The bottom end is a secondary problem, people defaulting on mortgages. Which the system would be able to tolerate in a market place where mortgages are properly secured. That is, a marketplace where people on the top end do their jobs right. This problem is caused only in part by CRA, AND in a manner different than Ron Paul argues. CRA encouraged a large number of middle class people to move back into the city cores around the country. Poor people moved out, hip, young, creative class moved in. All funded by CRA allowances. Gentrification and all that. Basically, Fannie and Freddie were moving 'good' people in, while Ginnie moved 'bad' people out. Problem was, according to the auditors, these "gentrifiers" are defaulting in droves. To the point where Fannie and Freddie collapsed. And, to add insult to injury, Ginnie is fine. The problems it does have it acquired in government attempts to rescue Fannie and Freddie.
I, frankly, find this state of affairs difficult to believe. If we were redeveloping the city cores, and then letting the same people who lived there before buy the redeveloped housing, then I could see a high level of defaults. But the people in those neighborhoods now are actually pretty solid. That is one of the most perplexing facets of this entire mess to me. I understand the bad risk assessment at the top end, I think ANYONE generally assigns a higher risk to people in poverty, and a lower one to people in higher socio-economic classes. I would have gotten that risk assessment wrong as well if I was judging that market. So how can so many solid home buyers be hitting the skids at the same time? I would like to think there is something more going on here. I am simply unable to find it.