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Originally Posted by detbuch
Are unscrupulous banks or, if not the bank itself but the bankers who write up the loans, intentionally selling homes to buyers who really can't afford them?
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Yes, they were.
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And, if so, what are they gaining?
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Easy, they were "gaining" the high fees charged to process the loan to a sub-prime borrower.
A key factor in this mess was the process by which a loan was given, then sold to a third party. The liability on this loan was often then off-loaded to yet another third party.
And here you have different markets. One focused on making money from the initial loan transaction, and the other focused on profit from a variety of derivitave loan products.
The system evolved to a point where it was very profitable (with little to no risk to the loan originator) to extend credit to an unworthy borrower.
This combined with other factors, the Fed's money policy, Government (both sides here) pressure to increase home ownership and rising home costs all contributed greatly to the current mess we're in.
-spence