TheSkinnyOn.com – The Skinny on the Housing Crisis

This is an in-depth look into how America dragged itself into the worst housing and credit crisis since The Great Depression. The reader is introduced to Billy and Beth, and learns about the housing crisis through their experiences with real estate agents, house inspectors, appraisers, mortgage brokers, lenders and attorneys. Each of these encounters is a lesson for any person considering the purchase or sale of a home, investing in real estate or just taking out a mortgage.

We learn how mortgage sales and securitizations became a trillion dollar business, disconnecting the American borrower from the lender and de-humanizing the process.

Skinny TV - Wall Street Whack-A-Mole

Ten Most Important Lessons From The Housing Crisis

1. Beware of buying mania. Whenever someone tells you that the price of something is certain to go up, remind them of the 2009 Housing Crisis.
2. Be wary of advice from any business which is unregulated, easy to enter and requires little training.
3. Listen to financial advisors. They all advocate having three to six months of living expenses in a savings account. You never know when you might need that money, and decisions made in duress are usually not good ones.
4. Buying a house is not brain surgery. Educate yourself about the market. Do not put all of your trust in anyone whose compensation model depends upon you to buy.
5. When buying a house, understand the motivations and agenda of all the professionals you work with.
6. Lenders make money by inducing you to borrow. They want you to pay them lots of interest and perhaps some late fees and penalties.
7. Do not depend upon the government to do your work for you. The government, too, has an agenda - not always in your best interest.
8. Wall Street is where a lot of really, really smart people work and stay up late figuring out creative ways to separate others from their money.
9. There are often reasons for waiting to buy a home.
10. Do not buy any product or make any investment that you do not fully understand. Each purchase or investment decision you make can have a major impact on your future. You owe it to yourself to spend the time to become financially literate.

Key Terms

Amoritization: The paying down of a loan amount.
Appraisal: Analysis of the market value of a property.
ARM (Adjustable Rate Mortgage): - The interest rate is fixed for some period (usually one to five years) and then adjusts annually.
Mortgagee: The person who owns the mortgage, i.e. the lender.
Mortgagor: The party who puts a mortgage on a house, i.e. the borrower.
Mortgage Security: An investment the returns on which are tied to bundles of mortgages on homes.
Mortgage Interest Deduction: A government incentive to home-ownership that gives owners an annual tax deduction for interest payments (so long as mortgage not in excess of $1,000,000).
Negative Amortization: When the loan amount increases instead of decreases.
NINJA Loans: Acronym for how crazy some lenders got when they made loans to borrowers who had 'no income, no job, no assets.'
Payment Option Loan: Gives the borrower the flexibility as to how much to pay the lender.
PMI (Private Mortgage Insurance): Payments due from a borrower required by some lenders when the loan-to-value of a first mortgage exceeds a specific threshold (usually 80%).
Prepayment Penalty: A free in some mortgage loans that must be paid to the lender if a loan is paid off sooner than a stipulated period (usually one to three years).
Ratings Agency: Supposedly impartial arbiter of the risk grading of certain investment products including mortgage securities.
Stated Income Loans: Loans for which the borrower does not have to produce written verification of the income he claims to be earning.
Tranche: One portion of a mortgage security - all the loans in a specific tranche are of similar risk metrics (e.g. down payment amount, credit score of borrower, etc.).

Bonus Resource: Download the full-length article entitled "The Skinny On Housing Crisis Vocab." Read Report

Real Reviews

"Jim Randel has put together a no-nonsense, thoroughly readable book on what caused the nation's housing crisis and what we will need to do to get out of it. This plain English analysis of a complex subject is a must read for the millions of Americans impacted by this shattering event."
- Arthur Levitt, Former SEC Chairman

"The stick figure format is a good way to get across points that would otherwise be lost in abstract arguments.... It really is essential reading for all first-time house buyers. My own 11 year old son read it and understood the conflicts of interest inherent in the advice given by people who get paid only if they convince you you make a bad buying decision."
- Patrick Killelea, Amazon Reviewer

"This book is brilliant! It should be required reading for every college student in America ... and for anyone interested in owning a home. This book explains how Main Street brought down Wall Street. "
- Matthew A. Martinez, Author