booming people were willing to buy and spend more money than what they had to fulfill their dreams. But as soon as money started to tighten those loans began to dry up causine the recession.
