What Did They Know, And When Did They Know It?

Mortgage companies, of course.

A class action suit has been filed by Gary Klein in Massachussettes, as reported by Jenifer McKim in the Boston Globe.

The suit alleges hundreds of homeowners were put into toxic mortgages that were doomed to fail.

I know many homeowners I talked to, having fully disclosed their finances, assumed they would not be given a loan they could not afford.

The suit focuses on “pick a payment” mortgages, many of which amortize negatively, which is a fancy way of saying that even if you make all the payments on time, your mortgage balance goes up.

Many of the mortgages now in default never should have been made by the lender.

This is not a crisis of people who lied about their income to get bigger houses.

This is a crisis of greed driven transactions that got a momentum of their own, creating a foreclosure crisis that has put the world economy into recession.