A rhumbline is a direct heading to a point. On a map it's a straight line. It looks like the perfect way to get where you're going. On a globe, though, it may be the long way around. For example, New York and Madrid are about the same latitude. On a map, a course due east from New York is the shortest distance to Madrid. On the round face of the earth, though, a curved path (called the great circle route) passing over Greenland and the northern Atlantic is shorter. Try it with a string and a globe if you don't believe it. That's probably what a lot of the comments on this blog will be like. Random? Disconnected? Circular? Probably. But maybe they will lead to a point eventually.



Wednesday, October 12, 2011

Government Backed Mortgages

Read an interesting statistic today.  Before the mortgage market, and subsequently the real estate market, collapsed in 2008, over half the mortgages in the U.S. were "subprime", defined by me as low credit scores, low or no downpayment, not enough income to service the debt, etc.  My first thought is to blame the underwriters who approved these loans. 

The other stat I read was that of the loans above, over 70% were guaranteed directly or indirectly by the federal government.  If you were a mortgage broker in 2007 and had some control over the underwriting process, why wouldn't you send in every crappy loan you could get your hands on?  Yeah, there is plenty of blame to go around in that mess but the incentives were completely nuts.  If the government subsidizes bad loans you get more bad loans.

Note:  This stuff happened legally in most cases, but some mortgage originators and borrowers flat-out lied on applications.  I have no sympathy for anyone involved in fraud.  Some have gone to jail and I hope more follow.
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