With the advent and proliferation of automated underwriting, I have seen a gradual move away from the sound underwriting principals of the past 50 years in home loans. In the past 3 decades, the federal government has made a concerted push on making home ownership possible for low and middle income families. While this goal is worthwhile because home ownership brings many benefits to the individual and society, I think in the past 10 years the scale has tipped too far in the other direction. The great economy of the 1990's has allowed many banking institutions to ignore sound and time tested underwriting guidelines in favor of more loans and higher profits. Obviously, more people can buy a home today than ever before.
Bankruptcies remain high even in our favorable economic climate.
There are literally millions of homeowners in properties that are worth the same amount as the existing loan balance, leaving no equity. I believe the reckless pursuit of profits in the financial sector will spell significant problems further down the road if foreclosures increase in number. Bankruptcy no longer carries the stigma it once did. As long as the U.S. economy continues to outperform, there shouldn't be a problem. As soon as the unemployment rate starts to increase and people can no longer pay the mortgage payment they probably shouldn't have been approved to carry to begin with.