Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

The BBC has an excellent pair of charts that show the flow of mortgage origination in the traditional way and the method of recent years.

The US sub-prime mortgage crisis has lead to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded.

Traditionally, banks have financed their mortgage lending through the deposits they receive from their customers. This has limited the amount of mortgage lending they could do.

In recent years, banks have moved to a new model where they sell on the mortgages to the bond markets. This has made it much easier to fund additional borrowing,

But it has also led to abuses as banks no longer have the incentive to check carefully the mortgages they issue.

All Is Well With Mortgages

All Is NOT Well With Mortgages

UPDATE: As I was posting this, I came across a modified version of this by Michael Shedlock in his Seeking Alpha post called: A Beautiful Model for Loan Fraud. It’s a brilliant modification because it illustrates how no parties really had a vested interest in whether the borrower kept paying.


Tags: ,


One Response to “[Getting Graphic] The Graphics Of Subprime”

  1. Barrett says:

    The appraiser’s role in this is limited. Appraisers appraise homes–not borrowers. Appraisals are not perfect, even if done by qualified, honest appraisers. The model should account for plus minus 5% in home value. However, the banks lent 100%+ on the appraised value of the home without looking at ANY supporting documentation. The model is flawed because it does not account for greed and dishonesty.