The House of Cards is a documentary that discusses the true reasons behind foreclosure and global economic failure. The main narrator in this documentary is correspondent David Faber. The documentary shows several different stories from the home buyer perspectives, mortgage brokers, investment bankers, and the companies who are trying to aid the home owners. The true greed behind the marketplace that robs individuals of their dreams. The main characters in this documentary is the banks, the investors, the consumer, rating agencies, and the government. Clearly seeing the roles that each character played provides a much better understanding on how this crisis occurred.
Another important character would be mortgage lenders like Daniel Sadek who altered the credit requirements and personally made 5 million dollars in profit through predatory lender.
Fanny May and Freddie Mac were two lenders who use to set the standard for mortgage terms, however getting involved in accounting standards, they lost their ability to dictate the terms. This opened the door for subprime lending. True financial mortgage crisis. Mortgage backed securities allowed them to dictate the terms of their mortgages. This allowed virtually anyone to get a mortgage, regardless how risky. Due to the terms of the mortgage, it was only a matter of time will they no longer be able to keep up with their payment obligation. The consumers have to turn in their house keys and turn their back on their American dream. The heartbreak behind losing their homes.
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September 11, 2001 was the beginning of the economic crisis. This just pushed the potential for economic collapse significantly. Retail plummeted, investments were lost and America was in trouble. Lowering the interest rates to encourage Americans to shop and spend money. Borrowing money was at the lowest rates in decades, primarily mortgage rates. However, the prices began to rise drastically. At that point banks determined that anyone with a pulse should be eligible for a loan. Subprime lending began to become a common practice. The risky mortgages consumed by Wall Street and turned them into a product that could be sold to aggressive foreign investors.
According to the House of cards, the cause of the financial crisis of 2008 can be attributed to the effects of the subprime mortgage and the number of foreclosures that occurred as a result. The price of houses rose because everyone, regardless of credit worthiness, was able to afford a house. The demand was high, resulting in the high prices. People were trapped in loans they couldn’t afford and they lost their homes as a result. Banks lost significant money because the homes they recovered were worth a fraction of the loans amount after the crash. The implementation of negative amortization allowed the buyers to pay only a portion of the interest each month. The unpaid portion was added to the total loan. The mortgage would end up growing instead of being paid down. Banks lost, the economy lost, and consumers paid the price as a result of this economic crash.
According to this film and the facts associated with this total crisis that occurred, personally the blame would be directed to the banks. By choosing the bank I am by no means relieving responsibility from the customer, government, rating system, and investors as well. They all played a role in this entire crisis. However, banks and funders are equipped to gage the likelihood of loans being repaid. Adjusting or changing that formula essentially set themselves up for the likelihood of a loan not being repaid. They knew loaning money to individuals who were not credit worthy or who did not make the money to pay their mortgage would result in them losing their house. Knowing the true situation for the prices of the houses rising, they had to know that the crash was inevitable. Therefore, knowing the majority of the facts and moving forward anyway leave me believing they are the ones who are mainly at fault for the financial crisis of 2008.
