Big Country Posted July 17, 2008 Share Posted July 17, 2008 I understand people want to blame the banks for this, and IMO they are to blame for their own floundering (depending on how much the govt forced them to make these bad loans as alluded to above), but no one forced anyone to sign up for or accept a mortgage that they could not afford. It is irrelevant what a bank was telling me I "could" afford or how much they were willing to give me, the responsibility still lies with me to make a sound decision given my situation. Quite frankly I have little sympathy for those losing their homes because of their own stupidity and lack of financial common sense. Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted July 17, 2008 Share Posted July 17, 2008 What law did they make to put this pressure on? Or did a congressman call every bank to put the screws to them? So are you suggesting that incumbent politicians don't have a strong motive to make their constituents feel good about their social and financial situations? When I hear stuff like this coming from somebody who is supposedly in the know, it makes me wonder what the heck our government and major financial institutions may be talking about behind closed doors. Given that both have long histories of questionable behavior, I wouldn't put possible collusion past them. Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted July 17, 2008 Share Posted July 17, 2008 So are you suggesting No, I asked you two questions that you didn't answer. Quote Link to comment Share on other sites More sharing options...
Pope Flick Posted July 17, 2008 Share Posted July 17, 2008 I understand people want to blame the banks for this, and IMO they are to blame for their own floundering (depending on how much the govt forced them to make these bad loans as alluded to above), but no one forced anyone to sign up for or accept a mortgage that they could not afford. It is irrelevant what a bank was telling me I "could" afford or how much they were willing to give me, the responsibility still lies with me to make a sound decision given my situation. Quite frankly I have little sympathy for those losing their homes because of their own stupidity and lack of financial common sense. There are a lot of forces at work here, and some bailouts are necessary. But if both the broker and lender werre in on fraud, no one should be bailed. Prosecutions and jail time for both parties are necessary. Some people weren't aware fraud was being done in their hame, ie some lenders tweaked monthly income numbers without people's knowledge in order to get approvals. Even then, if you're making 42K a year, shouldn't you be surprised you qualified for a 600K loan? Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted July 17, 2008 Share Posted July 17, 2008 What law did they make to put this pressure on? Or did a congressman call every bank to put the screws to them? Community Reinvestment Act of 1977 Quote Link to comment Share on other sites More sharing options...
Ramhock Posted July 17, 2008 Share Posted July 17, 2008 but no one forced anyone to sign up for or accept a mortgage that they could not afford. Loan Officer = "Boss, I sold that one, good to go, 30-yr fxd." Boss, 3 days before closing = "LO, you were making $1500 on that deal, if you or our closer can flip them into an ARM, you can make double that." Customer = "Well, OK." I speak with these people nearly everyday and they are not so bright. Quote Link to comment Share on other sites More sharing options...
muck Posted July 17, 2008 Share Posted July 17, 2008 Community Reinvestment Act of 1977 Winner, winner, chicken dinner! Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted July 18, 2008 Share Posted July 18, 2008 (edited) We keep our house listed just in case someone makes me an offer I can't refuse. I put my life savings of $20,000.00 into it. It appraises at $225,000.00 I bought it for $190,000.00. I owe about $150,000.00. When I was about to get laid off, the best offer I got was $125,000.00 (last November) because nobody wanted to make a decent offer when they could just go buy a similar, foreclosed house in my same neighborhood. I can afford my mortgage payment just fine as long as I'm employed. Had I lost my job and the house, the bank would have never seen a penny of that $25,000.00 difference out of me. Had I been in a spot with no job and no home why on earth would I give a f*ck about the bank? Edited July 18, 2008 by Clubfoothead Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 18, 2008 Share Posted July 18, 2008 The thing I'm having trouble with is that about 97% of mortgages are being repaid on time every time so how the hell did 3% of defaults, not all of which are foreclosed, get us into such a titanic f'n mess? Is it because most of the crappy mortgages were sold in the last 5 or so years thus the default % in new money is much higher? Quote Link to comment Share on other sites More sharing options...
yo mama Posted July 18, 2008 Share Posted July 18, 2008 (edited) The thing I'm having trouble with is that about 97% of mortgages are being repaid on time every time so how the hell did 3% of defaults, not all of which are foreclosed, get us into such a titanic f'n mess? Is it because most of the crappy mortgages were sold in the last 5 or so years thus the default % in new money is much higher? The mess is because the value of many of the homes is now less than the principle balance of the corresponding mortgage debt. Plus, with liquidity being tied up in so many upside down properties, lenders have less cash available to pursue other investments because they can't sell the mortgages as easily as they used to: people just are into buying collaterized mortgages like they used to be. Edited July 18, 2008 by yo mama Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 18, 2008 Share Posted July 18, 2008 The mess is because the value of many of the homes is now less than the principle balance of the corresponding mortgage debt. Plus, with liquidity being tied up in so many upside down properties, lenders have less cash available to pursue other investments because they can't sell the mortgages as easily as they used to: people just are into buying collaterized mortgages like they used to be. OK but you're only really upside down if you have to move. If you're staying put and you're paying a $200k mortgage on a house valued now at $180k, you're not upside down for all intents and purposes. Basically, the whole house of cards is predicated on Joe and Jill America borrowing more and more money ad infinitum. Quote Link to comment Share on other sites More sharing options...
yo mama Posted July 18, 2008 Share Posted July 18, 2008 (edited) OK but you're only really upside down if you have to move. If you're staying put and you're paying a $200k mortgage on a house valued now at $180k, you're not upside down for all intents and purposes. Basically, the whole house of cards is predicated on Joe and Jill America borrowing more and more money ad infinitum. But if the collateral backing the bank's paper assets are worth less than amounts appearing n the bank's financials, the bank has to write down its assets even if the mortgages are performing. So, on paper at least, the bank's assets go down in value even if no one is defaulting. That kind of bad news shakes investor confidence and people start selling their stock in the bank. Then, due to liquidity in the market and the bank's inability to sell the mortgages, the bank's ability to make new investments is severely curtailed which further restricts the bank's economic health. From the home owner's perspective, as long as they keep paying that mortgage their day to day lives aren't really affected (other than the impact on their ability to borrow against or sell the house). But from the bank's perspective the negative effects are more pronounced. Edited July 18, 2008 by yo mama Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted July 18, 2008 Share Posted July 18, 2008 Community Reinvestment Act of 1977 Man, that law was a slow burn to tank the economy in 2005. I understand people want to blame the banks for this, and IMO they are to blame for their own floundering (depending on how much the govt forced them to make these bad loans as alluded to above), but no one forced anyone to sign up for or accept a mortgage that they could not afford. A smart business doesn't give money to people it doesn't think can repay them. If I opened a business of lending money to people, I'd be a little more careful to balance the risks. These companies got greedy and saw short term gain over long term risk and deserve to reap what they sowed. Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted July 18, 2008 Share Posted July 18, 2008 Man, that law was a slow burn to tank the economy in 2005. Quote Link to comment Share on other sites More sharing options...
geeteebee Posted July 18, 2008 Share Posted July 18, 2008 These companies got greedy and saw short term gain over long term risk and deserve to reap what they sowed. Yep, and so do the dumbass borrowers. Unfortunately, the rest of us will have to bail both groups out. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 18, 2008 Share Posted July 18, 2008 Man, that law was a slow burn to tank the economy in 2005. A smart business doesn't give money to people it doesn't think can repay them. If I opened a business of lending money to people, I'd be a little more careful to balance the risks. These companies got greedy and saw short term gain over long term risk and deserve to reap what they sowed. do you place any of the blame on the borrower? Quote Link to comment Share on other sites More sharing options...
AtomicCEO Posted July 18, 2008 Share Posted July 18, 2008 do you place any of the blame on the borrower? Some, yes. But who is supposed to be more knowledgeable on this? The first-time borrower being pushed into a ARM, or the lender who has made it their business to loan money? Quote Link to comment Share on other sites More sharing options...
Bill Swerski Posted July 18, 2008 Share Posted July 18, 2008 (edited) Some, yes. And the single mother who is estranged from her third husband, has maxed out her credit cards, and is not receiving child support payments for her three children only gets "some" blame for taking out an ARM on a house that she can't afford? But who is supposed to be more knowledgeable on this? The first-time borrower being pushed into a ARM, or the lender who has made it their business to loan money? Even if a broker is using predatory tactics, consumers are ultimately responsible for educating themselves and reading the fine print before signing away their life savings. In the day and age of easy and nearly instantaneous access to this information over the Internet, the claim of ignorance is really silly. Edited July 18, 2008 by Bill Swerski Quote Link to comment Share on other sites More sharing options...
rocknrobn26 Posted July 18, 2008 Author Share Posted July 18, 2008 I think you misunderstood RnR post. They borrowed on their 1st house to fix up the 2nd to sell.....they had to sell the 2nd at a loss and now cannot afford the 1st. Now they are walking away from their primary house to live with their kids. Yup, you nailed it. I do feel bad for the guy losing his house for a 2nd lien. This is reason number one why you never ever ever put your house at risk with an equity line or use it as collateral for something else without having an escape plan or some way to not lose your house for something completely unrelated to your house. It was a dangerous game he played. It'll take a long while to dig out of that 480 FICO score he'll get in, and you'd think he would've learned his lesson the first time around. If he were my friend, I'd enroll him in the Dave Ramsey plan where you don't borrow money for anything. Really. Borrowing can be a fine tool if you know what you're doing, but this guy has blown it big time...twice. The first time was a house they had in TX. Bad market, couldn't sell it so they rented it. The guy stopped paying rent after 6 months, but would pay like every 3 which makes eviction difficult. When they finally did get him out, they discovered he trashed the house to the point that repair would have cost more than the house was worth (depressed market....they bought the house during a big boom in the early 80's). Quote Link to comment Share on other sites More sharing options...
Ramhock Posted July 18, 2008 Share Posted July 18, 2008 reading the fine print Unfortunately, some of them can't even read the large print. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 18, 2008 Share Posted July 18, 2008 Unfortunately, some of them can't even read the large print. When I re-fied (which I did at exactly the right time, FWIW), there was an air of frustration in the broker office as I settled back to read every page of every document before signing. They said I could take them home and come back the next day, which I did, having read them all thoroughly, including the data that I had provided in the first place. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted July 18, 2008 Share Posted July 18, 2008 Some, yes. But who is supposed to be more knowledgeable on this? The first-time borrower being pushed into a ARM, or the lender who has made it their business to loan money? I think you're obscuring the real "blame" issue, here. I mean, yeah, if I make a bet with a known welcher, that makes me pretty dumb, even if I thought there were contingencies that would protect my "investment". but when the welcher welches, HE is the welcher, and I'm the guy who got ripped off. he is the one who owes ME money. so, were the bankers who made dumb decisions loaning people money they likely wouldn't be able to repay if the market softened? yeah, absolutely. does that in any way excuse people walking away from their debt obligations? not really, IMO. Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted July 18, 2008 Share Posted July 18, 2008 I think you're obscuring the real "blame" issue, here. I mean, yeah, if I make a bet with a known welcher, that makes me pretty dumb, even if I thought there were contingencies that would protect my "investment". but when the welcher welches, HE is the welcher, and I'm the guy who got ripped off. he is the one who owes ME money. so, were the bankers who made dumb decisions loaning people money they likely wouldn't be able to repay if the market softened? yeah, absolutely. does that in any way excuse people walking away from their debt obligations? not really, IMO. I think you can make that argument for sure...and I would think Atomic would agree with you....but I think you totally miss his point. Who is in a better position to know whether there will be a potential problem....someone/something that has been through this business on many many occasions...or someone who has never entered the arena. Banks have more experience in giving loans....therefore Atomic's argument is that those who are repeat players should know the landmines much more easily than those who rarely enter....I don't think Atomic is trying to absolve anyone of responsibility, more trying to figure out who is more at fault....and I have to agree with him. The banks should have known better....it is their money....they should have known better. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 18, 2008 Share Posted July 18, 2008 how hard is it to figure out that you cant live in a 600k house on 40k a year? Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted July 18, 2008 Share Posted July 18, 2008 how hard is it to figure out that you cant live in a 600k house on 40k a year? How hard is it to figure out that the person you're lending the $600k to will never be able to pay it back? Quote Link to comment Share on other sites More sharing options...
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