Why Should We Pay for the Foreclosure Problem

[PAC]

Why should the tax payers bail out the borrowers and the lending indusrty?
Even inexperienced home owners should have been able to see the disaster coming when they agreed to teaser rates, too much house for their means,
real estate sellers, etc. One study has suggested that up to 75% of the borrowers who are now facing financial crisis did not bother to determine what their payments would be when the interest rate jumped at the end of the first two or three years. While I can show concern for the borrowers
I have none for the lenders who are the ones that will benefit from a government bail out.

[balrog666]

Why should the tax payers bail out the borrowers and the lending indusrty?

Votes - it's an election year.

:crazy:

[UnrepentantSinner]

We shouldn't. Tough tit for the lenders who made bad home loans. Tough tit to the renters homebuyers who had to have a 3,000 sq. ft. house because a 2,000 sq. ft. one wasn't big enough for a three person household.

I've been debt free (apart from a car loan) basically since 2000 and I'm starting to feel like a sucker for paying things off and only buying things I could afford.

[3point14]

Apparently (although I haven't checked it) each and every British taxpayer has lent Northern Rock about £700. This, I assume, is that if it all went boswonky for the lender, then the housing market would go pop in some way and the economy would nosedive. The bright sparks in government who have allowed it to get to the point where so much of the country's money is tied up in buildings can't afford to watch it all go down the drain, so they're forced to prop up NR with my money.

All of the above is speculation/guesswork, but not entirely uninformed.

[quixotecoyote]

misread the OP

[Jaggy Bunnet]

Apparently (although I haven't checked it) each and every British taxpayer has lent Northern Rock about £700.

£730 each apparently. And expected to go up to around £950.

[ServiceSoon]

We shouldn't.

[JoeEllison]

We're going to pay for it no matter what... the only question is how are we going to pay. Personally, I'd prefer to pay in a way that saves families from losing their homes, if at all possible.

[ponderingturtle]

£730 each apparently. And expected to go up to around £950.

I had heard that it was going to the people who had accounts with them, because of the insurance on bank accounts.

[brodski]

I had heard that it was going to the people who had accounts with them, because of the insurance on bank accounts.

No, that's the amount that we have lent northern rock, in order to prevent a bank collapsing. It is money which will almost certainly be repaid, Northern Rock is still a profitable business (ATM) just one with a MAJOR cash flow crisis. This figure of £730-950 per capita is not the same as the cost of Northern Rock's bad poor performance.

[Soapy Sam]

We all lent NR £730?

Goody.

Let's all go and withdraw it and have a party!

[3point14]

£730 each apparently. And expected to go up to around £950.

Deep joy.

After the Governor of the BoE announced that he wasn't intending to prop up NR so as not to encourage shonky* business methods, I was quite impressed, it seemed the right thing to do.

Now it seems that, if a large financial institution indulges in high profit/high risk activity that goes wrong, then the 'high risk' aspect magically disappears. This seems to me (one with heavy socialist leanings) to be contrary to the principles of capitalism.

I'm more than happy to be corrected in any of this, as finance is not my strong suit (not even sure I have a strong suit, to be honest)

It does all seem to be the result of a runaway housing market and the fact that so many people have such a large portion of their wealth tied up in their houses.




(*Okay, I don't think he actually used the word shonky)

[3point14]

No, that's the amount that we have lent northern rock, in order to prevent a bank collapsing. It is money which will almost certainly be repaid, Northern Rock is still a profitable business (ATM) just one with a MAJOR cash flow crisis. This figure of £730-950 per capita is not the same as the cost of Northern Rock's bad poor performance.

Sorry, being a fiscal dunderhead, I don't understand this last bit, could you expand?

[brodski]

Sorry, being a fiscal dunderhead, I don't understand this last bit, could you expand?
In very simple terms ( I'm a very simple guy ;) and I don't fully understand the ins and outs myself
)
The northern rock is in trouble because it cannot (currently) borrow enough money on the open market to pay out the investments people have with it that are currently maturing. The fact that northern rock owes more than it has in deposits is not (normally) a problem,, it is the normal state of affairs for banks to owe more than they have. It is a problem when more people want to take their money out of the NR than they have liquid assets to pay out with.

The £730-950 is the money which we are lending them till payday, they will pay it back, with (some) interest.
Any money which they don't pay back, and the interest, as well as loss of value in NR will be the cost.

ETA and of course there is the fact in the sentence of mine which you bolded I originally w anted to say "bad financial decisions" and then changed my mind to make it say" poor performance", but ended up saying "bad poor performance".
Mind you, if NR had gone in for good poor performance, we'd be having a different conversation... ;)

[brodski]

Now it seems that, if a large financial institution indulges in high profit/high risk activity that goes wrong, then the 'high risk' aspect magically disappears. This seems to me (one with heavy socialist leanings) to be contrary to the principles of capitalism. Yup, I see it that way too, of course there is the problem of what to do in such situations, the financial disaster that can happen when banks go down will impact of many more people than just the bankers, or even people who had any direct dealings with NR at all.


It does all seem to be the result of a runaway housing market and the fact that so many people have such a large portion of their wealth tied up in their houses.
I don't really make this leap. the problem is to do with a runaway international credit market. Mainly driven by record low interest rates, however much (but not all) of that credit was used to "buy" housing, which meant that for political reasons interest rates needed to be kept low, making credit more "affordable" to people who could not really afford it with devastating results.

[3point14]

In very simple terms ( I'm a very simple guy ;) and I don't fully understand the ins and outs myself
)
The northern rock is in trouble because it cannot (currently) borrow enough money on the open market to pay out the investments people have with it that are currently maturing. The fact that northern rock owes more than it has in deposits is not (normally) a problem,, it is the normal state of affairs for banks to owe more than they have. It is a problem when more people want to take their money out of the NR than they have liquid assets to pay out with.

The £730-950 is the money which we are lending them till payday, they will pay it back, with (some) interest.
Any money which they don't pay back, and the interest, as well as loss of value in NR will be the cost.

ETA and of course there is the fact in the sentence of mine which you bolded I originally w anted to say "bad financial decisions" and then changed my mind to make it say" poor performance", but ended up saying "bad poor performance".
Mind you, if NR had gone in for good poor performance, we'd be having a different conversation... ;)



Think I've got it - temporary outlay v. actual final cost (temporary outlay minus monies recouped)?

[3point14]

Yup, I see it that way too, of course there is the problem of what to do in such situations, the financial disaster that can happen when banks go down will impact of many more people than just the bankers, or even people who had any direct dealings with NR at all.

I don't really make this leap. the problem is to do with a runaway international credit market. Mainly driven by record low interest rates, however much (but not all) of that credit was used to "buy" housing, which meant that for political reasons interest rates needed to be kept low, making credit more "affordable" to people who could not really afford it with devastating results.

So, because we're all living on credit (an exageration, I know) then interest rates have to stay low so that we can all still afford to live on credit.

Low interest rates encourage more people to live on credit.

Repeat until...


Until what? At what point does it all have to stop? Does it have to stop or can we carry on like this for decades? (I'm guessing not)

[brodski]

So, because we're all living on credit (an exageration, I know) then interest rates have to stay low so that we can all still afford to live on credit. pretty much, of course the reality is that in practise Governments don't have direct control over interest rates, but the political pressure is there.


Low interest rates encourage more people to live on credit.

Repeat until...


Until what? At what point does it all have to stop? Does it have to stop or can we carry on like this for decades? (I'm guessing not) Remember the early 90's? Because it seems that some in the financial sector don't...

[3point14]

pretty much, of course the reality is that in practise Governments don't have direct control over interest rates, but the political pressure is there.

Remember the early 90's? Because it seems that some in the financial sector don't...

Some sort of regulation would seem to be in order then.

I'm sure financial institutions all over the world would wecome regulation that, while slightly reducing profit, would reduce the risk of them going into financial meltdown that would impact negatively on national and global economies. (where's the sarcastic smiley?)

[Walter Wayne]

We all lent NR £730?

Goody.

Let's all go and withdraw it and have a party!
Nah, just raise the interest up from the teaser rate you initially lent at (0% I am guessing).

[geni]

Why should the tax payers bail out the borrowers and the lending indusrty?

Because if you don't your economy slightly falls over. The trick is to make things slow down without actualy crashing.

[tkingdoll]

Northern Rock's business model was to borrow the money to then lend to homebuyers. This model has always been criticised, and of course has now resulted in a) this insane situation and b) the loss of the jobs of the big wigs at the top. But at least it wasn't a complete shock - someone somewhere knew it was a stupid idea which means that lessons will be learned.

I read the bail-out loan represents 3% of the British economy. Crumbs!

[geni]

Nah, just raise the interest up from the teaser rate you initially lent at (0% I am guessing).

Nope it is being lent a punative rate. I think it currently stands at 6.75%.

[UnrepentantSinner]

We're going to pay for it no matter what... the only question is how are we going to pay. Personally, I'd prefer to pay in a way that saves families from losing their homes, if at all possible.

Joe you've become one of my favorite posters here since this summer, but I'm going to have to disagree and say tough tit to those people who needed a 3,000 sq.ft. house becuase a 2000 sq.ft. one wasn't enough for a three (or more likely a two) person household or for those who barely could make $1000/mo. rent not realizing their $1200/mo. ARM wasn't going to bite them in the ass if rates went up or those who could afford, say, a 6.5 fixed mortgage, but decided to refi with an ARM and blew their "profits" buying toys and going out to dinner.

Before you respond to that paragraph, let me give you a caveat. I am in a small apartment with (what until the complex was purchased recently) a rent that would blow people in MA, NY, CA or south FL away for my monthly and I'm mortified about the financial ramifiactions of what, so far, are $70/mo. in increased costs for me -especially in light of a schedule change at work that will cost me $3-6000/year. I've also done everything I could over the last 6 years to cut my spending and not incur debt beyond the new car I mentioned above. I also have amassed a year or two worth of savings to cover me should I be unemployed that long.

As much as I feel for those people who have scrimped similarly to me since 2000, I would be disgusted to think that people who lived for today, spent like drunken sailors, ran up their credit cards and had to buy that McMansion were bailed out with my tax dollars... and don't get me started on the vultures who made these ill conceived and ill distributed preditory ARM loans who, doubtless, regardless of how many middle class folks lose their homes, won't miss out on a single limo ride or glass of champange.

Man, Aesop's fable about the ant and the grasshopper is very salient with me, but I hope people will understand if I, who has been fiscally responsible - even when I wanted to splurge - over the last seven years, thinks people who have splurged when they couldn't afford to over that same time need to pay for the consequences of their irresponsibility.

[geni]

Northern Rock's business model was to borrow the money to then lend to homebuyers. This model has always been criticised, and of course has now resulted in a) this insane situation and b) the loss of the jobs of the big wigs at the top. But at least it wasn't a complete shock - someone somewhere knew it was a stupid idea which means that lessons will be learned.

The problem is it is only a bad idea in the long run and people will always be able to convive themselves and others that this time things are different and the long run does not apply.


I read the bail-out loan represents 3% of the British economy. Crumbs!

Given the current cost of houseing and the amount of the market Northern Rock has that is no real suprise (although I think the figure is closer to 1.9%).

[geni]

Joe you've become one of my favorite posters here since this summer, but I'm going to have to disagree and say tough tit to those people who needed a 3,000 sq.ft. house becuase a 2000 sq.ft. one wasn't enough for a three (or more likely a two) person household or for those who barely could make $1000/mo. rent not realizing their $1200/mo. ARM wasn't going to bite them in the ass if rates went up or those who could afford, say, a 6.5 fixed mortgage, but decided to refi with an ARM and blew their "profits" buying toys and going out to dinner.

Yeah those toys and dinners they have been buying? Guess what has been supporting a fair chunck of your economy for the last few years?


Before you respond to that paragraph, let me give you a caveat. I am in a small apartment with (what until the complex was purchased recently) a rent that would blow people in MA, NY, CA or south FL away for my monthly and I'm mortified about the financial ramifiactions of what, so far, are $70/mo. in increased costs for me -especially in light of a schedule change at work that will cost me $3-6000/year. I've also done everything I could over the last 6 years to cut my spending and not incur debt beyond the new car I mentioned above. I also have amassed a year or two worth of savings to cover me should I be unemployed that long.

Which means that now house prices are comeing down and interest rates are likely to stay low for the time being you are in a great position.


As much as I feel for those people who have scrimped similarly to me since 2000, I would be disgusted to think that people who lived for today, spent like drunken sailors, ran up their credit cards and had to buy that McMansion were bailed out with my tax dollars... and don't get me started on the vultures who made these ill conceived and ill distributed preditory ARM loans who, doubtless, regardless of how many middle class folks lose their homes, won't miss out on a single limo ride or glass of champange.

Any bale out wont go as far as you seem to think. People may not lose thier homes but they will still be paying a fair chunck of their income to repay depts. Either they go bancrupt which hurts the economy or things are set up so they don't quite go brancrupt which allows a safer slowdown.


Man, Aesop's fable about the ant and the grasshopper is very salient with me, but I hope people will understand if I, who has been fiscally responsible - even when I wanted to splurge - over the last seven years, thinks people who have splurged when they couldn't afford to over that same time need to pay for the consequences of their irresponsibility.

They will. You could if you wanted take out a loan. The people you refer to not so much.

[3point14]

Joe you've become one of my favorite posters here since this summer, but I'm going to have to disagree and say tough tit to those people who needed a 3,000 sq.ft. house becuase a 2000 sq.ft. one wasn't enough for a three (or more likely a two) person household or for those who barely could make $1000/mo. rent not realizing their $1200/mo. ARM wasn't going to bite them in the ass if rates went up or those who could afford, say, a 6.5 fixed mortgage, but decided to refi with an ARM and blew their "profits" buying toys and going out to dinner.

Before you respond to that paragraph, let me give you a caveat. I am in a small apartment with (what until the complex was purchased recently) a rent that would blow people in MA, NY, CA or south FL away for my monthly and I'm mortified about the financial ramifiactions of what, so far, are $70/mo. in increased costs for me -especially in light of a schedule change at work that will cost me $3-6000/year. I've also done everything I could over the last 6 years to cut my spending and not incur debt beyond the new car I mentioned above. I also have amassed a year or two worth of savings to cover me should I be unemployed that long.

As much as I feel for those people who have scrimped similarly to me since 2000, I would be disgusted to think that people who lived for today, spent like drunken sailors, ran up their credit cards and had to buy that McMansion were bailed out with my tax dollars... and don't get me started on the vultures who made these ill conceived and ill distributed preditory ARM loans who, doubtless, regardless of how many middle class folks lose their homes, won't miss out on a single limo ride or glass of champange.

Man, Aesop's fable about the ant and the grasshopper is very salient with me, but I hope people will understand if I, who has been fiscally responsible - even when I wanted to splurge - over the last seven years, thinks people who have splurged when they couldn't afford to over that same time need to pay for the consequences of their irresponsibility.

Well said.

I myself have been fiscally irresponsible in the past. I'm still paying for it, I will be for some time. Although it bugs the hell out of me, I did, it. I was aware (or should have been aware) of the consequences of my actions as I took them, and it's my responsibility to deal with the outcome.

If the taking on of irresponsibly large debts has no negative consequences, then everyone will take on irresponsibly large debts.

[ponderingturtle]

Well said.

I myself have been fiscally irresponsible in the past. I'm still paying for it, I will be for some time. Although it bugs the hell out of me, I did, it. I was aware (or should have been aware) of the consequences of my actions as I took them, and it's my responsibility to deal with the outcome.

If the taking on of irresponsibly large debts has no negative consequences, then everyone will take on irresponsibly large debts.

Evidence that this these statements resemble reality in any fashion?

[3point14]

Evidence that this these statements resemble reality in any fashion?

Both of them? Well, for the first, I could send you my bank statments, they show without doubt that I have been bloody stupid in the past.

The second? Well, I can't provide any evidence, and what I say may not be true, but if there are no negative consequences to over-extending ones credit, then I'll have a large helping of mortgage please, a side order of credit card, hold the interest, and a couple of hefty bank loans for afters. All washed down with a cool glass of motor finance please.

[ServiceSoon]

is the normal state of affairs for banks to owe more than they have.
So our monentary policy is partly to blame? Fractional reserve banking.

[JoeEllison]

Joe you've become one of my favorite posters here since this summer, but I'm going to have to disagree and say tough tit to those people who needed a 3,000 sq.ft. house becuase a 2000 sq.ft. one wasn't enough for a three (or more likely a two) person household or for those who barely could make $1000/mo. rent not realizing their $1200/mo. ARM wasn't going to bite them in the ass if rates went up or those who could afford, say, a 6.5 fixed mortgage, but decided to refi with an ARM and blew their "profits" buying toys and going out to dinner.

Before you respond to that paragraph, let me give you a caveat. I am in a small apartment with (what until the complex was purchased recently) a rent that would blow people in MA, NY, CA or south FL away for my monthly and I'm mortified about the financial ramifiactions of what, so far, are $70/mo. in increased costs for me -especially in light of a schedule change at work that will cost me $3-6000/year. I've also done everything I could over the last 6 years to cut my spending and not incur debt beyond the new car I mentioned above. I also have amassed a year or two worth of savings to cover me should I be unemployed that long.

As much as I feel for those people who have scrimped similarly to me since 2000, I would be disgusted to think that people who lived for today, spent like drunken sailors, ran up their credit cards and had to buy that McMansion were bailed out with my tax dollars... and don't get me started on the vultures who made these ill conceived and ill distributed preditory ARM loans who, doubtless, regardless of how many middle class folks lose their homes, won't miss out on a single limo ride or glass of champange.

Man, Aesop's fable about the ant and the grasshopper is very salient with me, but I hope people will understand if I, who has been fiscally responsible - even when I wanted to splurge - over the last seven years, thinks people who have splurged when they couldn't afford to over that same time need to pay for the consequences of their irresponsibility.

Here's the problem: the banks are going to get bailed out one way or another. Since they are either way, and there's nothing we can do about it, why not do it in a way that doesn't also bail out home owners, many of whom ARE working class stiffs who got screwed over. Maybe we make an exception for second homes and investment purchases, but since the millionaires and billionaires are going to get bailed out, why can't some of the "thousandaires" get a little of the action too?

(For the record: 30-year fixed rate mortgage here... I'm sympathetic, not stupid!)

[ponderingturtle]

Here's the problem: the banks are going to get bailed out one way or another. Since they are either way, and there's nothing we can do about it, why not do it in a way that doesn't also bail out home owners, many of whom ARE working class stiffs who got screwed over. Maybe we make an exception for second homes and investment purchases, but since the millionaires and billionaires are going to get bailed out, why can't some of the "thousandaires" get a little of the action too?

(For the record: 30-year fixed rate mortgage here... I'm sympathetic, not stupid!)

Is loaning someone money at a reasonable interest rate a bailout? The 6.75% for NR seems to be a bit high for that sort of loan.

Yes some people are getting breaks on their mortgages, but not all of those are only good for the home owner, or being paid for by the public. If the bank will lose more money in a foreclosure than say reducing the interest rate and principle a bit, isn't it just good business?

[geni]

Is loaning someone money at a reasonable interest rate a bailout? The 6.75% for NR seems to be a bit high for that sort of loan.

Remeber that is in the UK where the base rate is 5.75%. NR is a profitable company if we are going to loan it money it seems reasonable that we should make a profit on the deal.

[ponderingturtle]

Remeber that is in the UK where the base rate is 5.75%. NR is a profitable company if we are going to loan it money it seems reasonable that we should make a profit on the deal.

That is my point this thread is "Why Should we Pay for the Foreclosure Problem" but no one has presented any evidence that we are paying for it. Temporary loans to deal with cash flow problems are not what people think of when they talk about bailout and such.

Basically I am asking the people complaining about how people with bad financial practices are getting a free ride to demonstrate this free ride or shut up.

[Tailgater]

Here's the problem: the banks are going to get bailed out one way or another. Since they are either way, and there's nothing we can do about it, why not do it in a way that doesn't also bail out home owners, many of whom ARE working class stiffs who got screwed over. Maybe we make an exception for second homes and investment purchases, but since the millionaires and billionaires are going to get bailed out, why can't some of the "thousandaires" get a little of the action too?

(For the record: 30-year fixed rate mortgage here... I'm sympathetic, not stupid!)

I've thought the same thing. I would like to see some form of workouts on the existing loans between the banks and the borrowers before any bailout. They came up with creative ways to make mortgages, so have them come up with creative ways to get these people back on track and paying for their homes. Free refinances, forgiveness of interest not paid to resume payments, anything to stop the foreclosures and get the homes paid for by the borrower. Slow the housing crash to homes that are just beyond saving.

My brother got about a month behind on his mortgage (wife left him with daughter in South Florida and she made more money:(), and got another job to catch up on the payments. During that time he notified the bank that he was having problems and sent some partial payments. The bank sent back the payments and added late charges with a another past due notice stating if he did not pay the full amount at one time, they would not accept it, and would continue the time he was delinquent toward foreclosure proceeding. That's f'd up. All he needs is for them to work with him a little and he's back on track, but it feels like they would rather tank someone than keep them as a customer. I'm currently working with a rep at the bank to help him out, but even customer service is slave to their own pre-existing policies.

[Gord_in_Toronto]

I've thought the same thing. I would like to see some form of workouts on the existing loans between the banks and the borrowers before any bailout. They came up with creative ways to make mortgages, so have them come up with creative ways to get these people back on track and paying for their homes. Free refinances, forgiveness of interest not paid to resume payments, anything to stop the foreclosures and get the homes paid for by the borrower. Slow the housing crash to homes that are just beyond saving.

My brother got about a month behind on his mortgage (wife left him with daughter in South Florida and she made more money:(), and got another job to catch up on the payments. During that time he notified the bank that he was having problems and sent some partial payments. The bank sent back the payments and added late charges with a another past due notice stating if he did not pay the full amount at one time, they would not accept it, and would continue the time he was delinquent toward foreclosure proceeding. That's f'd up. All he needs is for them to work with him a little and he's back on track, but it feels like they would rather tank someone than keep them as a customer. I'm currently working with a rep at the bank to help him out, but even customer service is slave to their own pre-existing policies.

I think that banks may very well have been prepared to do some sort of deal when only a few people were in default but, with the current crisis in the UK and US, they just do not have the resources to do accomodate a huge number of defaults.

[brodski]

So our monentary policy is partly to blame? Fractional reserve banking.

Not as such, no, runs on banks can occur under any system, and are in fact a lot more common under non FR systems.

[3point14]

Is loaning someone money at a reasonable interest rate a bailout? The 6.75% for NR seems to be a bit high for that sort

It's a sellers market. :)

[UnrepentantSinner]

Yeah those toys and dinners they have been buying? Guess what has been supporting a fair chunck of your economy for the last few years?

Paid for with revolving debt and home equity loans artificially inflated by the bubble. Our economic health over the last 5 years has been a house of (credit) cards.

Here's the problem: the banks are going to get bailed out one way or another. Since they are either way, and there's nothing we can do about it, why not do it in a way that doesn't also bail out home owners, many of whom ARE working class stiffs who got screwed over. Maybe we make an exception for second homes and investment purchases, but since the millionaires and billionaires are going to get bailed out, why can't some of the "thousandaires" get a little of the action too?

(For the record: 30-year fixed rate mortgage here... I'm sympathetic, not stupid!)

I'm torn because I want to be sympathetic to people who are just trying to make it, or finally buy a house and fell for predatory or ill advised lending tactic, but I don't have any sympathy for "thousandaires" because my brother is one. Over the last ten years, despite he and his wife making between $50,000 and $100,000 a year, they've constantly hit my parents (and my mom after dad died) because they'd pissed too much money away on eating out, Dooney and Burke purses for her, vacations, quarterly trips to Vegas for him to gamble, etc. etc. They're still in massive debt, owe my mom something like $10,000 and he just asked her for $15-20,000 so he could divorce his wife.

Oh yeah, after some earlier marital troubles, they moved from a 2,000 sq. ft. to a 3,000 sq. ft. house just so she'd feel better.

I don't want to punish people living paycheck to paycheck and who got screwed by the system, I want people who lived beyond their means like my brother and his wife to get punished.

Basically I am asking the people complaining about how people with bad financial practices are getting a free ride to demonstrate this free ride or shut up.

Clean slate wiping for consumers and bailouts for lenders hasn't happened on a wide scale yet because the bottom hasn't completely fallen out of the housing market yet. Mortgage holders are losing their homes, lenders are eating whatever the house doesn't fetch at auction and the CEO of Citibank might be looking for a new job soon. Once the housing market reaches meltdown mode the calls for a bailout will come though.

[JoeEllison]

I don't want to punish people living paycheck to paycheck and who got screwed by the system, I want people who lived beyond their means like my brother and his wife to get punished.

I agree with you completely. Unfortunately, "the rising tide lifts all ships"... and I'm unwilling to punish the undeserving just to make sure your brother gets what's coming to him.

[UnrepentantSinner]

I agree with you completely. Unfortunately, "the rising tide lifts all ships"... and I'm unwilling to punish the undeserving just to make sure your brother gets what's coming to him.

I understand where you're coming from. Much like the only solution I can come up with to the Iraq fiasco mine for this one involves a time machine. :)

[Walter Wayne]

Nope it is being lent a punative rate. I think it currently stands at 6.75%.That is a government bail out program I can get with.

Walt

[geni]

That is a government bail out program I can get with.

Walt

Unfortunely it is only posible where the banks lendings are at least reasonably sound.

[UnrepentantSinner]

I have one caveat about welching on debts that involves a company that financed plastic sugery, breast implants and a former friend of mine but it will have to wait for until there's less interesting TV on.

[Corsair 115]

Even inexperienced home owners should have been able to see the disaster coming when they agreed to teaser rates, too much house for their means, real estate sellers, etc. What's interesting to me is just how much the current subprime mortgage crisis is very much a made-in-America one. And how little analysis there's been, from what I can tell, of the regulations and practices which may have contributed to the current problems.

In Canada, for example, there is no subprime mortgage crisis. Why? Different regulations and banking practices. Subprime loans make up only about 5% of the market here as compared to about 20% in the U.S. The result is that the housing market here is doing just fine.

There is also the possibility of more underhanded activities contributing to the problem. There was a story published in the Toronto Star newspaper a couple of days ago how the New York State Attorney General was investigating possible collusion between a major savings & loan company and a real estate appraisal service to artificially inflate the prices of homes. The online version of the report can be found here: Collusion cited in subprime mortgage crisis (http://www.thestar.com/article/272816)

One study has suggested that up to 75% of the borrowers who are now facing financial crisis did not bother to determine what their payments would be when the interest rate jumped at the end of the first two or three years.I wonder how far down in the fine print of the contract that info was buried.

[Geek Goddess]

Not everyone who has been hurt by mortgage rates was buying a mansion when they could have had a smaller house. A great many of the people who got homes with very small down payments and ARMS were ones who had finally saved up enough cash to make a down payment of some sort and got into a home of some sort. And not all of them had ARMS.

I am trying to sell my home because I recently transferred to another city. (Or rather, I took a promotion with another company in another city). If I had put it on the market in March or April, I likely would have sold it in about 2-3 weeks. I put it on the market in June, and it's still there. I've lowered the price by $40,000 since then. I lowered it from the appraised values in May to the current appraised value. Same house. *I* am hurt financially, as a result of the sub-prime loan mess, even though I've made my payments on time for over 10 years on the place and had a standard loan. It affects everyone. I could wait months to sell it - I can make the payments, and my youngest son is living there taking care of it until it sells, but of course I would rather have my money and not be making payments/insurance/utilties/lawn care. There are people who can afford the payment on the house, but that don't have the 20% down payment that many banks are suddenly requiring. I went to my realtor's office and talked to several of her fellows. They are dealing with many foreclosures, and are NOT seeing that most of them are ARMS. Many of them are people who were stretched to the brink to make their payments, and used all their available cash to get into the house. When they have a disruption, and can't make a payment, it starts the ball rolling towards eventual foreclosure. Their consensus, in our market, is that the "mansions" are not the ones being foreclosed on, but normal family-sized homes.

There is now a surplus of homes, and a dearth of qualified buyers who have the available cash. I'm in the market for a new home, as soon as I sell mine. Should I buy something when I find what I want, or wait a few months and see if the market drops further? Potential buyers for my existing home are likely doing the same thing.

US likes to whinge on about his money, and I am sincerely glad that he is solvent, but not everyone who is hurting from the home mortgage crisis are people who spend their vacations in expensive locales, eat out every night, buy expensive consumer goods, and indulge in expensive vices like cigarettes. And I will throw in that, judging from my close friends who have always been childless, you have no idea what the expense of raising children is compared to looking out for only yourself. Sure, it's a choice, but do not mock people with families who don't have cash in the bank. My oldest friend and I have always tracked closely on salaries, and she has far more money in the bank, and a paid-for house, while I have two lovely sons. (Who were not spoiled and didn't get everything they asked for, not even Xboxes and iPods and designer shoes, thank you).

[The Almond]

My office mate (let's call him Bill, because that's what his name is) was, until last year, employed as an underwriter for large commercial/residential style loans.

The stories he tells are amazing. The banks would make offers to people whose current incomes qualified them only to make the low, teaser rates. Statutes stipulated that Bill couldn't grab these buyers by the neck and shout, "Do you have any idea what you're getting into!?!?!" Though, admittedly, he did occasionally do just that.

I think the banks are largely to blame for our current housing crunch. The loan officers clearly made no significant effort to explain to people what the concept behind variable rate mortgages was. They didn't explain what the payments would balloon out to, and they certainly didn't talk about the consequences for late payment.

Personally, I think it's a matter of business ethics that has largely been ignored over the past 5-10 years. Banks are using unethical practices to draw people into payments they will not be able to make.

[Gord_in_Toronto]

I used to watch the ads on the US channels by, who was it Ditech(?), that basically said, "we'll give you a home loan no matter what your financial circumstances are", with great amazement. I figured that they wanted people to defaulf so they could get whatever small amount of equity the poor suckers had left.

[ServiceSoon]

Not everyone who has been hurt by mortgage rates was buying a mansion when they could have had a smaller house.I would actually love to see more information about exactly who has been affected by this.

[3point14]

Not everyone who has been hurt by mortgage rates was buying a mansion when they could have had a smaller house. A great many of the people who got homes with very small down payments and ARMS were ones who had finally saved up enough cash to make a down payment of some sort and got into a home of some sort. And not all of them had ARMS.


Question... If all the people who had put themselves in an unstable financial position in order to purchase a home hadn't, wouldn't the price of houses have been affected to the point where, maybe, they would have been able to afford them without stretching themselves? If the people who couldn't reasonably afford the homes didn't buy them, wouldn't the price just drop till they could in accordance with market forces? Or is it the case that the house prices would keep rising, driven by 'buy to let' people who already have one home, but want another so they can make money?




I know little about the UK housing market, and less about the US one.

[egslim]

The stories he tells are amazing. The banks would make offers to people whose current incomes qualified them only to make the low, teaser rates. Statutes stipulated that Bill couldn't grab these buyers by the neck and shout, "Do you have any idea what you're getting into!?!?!" Though, admittedly, he did occasionally do just that.
If you have a situation with seasoned professionals on one side, and a significant number of novices on the other it can hardly be considered an even match. Personally I feel in such cases the government needs to step in to balance the situation. Much like schools educate about the dangers of smoking and tobaco ads are accompanied by a warning - at least they are in the Netherlands, don't know about the US.

For example, regulations could require a simple analysis of yearly payments together with any mortgage contract.

[Zbu]

All I can say is that I'm extremely depressed about this. It looks like me ever getting a house after I get my masters has now gone in the dumper. Personally, I was going to wait until I got my student loans paid off, but it seems that I'm going to be rentfing for...EVER. ;)

[ServiceSoon]

What did the buyers think ARM meant?

[The Don]

And for the record with respect to Northern Rock. Their problem was not one related directly to sub-prime lending in fact they are relatively picky about who they lend to and their default rate is significantly below industry norms.

No, as Teek and others have alluded to, the issue was that, like most other banks, their business model was based on lending more money than they held in deposits. This is not that unusual and one of the objectives of Basel II was to make financial institutions manage their risk (i.e. debt) more effectively. If you can prove that you manage your risk well, you're entitled to lend a larger multiple of the deposits you hold.

The problem came because banks were less willing to lend money to other banks. Northern Rock needed this money to honour loans they had promised. The Bank of England stepped in to lend the money (at a premium) but because the public lost faith in the bank, they started withdrawing their deposits. This caused two problems, first banks only keep small fraction of their deposits on hand, the rest is, among other things, loaned out. The second problem is that with reduced assets and the same amount of debt, there was a danger that NR might break their banking covenants (which is a big no, no).

Back in the day, the loans made was somewhat less than the sum of the deposits made (some banks loaned more than they held, some less but it all averaged out). Back then, as our older contributors may remember, getting a mortgage was a real chore and you felt honoured that you had been permitted to get one. Then can securitised debt.

There was a lot of money sloshing around the system looking for a return. Buying debt is one way to go. I lend £1 at 7% and acquire the debt. I then sell the debt in the form of a bond which pays 6% for £1. The bond owner now has responsibility for the debt (either because they've borrowed to buy the debt or because they've used their assets to acquire it). This is fine when the debt is of a high quality (i.e. it's going to be paid back) the issue comes when the return achieved for the debt doesn't match the return. It has been alleged that the "repackaged" debt was rated AAA (safe as houses if you pardon the pun) when if fact the sub-prime risk was much less good. People got greedy and thought they were buying risk free, high yield investments. It's all kind of unravelled now.

Pehaps if someone had just paused to consider the old maxim "if something seems too good to be true perhaps it is"

[BrooklynAndy]

Of course the general public will end up paying for the bailout - directly or indirectly.

I bought an apartment 4 years ago... not a sub-prime borrower on a low rate ARM, which when it was clear interest rates were rising, we flipped to a 30yr fixed.

At every step... purchase, refinance, and in our monthly statements, the bank, the broker, everyone in the system was pushing us to spend more or to "take some cash out"... "with your income you can afford so much more".

This was a very different experience from my first apartment purchase in the mid 90's when I had to jump thru many hoops to get a 10% down loan.

The brokers interest was clear... more expensive apartment larger commission (we go broke after the sale, no skin of the brokers' nose).

Our bank was less hard sell, but basically, the banker makes his fee upfront as well, this is especially true in the sub-prime market where the bank makes the loan, collects the fees and whatnot, and then sells the loan to someone else (say your pension fund). Also, in the sub-prime market, there is no ongoing bank relationship. My bank wants to sell me other services... the sub-prime lenders are largely one-off business.

All of this is, of course, just a repeat of many other "bubbles". The game is great as long as the bubble keeps expanding (prices continue to rise), but falls apart when either the borrower or bank can't "flip" the apartment.

Yes, there are a lot of people who profited from this who should be paying for it, but they are very hard to reach... they've already made their money and passed on their risks.

To a large degree, the Government had an obligation to help protect less educated borrowers (but by no means do I absolve borrowers who were making the largest purchase of their lives) and the failure of the Government to act upfront is why we will end up paying for this on the back side.

Much like Iraq... we can wring hands about how we got here and should spend some time on lessons learned... but, ultimately the question is what is best from here forward.

Bailout is the best option from where we are... not throwing thousands of people out of their homes because they believed the "experts" who loaned them the money, seems like good policy too. Some criminal prosecution and massive fines against some of the primary lenders seems like good idea.

[ServiceSoon]

The problem came because banks were less willing to lend money to other banks. Northern Rock needed this money to honour loans they had promised. The Bank of England stepped in to lend the money (at a premium) but because the public lost faith in the bank, they started withdrawing their deposits. This caused two problems, first banks only keep small fraction of their deposits on hand, the rest is, among other things, loaned out. The second problem is that with reduced assets and the same amount of debt, there was a danger that NR might break their banking covenants (which is a big no, no).
In your opinion one reason for this event is because of our current monetary fractional reserve banking policy. There are two ways to prevent these sorts of panics and consequently failures from occuring.

Federally Insure banks.
Move to 100% reserve policy.

Are banks in your country federally insured? The FDIC (http://en.wikipedia.org/wiki/Fdic) is a United States government coropration that insures banks.

[BrooklynAndy]

In your opinion one reason for this event is because of our current monetary fractional reserve banking policy. There are two ways to prevent these sorts of panics and consequently failures from occuring.

Federally Insure banks.
Move to 100% reserve policy.

Are banks in your country federally insured? The FDIC is a United States government coropration that insures banks.

I'm not familiar with the situation in England... but,

FDIC does NOT insure banks... it insures deposits up to $100K. Your bank can still fail, but you don't lose your nest egg - at least not the fist $100K. The goal being to make sure no one ever has to watch "Its a Wonderful Life" and say that ain't the way it happened at my bank.

And this only applies to ordinary deposits... not to more complicated financial instruments that look like deposits but are investments (like simple money market funds). The FDIC is also relatively underfunded in the event of a string of major bank collapses (but that is a different topic).

Generally, various entities have moved in when a US bank "fails" in order to prevent panic - even if not specifically insured. Also, bank failure is generally not totted out as front page news as a little panic goes a long way.

This has generally led to banks taking on more risk than they should, as they feel there is a "net" protecting them from catastrophe. Ummm, stuff like making a lot of sub-prime loans.

[Jaggy Bunnet]

In your opinion one reason for this event is because of our current monetary fractional reserve banking policy. There are two ways to prevent these sorts of panics and consequently failures from occuring.

Federally Insure banks.
Move to 100% reserve policy.

Are banks in your country federally insured? The FDIC (http://en.wikipedia.org/wiki/Fdic) is a United States government coropration that insures banks.

In the UK the government currently insures depositors for the first £2k and 90% of the next £33k of deposits under the Financial Services Compensation Scheme. This is being/has been extended to 100% coverage on the full £35k (not clear if it has actually happened or just been announced it will happen) and the government has fully backed Northern Rock's deposits that were in place before the run started, so it is now undoubtedly the safest place to have your cash.

Government is consulting on extending 100% protection to the first £100k. Main argument against this is that it encourages reckless behaviour from investors - they take no risk if bank goes under so have no incentive to avoid "dodgy" banks.

[godless dave]

Why should the tax payers bail out the borrowers and the lending indusrty?
Even inexperienced home owners should have been able to see the disaster coming when they agreed to teaser rates, too much house for their means,
real estate sellers, etc. One study has suggested that up to 75% of the borrowers who are now facing financial crisis did not bother to determine what their payments would be when the interest rate jumped at the end of the first two or three years. While I can show concern for the borrowers
I have none for the lenders who are the ones that will benefit from a government bail out.

What are you suggesting, that the people who own banks should suffer the consequences of their poor decisions? That's not how business works in America! Here, the rich are rewarded for both success and failure; the working and middle classes are penalized for both success and failure.

[ponderingturtle]

Government is consulting on extending 100% protection to the first £100k. Main argument against this is that it encourages reckless behaviour from investors - they take no risk if bank goes under so have no incentive to avoid "dodgy" banks.

But do you want people to think of bank accounts as investments or not? There is a role for risk free places to put your money. IF you view it as an investment that changes a whole lot of the dynamic of depositors vs say investors who own stock in the bank.

[Jaggy Bunnet]

But do you want people to think of bank accounts as investments or not? There is a role for risk free places to put your money. IF you view it as an investment that changes a whole lot of the dynamic of depositors vs say investors who own stock in the bank.

I don't want them to pile it into some dodgy bank that is offering interest rates that are higher than those offered generally in the market without needing to think why that might be.

Bank of Credit and Commerce International for example.

[ponderingturtle]

I don't want them to pile it into some dodgy bank that is offering interest rates that are higher than those offered generally in the market without needing to think why that might be.

Bank of Credit and Commerce International for example.

And shouldn't looking at that be the insurance estimaters job?

[BrooklynAndy]

I don't want them to pile it into some dodgy bank that is offering interest rates that are higher than those offered generally in the market without needing to think why that might be.

Bank of Credit and Commerce International for example.

I think that it makes sense that there should be a risk free place to put your money... and that society has an interest in assuring that for the small depositor (he/she doesn't really have the option of diversifying the risk on relatively small savings). But with deposit insurance...

The issue then is that there is a moral hazard for the banker and depositor - we can pay high rates of interest for deposits and make riskier investments with the money, because at the end of the day the investment money is guaranteed by the government. The depositor is, in fact, being encouraged to put their money in a "dodgy" bank.

This is why Bank regulation is so important. Hard to regulate lots of small depositors... easier to regulate a handful of banks to make sure they aren't taking on too much risk.

So ultimately, I see this as a government regulation and enforcement issue.

[WildCat]

So ultimately, I see this as a government regulation and enforcement issue.
Oh yeah, Illinois tried that a few years ago. Decided to require credit counseling for all loans in ZIP codes identified for having large numbers of defaults. And guess what? They all tended to be in poor and minority areas. So earlier this year the law was repealed as it was deemed racist and unfairly kept the poor and minorities from owning homes.

Good luck with that in NY!

[BrooklynAndy]

Oh yeah, Illinois tried that a few years ago. Decided to require credit counseling for all loans in ZIP codes identified for having large numbers of defaults. And guess what? They all tended to be in poor and minority areas. So earlier this year the law was repealed as it was deemed racist and unfairly kept the poor and minorities from owning homes.

Good luck with that in NY!

Sounds racist and unfair. Not to mention condescending. Requiring some basic education on saving and investing at the high school level for all kids, however, I could get behind.

I was suggesting that the Moral Hazard (of guaranteeing deposits) attaches both to the depositor - hey, I can't get hurt if the bank goes under, so whoever pays the highest rate is my bank And to the bank itself - hey, I can take big chances with the depositors money because a lynch mob won't come after me if I bet wrong.

I believe that deposit insurance (up to a point) is a good idea, but with it comes an obligation on the part of the Government to regulate and assure that the moral hazard issue doesn't get out of hand. In other words, they need to set minimum standards for the bank and watch to make sure they meet them.

[The Don]

In your opinion one reason for this event is because of our current monetary fractional reserve banking policy. There are two ways to prevent these sorts of panics and consequently failures from occuring.

Federally Insure banks.
Move to 100% reserve policy.

Are banks in your country federally insured? The FDIC (http://en.wikipedia.org/wiki/Fdic) is a United States government coropration that insures banks.
The cause of the problem was the fact that the NR's business model was dependent on being able to borrow money easily and cheaply and that the knee jerk reaction of lenders to the sub-prime issue was to refuse to lend money at (almost) any price.

It turned into a crisis because the public are a bunch of numpties who didn't understand that NR borrowing from the BoE at a penalising rate was a good thing and instead caused a run on the bank.

I think the BoE has done the right thing which is to lend money to NR at a premium both to penalise and to reflect the risk.

Requiring 100% coverage would cause an unreasonable constraint in the capital markets.

The government providing a complete underwriting of risk means that the lending institution can abdicate responsibility for risk management, a bad thing.

To prevent the run on the bank would require education, something the great majority of people seem to be unprepared to undertake

[WildCat]

In other words, they need to set minimum standards for the bank and watch to make sure they meet them.
It was the government that pushed this along in the first place by demanding that banks loosen their credit standards so that more minorities and poor could own homes, under threat of more regulations.

But as to the thread topic, no we shouldn't pay for foreclosure problems, and so far we (in the US) haven't. And there is no pending legislation on it either.

[Jaggy Bunnet]

I think the BoE has done the right thing which is to lend money to NR at a premium both to penalise and to reflect the risk.

Maybe, of course that always assumes that the interest will actually end up being paid...

http://www.guardian.co.uk/business/2007/nov/14/northernrock.bankofenglandgovernor1

[ServiceSoon]

Oh yeah, Illinois tried that a few years ago. Decided to require credit counseling for all loans in ZIP codes identified for having large numbers of defaults. And guess what? They all tended to be in poor and minority areas. So earlier this year the law was repealed as it was deemed racist and unfairly kept the poor and minorities from owning homes. Good luck with that in NY!
Stupid due process. Lately, the gov has been in the business of protecting people from themselves and in this situation protecting people from other people's stupid financial decisions.

[ServiceSoon]

But as to the thread topic, no we shouldn't pay for foreclosure problems, and so far we (in the US) haven't. And there is no pending legislation on it either.
H.R. 3915 synopsis (http://www.namb.org/images/namb/GovernmentAffairs/Section%20by%20Section.pdf)

Mortgage Reform and Anti-Predatory Lending Act of 2007 - H.R. 3915

The House is scheduled to vote on this legislation intended to reform consumer mortgage practices. They are changing the way this industry operates.

[geni]

It was the government that pushed this along in the first place by demanding that banks loosen their credit standards so that more minorities and poor could own homes, under threat of more regulations.

Evidences?


But as to the thread topic, no we shouldn't pay for foreclosure problems, and so far we (in the US) haven't. And there is no pending legislation on it either.

You will pay. Lower interest on saveings higher costs on loans and more expensive imports. Gets really fun when it starts impacting your tax base.

[Tokenconservative]

Apparently (although I haven't checked it) each and every British taxpayer has lent Northern Rock about £700. This, I assume, is that if it all went boswonky for the lender, then the housing market would go pop in some way and the economy would nosedive. The bright sparks in government who have allowed it to get to the point where so much of the country's money is tied up in buildings can't afford to watch it all go down the drain, so they're forced to prop up NR with my money.

All of the above is speculation/guesswork, but not entirely uninformed.

Once more, but in English this go 'round?

Is GB facing a similar "mortgage crisis"?

Tokie

[Tokenconservative]

H.R. 3915 synopsis (http://www.namb.org/images/namb/GovernmentAffairs/Section%20by%20Section.pdf)

Mortgage Reform and Anti-Predatory Lending Act of 2007 - H.R. 3915

The House is scheduled to vote on this legislation intended to reform consumer mortgage practices. They are changing the way this industry operates.

Actually, they are simply doing what they always do: closing the barn door after the horse thief has come and gone.

The industry will find ways around this, and if necessary force gov't to bend things to get it done.

There's no conspiracy here...it's just business and the residential building and selling and lending businesses are really big, really powerful and give our honest-as-a-day-on-Mercury-is-long politicos on BOTH sides, piles and piles of money to make sure they do what these industries want.

This resolution is okay by these industries because they stopped making the loans and engaging in the practices being "fixed" in it a year or two ago. No skin off their noses.

Tokie

[Tokenconservative]

Why should the tax payers bail out the borrowers and the lending indusrty?
Even inexperienced home owners should have been able to see the disaster coming when they agreed to teaser rates, too much house for their means,
real estate sellers, etc. One study has suggested that up to 75% of the borrowers who are now facing financial crisis did not bother to determine what their payments would be when the interest rate jumped at the end of the first two or three years. While I can show concern for the borrowers
I have none for the lenders who are the ones that will benefit from a government bail out.

Here's the best PERSONAL approach to this "crisis" I've found: when I see that some "news" report on the "crisis" is about to come up on TV or radio, or come across same in a published source, I QUICKLY (key) turn the channel or the page.

Why?

Simple: it is not a crisis.

In fact, even in the hardest-hit areas (US market...still waiting to see if this is going on in GB) the outside maximum number of homes involved is about 6%...this MAY rise to the enormous number of 8% at the peak over about the next year (it is estimated the "crisis" will peak between Mar/Aug of next year). This means that at MOST 8% (really, we need to be looking in the 4-6% range, tho) of ALL homes in a given market will be impacted.

Some will shriek "even ONE home is too many!!!"

Others, more...circumspect will say "gee..even 8% ain't a lot..."

That's because it's not.

While it certainly would suck to be among that 8%, this, like the "crisis in Iraq!!!" we hear about in the "news" media, is a crisis that um...ain't.

Tokie

[Tokenconservative]

We're going to pay for it no matter what... the only question is how are we going to pay. Personally, I'd prefer to pay in a way that saves families from losing their homes, if at all possible.

Another approach is to let the market do its work. Some will (and would've anyway) "lost" their homes. A few more perhaps than is generally the case for several reasons including loosened lending practices, sure...but also homeowner/borrower greed and ignorance.

I'd prefer not to pay at ALL for the financial mistakes of these few people. Why should I? I had piles of United Airlines stock just before they wenk BK...did any of these HOs help ME?

Tokie

[Tokenconservative]

What's interesting to me is just how much the current subprime mortgage crisis is very much a made-in-America one. And how little analysis there's been, from what I can tell, of the regulations and practices which may have contributed to the current problems.

In Canada, for example, there is no subprime mortgage crisis. Why? Different regulations and banking practices. Subprime loans make up only about 5% of the market here as compared to about 20% in the U.S. The result is that the housing market here is doing just fine.

There is also the possibility of more underhanded activities contributing to the problem. There was a story published in the Toronto Star newspaper a couple of days ago how the New York State Attorney General was investigating possible collusion between a major savings & loan company and a real estate appraisal service to artificially inflate the prices of homes. The online version of the report can be found here: Collusion cited in subprime mortgage crisis (http://www.thestar.com/article/272816)

I wonder how far down in the fine print of the contract that info was buried.

Nothing like simplification to a ridiculous degree to help one undestand a problem...of COURSE Canada's not facing this problem!

Because well, we all know Canada is just so much BETTER!

Sheesh.

Tokie

[Tokenconservative]

It was the government that pushed this along in the first place by demanding that banks loosen their credit standards so that more minorities and poor could own homes, under threat of more regulations.

But as to the thread topic, no we shouldn't pay for foreclosure problems, and so far we (in the US) haven't. And there is no pending legislation on it either.


Yes, this was one of the issues (no...I don't have a link--LIIIINNNKKKKKKK!!!!--either) which is providing wonderful fodder for those such as Sharpton and Jackson to now claim that the FC crisis is hitting non-whites harder. It may well be, but that's because by the numbers, and for reasons having more to do with income levels and spending habits (Hispanics experience this far less and Asian almost not at all), blacks tend to get into more trouble credit score-wise than anyone else. Of course, liberals scream "come see the racism inherent in the sytem!" at this news, but it has nothing to do with that. Redlining is a thing of the past; yes, it happens very occasionally, usually though, it's among racist RE agents coercing mgt. LOs not to lend to a ______ family because if the agent is known to have moved one of "them" into a particular neighborhood, that agent's business might dry up. Again...this is exceedingly rare in the US these days.

No pending legislation but various fed agencies are pushing for it: FDIC and Treasury among them.

Is it likely there will be a bailout? It's an election year....

Tokie

[Raptor Witness]

Speaking of the [subprime] (http://en.wikipedia.org/wiki/2007_Subprime_mortgage_financial_crisis) issue. I wonder why the [trend line] (http://www.alpari-idc.com/en/market-analysis-guide/technical-analysis/trend-lines.html) isn't being discussed?

Judging from what I'm seeing in these graphs, God Almighty is behind the mortgage meltdown.

http://farm3.static.flickr.com/2106/2062090201_3e5c6b1025_o.jpg

[Link] (http://finance.yahoo.com/charts#chart1:symbol=cfc;range=5y;charttype=line;c rosshair=on;logscale=on;source=undefined)

http://farm3.static.flickr.com/2166/2067568214_a157656689_o.jpg

[Link] (http://patrick.net/housing/contrib/CAForeclosuresQ22007.jpg)

http://farm3.static.flickr.com/2011/2065692665_9f505e2561_o.gif


[Link] (http://www.lao.ca.gov/2006/cal_facts/2006_calfacts_econ.htm#economy)

[Countrywide Financial] (http://nyjobsource.com/countrywide.html) is one of the top mortgage companies in the nation. It also provides financial services including banking, investment services and insurance. Countrywide has more than 1,000 offices nationwide.

If [California] (http://en.wikipedia.org/wiki/Economy_of_California#California_Department_of_Fin ance) were an independent country, it's economy would rank in the top ten.

[Tokenconservative]

If [California] (http://en.wikipedia.org/wiki/Economy_of_California#California_Department_of_Fin ance) were an independent country, it's economy would rank in the top ten.

Brilliant post ho, ergo propter hoc "logic" here (and even if you are kidding, there are those who will see this as more than reasonable).

We are likely to see a "spike" upward in foreclosures as the majority of 2-3-and 5 year ARMs, Option-ARMs come due and as the int. rate rises impacing HELOCs, too, over the next year, hitting hardest March-August.

Now, we had a lot of forest fires in CA this summer/fall. And as you note, CA has one of the largest economies in the world.

Will it be mere coincidence that more foreclosures will occur AFTER these fires?

I think not.

And we know what caused the fires, too.....


GLOBAL WARMINGGGGGGGGGGG!!!!!

So now, since we also know that Global Warming caused Katrina (or was it GW Bush's hurricane machine?) we can arrive at a SCIENTIFIC CONSENSUS that says: the US housing market "meltdown" is caused by....

GLOBAL WARMINGGGGGGGGGGG!!!!!!!

[Raptor Witness]

[Home Prices Post Biggest Drop Since Record Keeping Began] (http://www.nytimes.com/2007/11/28/business/28econ.html) - NY Times

[S.&P./Case-Shiller Housing Report (pdf)] (http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_112766.pdf)

Prices of single-family homes in the third quarter fell 4.5 percent nationwide compared with a year ago, according to the Standard & Poor’s/Case-Shiller National Home Price Index. It was the largest drop since records for the index began in 1988.

[TAMPA BAY AREA LEADS NATION IN PRICE DROP] (http://www.tbo.com/news/money/MGBR29T6J9F.html) - The Tampa Tribune

The Tampa metro area posted the largest yearlong decrease in home prices in September among 20 cities tracked by Standard & Poor's Case Shiller Home Price Index. Prices dropped 11.1 percent, compared with the same month last year, according to the index, released Tuesday.

http://farm3.static.flickr.com/2227/2072040606_517363e89b_o.jpg

http://farm3.static.flickr.com/2215/2072113242_a8afffa157_o.jpg

[Tokenconservative]

Well, there it is.

You simply can't argue with a chart like that.

It's like taking that snippet from the 120 years chart NASA/GISS use and saying "see!? SEEEEE!!!???" and saying that since global temps have warmed (slightly, but far less than in the 70s, and the 30s) that that is proof--PROOOOOOFFFFFFFF!!!!!!!--that humans are causing warming, even though it wasn't proof--PROOOOOOOFFFFFFF!!!!--during previous warming trends.

Clearly, the dip in housing pricing is as a result of hurricanes.

Um...question: no hurricanes hit the US this year (despite the claims of GWists that every hurricane season after 2005 would be worser and worser) and yet housing pricing continues to slide--4-5% nationally, avg'd.

I may be a bit naive, but given that two 'cane seasons have passed since TEOTWAWKI when Katrina hit, wouldn't it make sense for pricing to have begun to climb again?

I guess not. Once a hurricane hits, housing pricing falls and just keeps falling.

Wait...that doesn't make sense either, since lots and lots of hurricanes have hit America and prices for houses go up and they go down.

Alla time.

Tokie

[Corsair 115]

Nothing like simplification to a ridiculous degree to help one undestand a problem...of COURSE Canada's not facing this problem!

Because well, we all know Canada is just so much BETTER!That's it? That's the extent of your reply? I guess for you to admit that perhaps, just perhaps, the U.S. got itself into the subprime mess is too much for your pride to swallow?

The data on the Canadian housing market is easy to find. Dig it up for yourself if you don't believe me. There were many news stories on the U.S. subprime mortgage isses when it really started coming to the fore a couple of months back, highlighting the differences between the U.S. and Canadian housing markets. You shouldn't have much trouble finding those either.

The point remains, which you avoided: the U.S. subprime issue is a made-in-America one, and there has been relatively little examination or discussion, from what I can tell, of the regulations and banking practices which might have contributed to the problem.

You also ignored the potential for criminal activity contributing to the mess (i.e. collusion).

It's a shame you're not interested in genuine conversation and instead are locked into the nonsense of left/right, conservative/liberal, Democrat/Republican partisanship which infests so much of American politics these days. One would think on a message board devoted to the use of reason, logic, facts, and evidence, to examine and discuss situations there'd be more reason, logic, facts, and evidence.

But I guess mindless partisanship gives you more of a warm, fuzzy feeling than does actual facts and evidence.

[Gord_in_Toronto]

The whole mess is explained here:

http://www.youtube.com/watch?v=SJ_qK4g6ntM[/url]


The last minute explains why it concerns us all. :jaw-dropp

[thaiboxerken]

If only being stupid was illegal... then we could jail these morons. Of course, it would still cost tax-payer money, but I'd feel better.

[letsthink]

There is no federal bailout being discussed. There are discussions among the treasury department, the banks, the servicers of securitized loans, investors in securitizations, and other interested parties so that everyone comes to an agreement about how modifications will be done. An attempt is being made to get the players to try to agree to forbear on interest rate increases for a time period to allow the housing market to recover.

There are plenty of borrowers for whom modifications will not make any difference. These folks are headed for the sheriff's auction. But there are plenty of others who planned to refi before their hybrid ARM reset and cannot do so since the mortgage market is shut down for all but the cleanest borrowers. So a modification that simply extends the existing fixed rate for 3 to 5 years will allow these borrowers to keep up with their payments long enough to pay down the mortgage, sell the house in a non-stressed market, or refinance when the mortgage market unfreezes.

[Tony]

I've thought the same thing. I would like to see some form of workouts on the existing loans between the banks and the borrowers before any bailout. They came up with creative ways to make mortgages, so have them come up with creative ways to get these people back on track and paying for their homes. Free refinances, forgiveness of interest not paid to resume payments, anything to stop the foreclosures and get the homes paid for by the borrower. Slow the housing crash to homes that are just beyond saving.

My brother got about a month behind on his mortgage (wife left him with daughter in South Florida and she made more money:(), and got another job to catch up on the payments. During that time he notified the bank that he was having problems and sent some partial payments. The bank sent back the payments and added late charges with a another past due notice stating if he did not pay the full amount at one time, they would not accept it, and would continue the time he was delinquent toward foreclosure proceeding. That's f'd up. All he needs is for them to work with him a little and he's back on track, but it feels like they would rather tank someone than keep them as a customer. I'm currently working with a rep at the bank to help him out, but even customer service is slave to their own pre-existing policies.

You and Joe are right. There is a responsibility gap.

"Responsibility" is often brought out when we're talking about the poor or middle classes. When its the rich, the government, or financial institutions (the ones with the power and money) acting irresponsibly, we, the middle class tax-payers, "bail them out". For once, I'd like to see the consumers and the middle class get a bail-out and let the parties with the power suffer the consequences of their irresponsibility.

[ServiceSoon]

I was under the impression that the rich paid more taxes. Can you give an example of when the middle class bailed the rich out?

[Geek Goddess]

I was under the impression that the rich paid more taxes. Can you give an example of when the middle class bailed the rich out?

As I move up the income ladder (having gone from 'poor' into middle class and now touching on what would be considered 'well off'), I know that I pay more and more taxes. Perhaps as a percent of my income it might be slightly less than it used to be, but in absolute dollars, it has grown mightily. The rich pay more dollars.

However, cutting the taxes of the wealthy by 15% decreases the total government take much less than cutting the taxes of the middle class by even 1%. The great huge bulk of taxes comes from the middle class portion. There are tens of millions of people in that group. There are NOT tens of millions of millionaires. The millionaires are the ones who build businesses and hire people, more so than the middle class does. If my boss can pay $50K less in taxes, he can hire more employees, who then have jobs and contribute to help grow the business. I don't read much 'theory' but I see what does on in the real world, every day.

[ServiceSoon]

As I move up the income ladder (having gone from 'poor' into middle class and now touching on what would be considered 'well off'), I know that I pay more and more taxes. Perhaps as a percent of my income it might be slightly less than it used to be, but in absolute dollars, it has grown mightily. The rich pay more dollars.

However, cutting the taxes of the wealthy by 15% decreases the total government take much less than cutting the taxes of the middle class by even 1%. The great huge bulk of taxes comes from the middle class portion. There are tens of millions of people in that group. There are NOT tens of millions of millionaires. The millionaires are the ones who build businesses and hire people, more so than the middle class does. If my boss can pay $50K less in taxes, he can hire more employees, who then have jobs and contribute to help grow the business. I don't read much 'theory' but I see what does on in the real world, every day.Due to our progressive tax scale the top 10% wage earners pay 70% of income taxes. Source is the American Tax Foundation. (http://www.taxfoundation.org/research/show/250.html)

[JoeEllison]

I was under the impression that the rich paid more taxes. Can you give an example of when the middle class bailed the rich out?

The 1980s. It wasn't that long ago.

[Geek Goddess]

Due to our progressive tax scale the top 10% wage earners pay 70% of income taxes. Source is the American Tax Foundation. (http://www.taxfoundation.org/research/show/250.html)

Good point.

However, I should also point out that the truly 'rich' - like individuals with a net worth over a million dollars, are not the top 10%, but the top 0.5 -1%. My data are a few years old, but IIRC a salary of $100K was in the top 2%.

[balrog666]

Good point.

However, I should also point out that the truly 'rich' - like individuals with a net worth over a million dollars, are not the top 10%, but the top 0.5 -1%. My data are a few years old, but IIRC a salary of $100K was in the top 2%.


Forget net worth as a criterion - anyone who's owned a house in California for twenty years or has a 30-year-old 401K can meet that threshold.

However, last year the 99-percentile level for taxable income was approximately $175,000.

[Tony]

Good point.

However, I should also point out that the truly 'rich' - like individuals with a net worth over a million dollars, are not the top 10%, but the top 0.5 -1%. My data are a few years old, but IIRC a salary of $100K was in the top 2%.

Do you have any figures on the amount they pay?

[ponderingturtle]

Due to our progressive tax scale the top 10% wage earners pay 70% of income taxes. Source is the American Tax Foundation. (http://www.taxfoundation.org/research/show/250.html)

So what? That would happen in a fixed percentage system if there was enough difference in what the high end make compared to the average.

The way to make everyone pay the same is make it independant of income, say 50,000 dollars a year for everyone. It just would suck to be makeing $35,000 a year.

[Geek Goddess]

Do you have any figures on the amount they pay?

how much who pays to who?

[Mister Agenda]

However it is dealt with there has to be enough in the way of consequences to prevent moral hazard. If you took out one of these loans and can't afford it you should wind up feeling like a fool, not like you got away with something. I don't object to softening the blow a bit by spreading the adjustment period out, but if we don't let the market correct, the distortion will come back to bite us on the ass somewhere else.

[PAC]

Since I started this thread The Bush has gotten involved and lead us down another garden path to problems. You may want to check out the opinions of the Cato Institute (cato.org). They talk about a number of problems with this bail out. It's intelligent stuff!

[balrog666]

Since I started this thread The Bush has gotten involved and lead us down another garden path to problems. You may want to check out the opinions of the Cato Institute (cato.org). They talk about a number of problems with this bail out. It's intelligent stuff!


But, five years down the road, all those corporations will be renamed and reincorporated elsewhere, all those old records will be shredded, the statute of limitations on the abject fraud will be past, and so we won't have to put 100,000 criminal mortgage brokers, bankers, and financial managers in jail for fraud.

It's a win-win-win situation - unless you're not a corrupt banker, a corrupt mortgage broker, or a corrupt financial management corporation.

[PAC]

But, five years down the road, all those corporations will be renamed and reincorporated elsewhere, all those old records will be shredded, the statute of limitations on the abject fraud will be past, and so we won't have to put 100,000 criminal mortgage brokers, bankers, and financial managers in jail for fraud.

It's a win-win-win situation - unless you're not a corrupt banker, a corrupt mortgage broker, or a corrupt financial management corporation.


While I.m not a fan of the bankers or real estate folks, what criminal activity did they participate in?

[ServiceSoon]

Everything I have seen from CATO is gold.

[PAC]

Everything I have seen from CATO is gold.

I don't agree with all of their opinions but I see the logic of their point of view.

[balrog666]

While I.m not a fan of the bankers or real estate folks, what criminal activity did they participate in?

Intentional misrepresentation/misstatement of borrower assets and income.
Intentional misrepresentation /misstatement of borrower legal status and credit scores.
Intentional misrepresentation /misstatement/use of false documents to obtain insurance.
Gross misrepresentation of appraisals, loan documentation, and borrower status to bundle loans.
Intentional misrepresentation/misstatement of a financial instrument to facilitate a fraudulent sale.
Gross fraud in selling the same financial instrument to multiple parties.
Intentional misrepresentation/misstatement of a financial asset by a broker or financial manager to facilitate a fraudulent sale.
Intentional misrepresentation/misstatement of capital assets.

That's fraud, buddy, every step of the way.

[Jaggy Bunnet]

Intentional misrepresentation/misstatement of borrower assets and income.
Intentional misrepresentation /misstatement of borrower legal status and credit scores.
Intentional misrepresentation /misstatement/use of false documents to obtain insurance.
Gross misrepresentation of appraisals, loan documentation, and borrower status to bundle loans.
Intentional misrepresentation/misstatement of a financial instrument to facilitate a fraudulent sale.
Gross fraud in selling the same financial instrument to multiple parties.
Intentional misrepresentation/misstatement of a financial asset by a broker or financial manager to facilitate a fraudulent sale.
Intentional misrepresentation/misstatement of capital assets.

That's fraud, buddy, every step of the way.

All that's missing is the evidence.

[PAC]

Intentional misrepresentation/misstatement of borrower assets and income.
Intentional misrepresentation /misstatement of borrower legal status and credit scores.
Intentional misrepresentation /misstatement/use of false documents to obtain insurance.
Gross misrepresentation of appraisals, loan documentation, and borrower status to bundle loans.
Intentional misrepresentation/misstatement of a financial instrument to facilitate a fraudulent sale.
Gross fraud in selling the same financial instrument to multiple parties.
Intentional misrepresentation/misstatement of a financial asset by a broker or financial manager to facilitate a fraudulent sale.
Intentional misrepresentation/misstatement of capital assets.

That's fraud, buddy, every step of the way.

There are millions of questionable mortgages. Are you suggesting that there was fraud in a significant amount of these?

It is much more likely that a massive number of folks made poor financial decisions. The real issue here is the agreed upon inflation in interest rates a couple of years into the loans. That is not fraud, it's poor decision making.
The Bush has once again lead the government into breaking legal contracts.
The problem is the damage to our system of contracts and the fact that this will dry up the financing for low-end mortgages as people will not want to provide dollars for the higher risk market when the government can come in and destroy their investments. In the long run they have harmed the capability of higher risk individuals to ever have the chance to own a home.

I also would like to see the evidence of your accusations.

[Tokenconservative]

That's it? That's the extent of your reply? I guess for you to admit that perhaps, just perhaps, the U.S. got itself into the subprime mess is too much for your pride to swallow?

The data on the Canadian housing market is easy to find. Dig it up for yourself if you don't believe me. There were many news stories on the U.S. subprime mortgage isses when it really started coming to the fore a couple of months back, highlighting the differences between the U.S. and Canadian housing markets. You shouldn't have much trouble finding those either.

The point remains, which you avoided: the U.S. subprime issue is a made-in-America one, and there has been relatively little examination or discussion, from what I can tell, of the regulations and banking practices which might have contributed to the problem.

You also ignored the potential for criminal activity contributing to the mess (i.e. collusion).

It's a shame you're not interested in genuine conversation and instead are locked into the nonsense of left/right, conservative/liberal, Democrat/Republican partisanship which infests so much of American politics these days. One would think on a message board devoted to the use of reason, logic, facts, and evidence, to examine and discuss situations there'd be more reason, logic, facts, and evidence.

But I guess mindless partisanship gives you more of a warm, fuzzy feeling than does actual facts and evidence.

Given that I was banned from this forum back around, I think, Hallween--no doubt due to the weight of all the complaints the mods get about me from whiners and complainers like you, I hope you'll find it in your heart at this time of the year to forgive my late reply to your minless rant.

The "US" did not get into a mess. This is being blown out of proportion by a left-advocacy media intent on seeing a socialist in the White House and intent on seeing socialists in charge in our Congress.

There IS no "crisis." In fact, the current foreclosure rate (expected to rise to as much as 6% nationally at the peak of the "crisis" mid-2008) is lower today than it was in the mid 90s. Note that I emphasized "rate" for a reason.

Hmmm....it wasn't called a "crisis" then, for some reason. I wonder what the difference could possibly be!?

Other than blaming Canada, I don't give a naked mole rat's ass what happens there. Why would I?

This has nothing to do with "banking." Banks here have, largely, remained conservative in their lending practices and are not a part of the "crisis." It's mortgag lenders that we need to look at. And since most of those who engaged in these legal, but risky lending practices are out of business or will be soon, this is what in a free market (Google that term, since you live and work under socialism you need to understand it) is called a "correction." Companies that make bad decisions get to go out of business. In Canada, companies are not PERMITTED to make bad decisions, and not permitted to go out of business either, and consumers are, likewise, not permitted to make risky decisions as with these types of loans.

Now, I suggest YOU look up some of the numbers. Right now, the "crisis" involves MAYBE 4% of ALL homes in America. Of all homes in America 90% are being paid on time. Of the remaining 10% only about .5% fall under the "risky" category identified as a part of the "crisis."

Tokie

[Tokenconservative]

There are millions of questionable mortgages. Are you suggesting that there was fraud in a significant amount of these?

It is much more likely that a massive number of folks made poor financial decisions. The real issue here is the agreed upon inflation in interest rates a couple of years into the loans. That is not fraud, it's poor decision making.
The Bush has once again lead the government into breaking legal contracts.
The problem is the damage to our system of contracts and the fact that this will dry up the financing for low-end mortgages as people will not want to provide dollars for the higher risk market when the government can come in and destroy their investments. In the long run they have harmed the capability of higher risk individuals to ever have the chance to own a home.

I also would like to see the evidence of your accusations.

Lots and lots of fraud, especially appraisal fraud, HAS taken place, but yes, even more of these are simply due to poor decisions and indeed, the GREED of borrowers.

The problem is allowing government into this to "fix" a problem that simply doesn't exist. The foreclosure RATE was higher in 1999 than it is now. Why din't gummint step in then?

The problem, insignificant as it currently is, will only be made worse as government "fixes" it.

Tokie

[Tokenconservative]

Intentional misrepresentation/misstatement of borrower assets and income.
Intentional misrepresentation /misstatement of borrower legal status and credit scores.
Intentional misrepresentation /misstatement/use of false documents to obtain insurance.
Gross misrepresentation of appraisals, loan documentation, and borrower status to bundle loans.
Intentional misrepresentation/misstatement of a financial instrument to facilitate a fraudulent sale.
Gross fraud in selling the same financial instrument to multiple parties.
Intentional misrepresentation/misstatement of a financial asset by a broker or financial manager to facilitate a fraudulent sale.
Intentional misrepresentation/misstatement of capital assets.

That's fraud, buddy, every step of the way.

Hmmm...sounds wike sombody was stupid, stupid boy!

Ya got sucked into an ARM or HELOC and now YOU are hurtin' huh, pal?

Sucks to be you!

But live and learn, eh?

Tokie

[Tokenconservative]

There is no federal bailout being discussed. There are discussions among the treasury department, the banks, the servicers of securitized loans, investors in securitizations, and other interested parties so that everyone comes to an agreement about how modifications will be done. An attempt is being made to get the players to try to agree to forbear on interest rate increases for a time period to allow the housing market to recover.

There are plenty of borrowers for whom modifications will not make any difference. These folks are headed for the sheriff's auction. But there are plenty of others who planned to refi before their hybrid ARM reset and cannot do so since the mortgage market is shut down for all but the cleanest borrowers. So a modification that simply extends the existing fixed rate for 3 to 5 years will allow these borrowers to keep up with their payments long enough to pay down the mortgage, sell the house in a non-stressed market, or refinance when the mortgage market unfreezes.

That is not how it's being sold either in the left-advocacy media or by self-serving, power hungry politicos on the left.

The are assuring America that every other house is 15 minutes from that knock on the door from the Sheriff, and that the ONLY way to fix it is to elect Dems this coming year.

Tokie

[balrog666]

Hmmm...sounds wike sombody was stupid, stupid boy!

Ya got sucked into an ARM or HELOC and now YOU are hurtin' huh, pal?

Sucks to be you!

But live and learn, eh?

Tokie

Yep, many people were stupid. Borrowers, lenders, banks, bond funds ...

And, no, I wasn't one of them.

But I did get a very good look at some of it. ;)

[Tokenconservative]

Yep, many people were stupid. Borrowers, lenders, banks, bond funds ...

And, no, I wasn't one of them.

But I did get a very good look at some of it. ;)

Many borrowers were very stupid. Very few lenders (banks have nothing to do with this. Why do you keep saying that if, as you pretend, you know something about it?), brokers, investors etc. were seriously hurt other than those that've gone belly up. Mostly it's their investors who've been left holding the bag. But I've invested before (had a bunch of United stock!) and I don't recall signing anything that guaranteed I would not lose money.

Tokie

[Gord_in_Toronto]

Many borrowers were very stupid. Very few lenders (banks have nothing to do with this. Why do you keep saying that if, as you pretend, you know something about it?), brokers, investors etc. were seriously hurt other than those that've gone belly up. Mostly it's their investors who've been left holding the bag. But I've invested before (had a bunch of United stock!) and I don't recall signing anything that guaranteed I would not lose money.

Tokie

"banks have nothing to do with this"? So you really do live a different Universe? :boggled:

All is explained here:

http://www.youtube.com/watch?v=SJ_qK4g6ntM

[Tokenconservative]

"banks have nothing to do with this"? So you really do live a different Universe? :boggled:

All is explained here:

http://www.youtube.com/watch?v=SJ_qK4g6ntM

Sorry...I keep assuming (wrongly, it seems) that I am talking to people who are more...sophisticated in these matters.

You use the term "bank" to mean "anybody who makes mortgage loans!!!" Um...no. Banks are a different sort of entity from a mortgage lender.

A bank MAY make mortgage loans if it wants to, but a mortgage lender cannot, say, open a savings or checking account for you.

Again...two different sorts of financial animals.

My mistake for assuming you knew the difference.

Best,
Tokie

[Gord_in_Toronto]

Sorry...I keep assuming (wrongly, it seems) that I am talking to people who are more...sophisticated in these matters.

You use the term "bank" to mean "anybody who makes mortgage loans!!!" Um...no. Banks are a different sort of entity from a mortgage lender.

A bank MAY make mortgage loans if it wants to, but a mortgage lender cannot, say, open a savings or checking account for you.

Again...two different sorts of financial animals.

My mistake for assuming you knew the difference.

Best,
Tokie

Snicker. And, unlike you apparently, I know what commercial-mortgage-backed securities are. And that most of the banks in the World bought them including most Canadian banks with the exception of the Toronto Dominion Bank (because one of their senior managers saw the potential pitfalls).

The whole world banking system is in trouble because of this issue and you are lecturing me on what banks and mortgage companies are? :boggled:

[Corsair 115]

Given that I was banned from this forum back around, I think, Hallween--no doubt due to the weight of all the complaints the mods get about me from whiners and complainers like you, I hope you'll find it in your heart at this time of the year to forgive my late reply to your minless rant. Perhaps you ought to stick to the point instead of continuing with this apparent persecution complex of yours.

The only thing I'm complaining about in regards to you so far is avoiding relevant points and engaging in useless rants, such as the one above.

The "US" did not get into a mess. Then please explain why there is no subprime mortgage issue in Canada. That was the question I asked you quite some time ago. If other nations are not exhibiting the subprime issue and the United States is, then clearly the problem is due to the specific financial environment which exists in the U.S., or in other words, its regulations and banking practices.

Again, the point I made in the first place which you seem incapable of acknowledging.

Other than blaming Canada, I don't give a naked mole rat's ass what happens there. Why would I? See above. It's pretty basic; I can't see how you're missing it unless admitting perhaps the U.S. is in error is something you are incapable of doing.

I find it unfortuante when one's political ideology gets in the way of simple anaylsis, and you appear to be a prime candidate. Such silly comments as "socialist" Canada only serve to paint you as a rabid ideologue rather than someone interested in rational analysis of a current problem or situation. It's a shame you can't remove your conservative/liberal, left/right blinders once in awhile.



The whole world banking system is in trouble because of this issue and you are lecturing me on what banks and mortgage companies are? :boggled:I suspect that's because Tokenconservative is only interested in playing the role of über-conservative provocateur on the forum. Reasoned arguments don't fit into that role. Political diatribes do, hence the speeches presented so far.

[ChaoticLimbs]

My wife was working as a mortgage agent at a real estate agency before and during the "collapse". She kept getting frustrated that the Realtors and mortgage agents could not get potential homeowners to lower their expectations from McMansion to Something I Can Afford.
So, they took the teaser variable rate, spent WAY too much for a house, and to top it all off, LIED about their incomes. (stated loan instead of verified) This means that as the mortgage agent she had to submit their paperwork for approval knowing full well that this consumer was shooting themselves in the foot. You see, she could not simply advise the customer that they were screwing themselves. To do that you fall afoul of the numerous anti-discrimination laws present in this country. The end result is that you can advise a white couple that it would be foolish to do this, while if you mention that to a minority couple, and you luck out and find a hypersensitive one, you're gonna get sued. This means the white couples get better advice!
Any attempt by a mortgage agent to decide whether a consumer purchases a thing, even if it's simply advice of pending DOOOOOM!, can be construed as discrimination. Obviously, the rule is there to protect people, but it only does that if they already know what they're doing.

We're in New Mexico, 2nd poorest state in the country. Here in Rio Rancho, at one point, the average home sale was over 230,000 dollars. Average income? 19,000 dollars per year. A house of about 2500 sq ft was going for about 320,000 dollars, and came on 1/8th acre of land. (we have PLENTY of land)
Obviously, average people weren't buying average homes, but still. Tomfoolery was going on all around.

[Tokenconservative]

Perhaps you ought to stick to the point instead of continuing with this apparent persecution complex of yours.

The only thing I'm complaining about in regards to you so far is avoiding relevant points and engaging in useless rants, such as the one above.

Then please explain why there is no subprime mortgage issue in Canada. That was the question I asked you quite some time ago. If other nations are not exhibiting the subprime issue and the United States is, then clearly the problem is due to the specific financial environment which exists in the U.S., or in other words, its regulations and banking practices.

Again, the point I made in the first place which you seem incapable of acknowledging.

See above. It's pretty basic; I can't see how you're missing it unless admitting perhaps the U.S. is in error is something you are incapable of doing.

I find it unfortuante when one's political ideology gets in the way of simple anaylsis, and you appear to be a prime candidate. Such silly comments as "socialist" Canada only serve to paint you as a rabid ideologue rather than someone interested in rational analysis of a current problem or situation. It's a shame you can't remove your conservative/liberal, left/right blinders once in awhile.



I suspect that's because Tokenconservative is only interested in playing the role of über-conservative provocateur on the forum. Reasoned arguments don't fit into that role. Political diatribes do, hence the speeches presented so far.

I was asked, I answered. You need to take up your fury at my returning presence here with the administration.

I've avoided nothing. My pointing up the truth and doing so without making it easier for people like you to stomach, often gets me the boot in forum sites such as this.

You are absolutely right: the US is eeeehhhhvvviiiilllllll! Nobody is arguing that. We all know it. Canada = good and pure. US = eeehhhhhvvviiiiilllll!

Here is the difference between Canada and the US in this regard: first, your press is controlled by the government. Second, your press likes your socialist government. Third, our press is not controlled by our government, unless there is a socialist in the White House...then they don't need to be controlled as they are all on the same page. Currently, there is not a socialist (well, not a hardcore one like Osama Obama or Hitlery, anyway) and do our media has made-up a "foreclosure crises" out of political wholecloth.

I will now write very slowly, so that you can follow..please don't be shy about moving your lips while reading along:

There.

Is.

No.

Foreclosure.

Crisis.

In.

The.

United.

States.

Of.

America.

Read that over a few times to make sure you can recite it in your fevered sleep.

Got it?

K.

Moving on to the salient points:

1. There is no crisis. In fact, the RATE of foreclosure right now, is below that of 1999, when nobody was saying a word in the media about foreclosure. Look at election schedules in the US, and see if you can figger out any correlations. Of all US mortgages, 90% are being paid on time and are at no (identifiable) risk (meaning they are not "at risk" ARM, Option-ARM or HELOC mortgages). Of the reamining 10% (these are round figures) something around .50% of 1% are in the "at risk" category and something around 1% of that .50% are, identifiably, loans in which the homeowner will most likely (based on numbers when the loan was made) not be able to meet their cap-rate payment.

Now, given, if therer were oh, 360 houses in America, these numbers would indeed mean "CRISIS!!!" Um...there are more houses than that here. A few more, anyway.

2. This is an election year, and has been since 2004. The left-advocacy media here, completely free to do so, has been telling us since then that our econmy is collapsing. They have leapt on this non-crisis as a means of saying "see!? SEEEEEE!!!!?? what GW has wrought!!??" I cannot help it if you are not sophisticated enough to understand this.

I suspect that you will dismiss these facts because they do not neatly fit into your leftist perspectives.

And I'd be right to suspect that.

Tokie

[Tokenconservative]

My wife was working as a mortgage agent at a real estate agency before and during the "collapse". She kept getting frustrated that the Realtors and mortgage agents could not get potential homeowners to lower their expectations from McMansion to Something I Can Afford.
So, they took the teaser variable rate, spent WAY too much for a house, and to top it all off, LIED about their incomes. (stated loan instead of verified) This means that as the mortgage agent she had to submit their paperwork for approval knowing full well that this consumer was shooting themselves in the foot. You see, she could not simply advise the customer that they were screwing themselves. To do that you fall afoul of the numerous anti-discrimination laws present in this country. The end result is that you can advise a white couple that it would be foolish to do this, while if you mention that to a minority couple, and you luck out and find a hypersensitive one, you're gonna get sued. This means the white couples get better advice!
Any attempt by a mortgage agent to decide whether a consumer purchases a thing, even if it's simply advice of pending DOOOOOM!, can be construed as discrimination. Obviously, the rule is there to protect people, but it only does that if they already know what they're doing.

We're in New Mexico, 2nd poorest state in the country. Here in Rio Rancho, at one point, the average home sale was over 230,000 dollars. Average income? 19,000 dollars per year. A house of about 2500 sq ft was going for about 320,000 dollars, and came on 1/8th acre of land. (we have PLENTY of land)
Obviously, average people weren't buying average homes, but still. Tomfoolery was going on all around.

And...therefore, what?

The "crisis" has many facets, the stupidity, greed and status-seeking of homebuyers being three, the greed and crookeness of mortgage brokers and RE agents and appraisers being a few more, the laxity of fed. mortgage lending regs being some more...

Now we know.

And we are seeing some corrections in the market, as markets do. We are seeing over-reaction in politics, as politicians do, and we may see some of the real crooks go to jail, as we saw with the Savings and Loan mess in the 80s.

Goody.

Meanwhile, regardless of what happened in NM, this is still not a "crisis."

You are experiencing something on the order of 3% foreclosure rate, lower than some states, a bit higher than a few others. You MAY at the peak in mid-2008 experience double that for a few months.

Then it will be over, as most ARMs obtained by morons and pushed on them by crooks will cap out then.

So...where's the crisis?

Tokie

[JonnyFive]

Sorry...I keep assuming (wrongly, it seems) that I am talking to people who are more...sophisticated in these matters.

You use the term "bank" to mean "anybody who makes mortgage loans!!!" Um...no. Banks are a different sort of entity from a mortgage lender.

A bank MAY make mortgage loans if it wants to, but a mortgage lender cannot, say, open a savings or checking account for you.

Again...two different sorts of financial animals.

My mistake for assuming you knew the difference.

A bank may make mortgage loans?

Residential real estate loans alone make up approximately 18% of total commercial bank assets in the United States (over 1,300 billion in 2003, more than the amount issued by thrift institutions, credit unions, and finance companies combined). Banks are a huge player in the world of real estate lending, so I have no idea why you claimed this has nothing to do with banks.

Also, thrift institutions (another major mortgage issuer) actually can issue both checking and savings accounts, even though they are different from commercial banks from a regulatory standpoint. They have been able to do this for almost three decades.

Also, as another poster just pointed out, the securitization of mortgages (namely the issuance of mortgage-backed securities) is going to be affected by fluctuations in the underlying mortgages, both in terms of performance of the securities and investor confidence in those securities. While many of the securities themselves are not issued by the banks, per se, they are backed by the mortgages that are, in many cases, issued by commercial banks.

I don't think the poster you're responding to was using the term "bank" to mean what you think. Also, the distinction in terms of financial regulations isn't nearly as cut and dry as your statement implies.

[Tokenconservative]

A bank may make mortgage loans?

Residential real estate loans alone make up approximately 18% of total commercial bank assets in the United States (over 1,300 billion in 2003, more than the amount issued by thrift institutions, credit unions, and finance companies combined). Banks are a huge player in the world of real estate lending, so I have no idea why you claimed this has nothing to do with banks.

Also, thrift institutions (another major mortgage issuer) actually can issue both checking and savings accounts, even though they are different from commercial banks from a regulatory standpoint. They have been able to do this for almost three decades.

Also, as another poster just pointed out, the securitization of mortgages (namely the issuance of mortgage-backed securities) is going to be affected by fluctuations in the underlying mortgages, both in terms of performance of the securities and investor confidence in those securities. While many of the securities themselves are not issued by the banks, per se, they are backed by the mortgages that are, in many cases, issued by commercial banks.

I don't think the poster you're responding to was using the term "bank" to mean what you think. Also, the distinction in terms of financial regulations isn't nearly as cut and dry as your statement implies.


Yes...a bank MAY make mortgage loans. I think you MAY have missed the rest: a mortgage lender may NOT open a checking account for you.

Did you miss that part?

18%...well, clearly then that is the bulk of the banking business. The reason I made that claim is because BANKS operate under different an much more closely-watched rules and BANKS are NOT a part of the "foreclosure crisis." Now you will rush out to scour the 'net for data showing that this or that bank has foreclosures on its books.

Oh, my!

Of course they do. But they are not a part of this "crisis," nonetheless.

Ah...now we'll just bundle in everyone, because after you keyed the first para you had one of those "uh, oh," moments, but decided to forge ahead. I said nothing about thrifts or savings & loans...or Vinny, the neighborhood loan shark....

We were, if memory serves, discussing banks and mortgag lenders. One may be the other but the other cannot be the one. And banks are NOT playing a major part in the "foreclosure crisis," no matter how much you want to now try and argue that you know the difference between the two.

Why not just say, "hmmm...yer right, Tokie, I mispoke on that account, and realize now that we are jus talking about mortgage lenders."

Were you to do that, I'd not say a word about it.

But of course, since this conversation involves Tokie, it now must divert from it's original and quite interesting course to become a "get Tokie" thread.

This is so boring.

I think the poster (and you) don't understand the distinction, and that he WAS using just the way I thought: he believe "banks" are as much a part of the "crisis" as you do, and that "banks" are the same thing as a mortgage lender, as you apparently do.

Tokie

[wolfgirl]

I have to admit that I quickly tire of people complaining about being taken advantage of when they could avoid it by simply taking some time to understand whatever the transaction might be that you're getting into.

We live frugally, drive two older but paid-off cars, have no credit card debt, and are only about eight years from paying off our mortgage (which we refinanced from a 30-year fixed to a 15-year fixed when rates were at their lowest AND have always made extra payments on). We live in a modest home, but we plan on building our final "dream home" in a couple of years (when things hopefully settle down). We know what we can afford and didn't get in over our heads when it would have been SO easy to do. We could've bought a really beautiful home a couple of years ago, but we chose to stay put. We really didn't NEED a bigger, nicer house; it just would've been an ego boost. Even when we bought our current house 15 years ago, the realtor tried to talk us into spending more, but we stayed firm with what we felt comfortable being able to afford.

So now I wonder why we didn't just buy that really nice house and let the government bail me out now if I couldn't afford it anymore.

It strikes me as unfair that those of us who made realistic but less fun decisions a couple of years ago end up with less than those who made bad decisions. They took on more mortgage than they could possibly afford to buy a house that was beyond their means, and now they get to keep it because (sniff) they didn't understand!

Sometimes I feel like a little kid crying "It's not fair!" But then I remember what I always told my kids when they were growing up..."Life isn't fair." So I know that my warped sense of fairness and justice is unrealistic in the real world. But still...It's not fair!

[JonnyFive]

Yes...a bank MAY make mortgage loans. I think you MAY have missed the rest: a mortgage lender may NOT open a checking account for you.

Define "mortgage lender;" you're using highly vague terms. Finance companies can't open a checking account for you, but thrift institutions (which aren't commercial banks, but are often referred to as savings banks) can.

Quickly checking, I notice that credit unions can also issue checking accounts, which leaves you with "finance companies," which are a minority in the mortgage lending business.

Did you miss that part?

No, but I think you missed most of what I wrote.

18%...well, clearly then that is the bulk of the banking business.

As it is the largest single category of assets on the balance sheet for commercial banks, I would say "yes, yes it is."

"Loans" generally speaking are more than half of the overall bank balances, of which real estate loans are more than half the overall loans on the banks' balance sheets.

The reason I made that claim is because BANKS operate under different an much more closely-watched rules and BANKS are NOT a part of the "foreclosure crisis." Now you will rush out to scour the 'net for data showing that this or that bank has foreclosures on its books.

Uh... what the hell are you talking about? I didn't say anything about a "foreclosure crisis," I simply stated that your claim that banks have "nothing to do with this" was incorrect, and that you were oversimplifying the organization of the involved financial institutions.

So yes, as commercial banks engaged in risky lending practices and invest in mortgage-backed securities, they are vulnerable to a credit contraction caused by the default risk inherent in such loans.

I don't honestly know why you make everything so political and emotional, this is a fairly simple situation in economics.

Of course they do. But they are not a part of this "crisis," nonetheless.

I haven't used the word crisis. As is typical for you, you insist on trying to pin ideas to me that I do not actually hold. I seem to recall a similar situation occurred when we discussed the atomic bombing of the nation of Japan, where you tried to turn my simple statements into over-arching condemnation for something I never condemned in the first place.

Ah...now we'll just bundle in everyone, because after you keyed the first para you had one of those "uh, oh," moments, but decided to forge ahead. I said nothing about thrifts or savings & loans...or Vinny, the neighborhood loan shark....

You use terms like "mortgage lenders" like they have some specific technical meaning that they do not.

If you want to talk about residential real estate loans, then you're talking commercial banks, thrift institutions, credit unions, and finance companies (in that order) in terms of volume. Beyond that, you really are in "Vinny the loan shark" territory.

If you want to talk about this technically, please use meaningful language. The term "mortgage lender" doesn't carry specific regulatory context, and is therefore quite useless for our purposes.

We were, if memory serves, discussing banks and mortgag lenders. One may be the other but the other cannot be the one. And banks are NOT playing a major part in the "foreclosure crisis," no matter how much you want to now try and argue that you know the difference between the two.

Again, I haven't used the word "crisis" at all. I believe that this was a natural extension of certain risky lending practices, primarily extending credit at rates inappropriate to the risks invovled. I work in a field where this kind of thing comes up all the time, so I can't say that this situation particularly shocks or amazes me.

Subprime loans (the risk category involved in the current crunch) were issued in amounts in excess of four to five times the total mortgage holdings of finance companies. Ergo, the remainder must have been issued by commercial banks, thrift institutions, credit unions, or private financiers. As banks regularly engaged in subprime lending, I would venture that they hold the majority of the subprime loans as well.

The subprime market was a highly appealing high risk/high reward venture. With housing prices on the rise, it would make sense to try to capitalize on those heavily leveraged properties for the sake of a higher return. The default risk inherent in such loans came with the territory, and now that risk may hurt some people.

Why not just say, "hmmm...yer right, Tokie, I mispoke on that account, and realize now that we are jus talking about mortgage lenders."

I don't even know if you have any idea what you're talking about, because you insist on using fuzzy terms like "mortgage lenders." You can't possibly mean "finance companies" (that being the catchall for "non-bank, non-credit union, non-thrift institution lending institutions"), as the total subprime holdings far exceed their share of the mortgage market.

But of course, since this conversation involves Tokie, it now must divert from it's original and quite interesting course to become a "get Tokie" thread.

No, this is more of a "correct another poster's misconceptions about economics and finance" thing for me. I am greatly interested in the subjects, and they have direct relevance to the line of work I'm in. I hate to see people chewing up and spitting out the technical nuances.

I think the poster (and you) don't understand the distinction, and that he WAS using just the way I thought: he believe "banks" are as much a part of the "crisis" as you do, and that "banks" are the same thing as a mortgage lender, as you apparently do.

You know, there isn't a special regulatory category for "mortgage lender." Most of the mortgage lenders (i.e. financial institutions that issue mortgages) are, in fact, commercial banks or savings banks (thrift institutions). As I said, the finance companies (the only even remotely high volume mortgage lenders that can't issue checking accounts) are a distant fourth place in volume, and are increasingly focused on second mortgages and other re-finance arrangements over first mortgages.

[Tokenconservative]

I have to admit that I quickly tire of people complaining about being taken advantage of when they could avoid it by simply taking some time to understand whatever the transaction might be that you're getting into.

We live frugally, drive two older but paid-off cars, have no credit card debt, and are only about eight years from paying off our mortgage (which we refinanced from a 30-year fixed to a 15-year fixed when rates were at their lowest AND have always made extra payments on). We live in a modest home, but we plan on building our final "dream home" in a couple of years (when things hopefully settle down). We know what we can afford and didn't get in over our heads when it would have been SO easy to do. We could've bought a really beautiful home a couple of years ago, but we chose to stay put. We really didn't NEED a bigger, nicer house; it just would've been an ego boost. Even when we bought our current house 15 years ago, the realtor tried to talk us into spending more, but we stayed firm with what we felt comfortable being able to afford.

So now I wonder why we didn't just buy that really nice house and let the government bail me out now if I couldn't afford it anymore.

It strikes me as unfair that those of us who made realistic but less fun decisions a couple of years ago end up with less than those who made bad decisions. They took on more mortgage than they could possibly afford to buy a house that was beyond their means, and now they get to keep it because (sniff) they didn't understand!

Sometimes I feel like a little kid crying "It's not fair!" But then I remember what I always told my kids when they were growing up..."Life isn't fair." So I know that my warped sense of fairness and justice is unrealistic in the real world. But still...It's not fair!


Good points, and very good way to approach things.

You are right to cry "not fair!" Look at the immigration scamnesty attempt. What about the millions who became citizens the old-fashioned way: by working for it for a decade or more?

Piss on 'em! That's what the Bush-Kennedy Scamnesty was basically saying--and about to do.

Same with this, and as with the scamnesty it's even MORE political (the scamnesty is about money, mostly).

There actually is no "crisis," but it's an election year and the media is desperate to see a socialist elected to the White House and, they hope, both houses of Congress turned over to their rightful owners, the socialists.

So they are making this minor market correction into a "crisis." Most fed agencies, run at the mid and lower management levels by socialists, are jumping on the bandwagon, and even the higher ups, believing a Hitlery Admin and a fully-socialist Congress to be a shoo-in, are loudly bleating their support of socialist ideals in the hopes of protecting their jobs.

Nobody offered a federal bailout in the 80s when there really WAS a foreclosure crisis.

Why should there be one now?

Well, because by offering one the leftists will be able to say "see!? SEEEEEEE!!!!??? We TOLDJA Bush was destroying the economy!!!!!"

The frightening thing is seeing how many utter, economic n00bs believe it, and that doing stuff like this will most assuredly become a self-fullfilling prophecy...which is what the left is desperate to see (a truly damaged economy) in order to get that shoo-in the the White House and Congress.

Tokie

[Tokenconservative]

Define "mortgage lender;" you're using highly vague terms. Finance companies can't open a checking account for you, but thrift institutions (which aren't commercial banks, but are often referred to as savings banks) can.

Quickly checking, I notice that credit unions can also issue checking accounts, which leaves you with "finance companies," which are a minority in the mortgage lending business.

No, but I think you missed most of what I wrote.

As it is the largest single category of assets on the balance sheet for commercial banks, I would say "yes, yes it is."

"Loans" generally speaking are more than half of the overall bank balances, of which real estate loans are more than half the overall loans on the banks' balance sheets.

Uh... what the hell are you talking about? I didn't say anything about a "foreclosure crisis," I simply stated that your claim that banks have "nothing to do with this" was incorrect, and that you were oversimplifying the organization of the involved financial institutions.

So yes, as commercial banks engaged in risky lending practices and invest in mortgage-backed securities, they are vulnerable to a credit contraction caused by the default risk inherent in such loans.

I don't honestly know why you make everything so political and emotional, this is a fairly simple situation in economics.

I haven't used the word crisis. As is typical for you, you insist on trying to pin ideas to me that I do not actually hold. I seem to recall a similar situation occurred when we discussed the atomic bombing of the nation of Japan, where you tried to turn my simple statements into over-arching condemnation for something I never condemned in the first place.

You use terms like "mortgage lenders" like they have some specific technical meaning that they do not.

If you want to talk about residential real estate loans, then you're talking commercial banks, thrift institutions, credit unions, and finance companies (in that order) in terms of volume. Beyond that, you really are in "Vinny the loan shark" territory.

If you want to talk about this technically, please use meaningful language. The term "mortgage lender" doesn't carry specific regulatory context, and is therefore quite useless for our purposes.

Again, I haven't used the word "crisis" at all. I believe that this was a natural extension of certain risky lending practices, primarily extending credit at rates inappropriate to the risks invovled. I work in a field where this kind of thing comes up all the time, so I can't say that this situation particularly shocks or amazes me.

Subprime loans (the risk category involved in the current crunch) were issued in amounts in excess of four to five times the total mortgage holdings of finance companies. Ergo, the remainder must have been issued by commercial banks, thrift institutions, credit unions, or private financiers. As banks regularly engaged in subprime lending, I would venture that they hold the majority of the subprime loans as well.

The subprime market was a highly appealing high risk/high reward venture. With housing prices on the rise, it would make sense to try to capitalize on those heavily leveraged properties for the sake of a higher return. The default risk inherent in such loans came with the territory, and now that risk may hurt some people.



I don't even know if you have any idea what you're talking about, because you insist on using fuzzy terms like "mortgage lenders." You can't possibly mean "finance companies" (that being the catchall for "non-bank, non-credit union, non-thrift institution lending institutions"), as the total subprime holdings far exceed their share of the mortgage market.



No, this is more of a "correct another poster's misconceptions about economics and finance" thing for me. I am greatly interested in the subjects, and they have direct relevance to the line of work I'm in. I hate to see people chewing up and spitting out the technical nuances.



You know, there isn't a special regulatory category for "mortgage lender." Most of the mortgage lenders (i.e. financial institutions that issue mortgages) are, in fact, commercial banks or savings banks (thrift institutions). As I said, the finance companies (the only even remotely high volume mortgage lenders that can't issue checking accounts) are a distant fourth place in volume, and are increasingly focused on second mortgages and other re-finance arrangements over first mortgages.

Just because you are ignorant of the terms used in this industry does not make them "vague."

Mortgage lenders are, loosely, regulated under the RESPA Act. Banks that lend for mortgages come under RESPA aegis, but are also regulated by Federal banking authorities. Mortgage lenders are companies that, specifically, lend mortgages on real estate. Banks lend on real estate..and cars, and airplanes, and diamond rings, and businesses, etc.

Here we are (or I thought we were....now it's off into the la-la land of nit-pickery over every tittle and jot, just as such "debates" always come down to in this forum, so extraordinarily full of pedants) talking specifically about those who lend on residential real estate, or "mortgages" in the common parlance of the industry.

Technically speaking, yes, a loan to purchase a factory would be a mortgage, but most people (and the industry) when you say "I'se gots a mortgage on muh house!" take this to mean the speaker has obtained a loan toward the ends of purchasing a piece of real estate that includes improvements designed and intended to act as a residence.

A "mortgage."

I hope this is more clear to you now.


Credit unions are, also, not banks, and not regulated by the same regulatory agencies, though they do, ostensibly do many of the same things banks do. The primary difference being that you cannot, generally, walk in off the street and open an account or get a loan through a credit union (the term "union" should tell you something about this, but I doubt that it will. Pedants are extraordinary obtuse when it comes to such things).

Now we are talking about "loans." Sigh. Once again, as you are not delimiting here for TYPE of loan, it become increasingly difficult ot maintain any sort of rational discourse with you. Commercial banks lend on all sorts of things and some provide mortgages for houses...others provide mortgages for other banks. Or factories. Or car dealerships. When you identify "mortgages," you are pulling in all that stuff, too. How many people do you know who live at a factory or car dealership? I know very few.

But of course, pedantry is its own reward!

Skip, skip, skip...ah!

The term "mortgage lender" is what those in the um...mortgage lending industry call themselves. You know that government regulartor rarely use the same language as real people, right? That's why in the military a hammer is not a hammer but a "kinetic impact device."

That means both everything and nothing. Could be a meteorite or a hammer. Or something else!

Skip, skip, skip...wow.

Again: there is no "crisis," no matter if we go round and round and round and round and round about whether the tittle or jot is in the right place in this or that or the other word. The reality is that banks are not leading the "crisis" because banks due to their nature and their regulation (much stiffer than that imposed on mortgage lenders for a variety of reasons strecthing all the way back to the 1930s) have not been making the sorts of risky residential (key term) mortgage loans that mortgage lenders have been able to.

Ergo, it's companies like Countrywide, massive MORTGAGE lenders (through whom you cannot get a loan for your next car or for that beautiful engagement ring, nor will they open a checking or passbook account for you, nor will they offer to you a host of investment vehicles such as mutual funds and money market accounts, etc., etc.--the lend on real estate, and in this case we are talking about RESIDENTIAL real estate and I frankly don't know how I can be any more clear) who are suffering the brunt of the "crisis" that isn't.

Okay?

As to why I make "everything" so political (you, are the one coming unhinged, not I, so it's not emotional to me, regardless of how you, in your own pique, must project that it is instead, I who is "emotional") it's because what is going on with the "crisis" IS political. This is just another attempt on the left, through their 5th column, the American media, to manufacture a "crisis" ahead of the election, that they can both blame on the Republicans and make it appear as if they, looking out for the little guy, are riding to the rescue. Of couse, all that Congress' meddling in this minor market correction will do is guarantee it's becoming a REAL crisis...at which point they will be able to, through their media, again, point and say "see!??? SEEEEEEEE!!!!????"

Tokie

[JonnyFive]

Just because you are ignorant of the terms used in this industry does not make them "vague."

Mortgage lenders are, loosely, regulated under the RESPA Act. Banks that lend for mortgages come under RESPA aegis, but are also regulated by Federal banking authorities. Mortgage lenders are companies that, specifically, lend mortgages on real estate. Banks lend on real estate..and cars, and airplanes, and diamond rings, and businesses, etc.

Yes, "mortgage lenders" as you are using the term would be finance companies that specialize in the lending of mortgages. As finance companies aren't regulated by the Federal regulations governing banks (as they aren't banks) the rest of your statement follows as obvious.

The RESPA Act has to do with the procedural elements of real estate transactions, but it doesn't set up a special, unique regulatory entity of a "mortgage lender," as being a provider of mortgages doesn't preclude being something else as well (any lending entity would be governed by such laws if issuing a mortgage). If you want to talk about those companies from an economics perspective, they would more generally be regulated as finance companies. The RESPA provisions would govern their mortgage lending to some extent, as would other pertinent government regulations.

RESPA seems like kind of a specific law to choose too. I mean, it governs very narrow aspects of real estate transactions, and has very little to do with the end lending process. Why did you pick that particular law, of all things? It doesn't even apply specifically to lenders.

Sure, commercial banks lend on other things, but they also make up almost half of the residential real estate market. They are also heavily invested in the mortgage derivatives market. They are also heavily involved in subprime lending.

Here we are (or I thought we were....now it's off into the la-la land of nit-pickery over every tittle and jot, just as such "debates" always come down to in this forum, so extraordinarily full of pedants) talking specifically about those who lend on residential real estate, or "mortgages" in the common parlance of the industry.

Which would include, in a very high percentage, commercial banks. It would also include, in a very high percentage, thrift institutions that you claimed you weren't talking about.

Technically speaking, yes, a loan to purchase a factory would be a mortgage, but most people (and the industry) when you say "I'se gots a mortgage on muh house!" take this to mean the speaker has obtained a loan toward the ends of purchasing a piece of real estate that includes improvements designed and intended to act as a residence.

Tokie, I have made it clear that I am talking only about residental real estate loans. Residential real estate loans make up about 18% (a sizeable fraction) of all commercial bank assets and commercial banks account for a sizeable fraction of all real estate loans (rough estimate at about 40 - 45%, although I can calculate the exact figure if you really want me to).

I hope this is more clear to you now.

I honestly don't think you read what I write half of the time.

Credit unions are, also, not banks, and not regulated by the same regulatory agencies, though they do, ostensibly do many of the same things banks do. The primary difference being that you cannot, generally, walk in off the street and open an account or get a loan through a credit union (the term "union" should tell you something about this, but I doubt that it will. Pedants are extraordinary obtuse when it comes to such things).

Yes, I know that. I mentioned credit unions because they are the fourth (possibly third, see below) largest provider of residential real estate loans in the United States. I am quite aware that they are not regulated as commercial banks (and stated as much).

The data I have lumps all finance company "real estate" loans into one category, while it gives the breakdown for banks, credit unions, and thrift institutions. Finance companies had (in 2003, my data) about 157 billion in "real estate" loans. That would include commercial real estate, second mortgages, etc.

Commercial banks had (2003) about 1,350 billion in residential real estate loan assets, thrift institutions about 727 billion, and credit unions around 107 billion. Finance companies (which would include the companies you call mortgage lenders), as I said, have 157 billion in general real estate loans.

I would love to see a data breakdown that separates out residential loans, along with first-mortgages from refinancing arrangements, but it's not especially important.

Now we are talking about "loans." Sigh. Once again, as you are not delimiting here for TYPE of loan, it become increasingly difficult ot maintain any sort of rational discourse with you. Commercial banks lend on all sorts of things and some provide mortgages for houses...others provide mortgages for other banks. Or factories. Or car dealerships. When you identify "mortgages," you are pulling in all that stuff, too. How many people do you know who live at a factory or car dealership? I know very few.

This supports my theory that you don't read what I write. I clearly used the context of overall loans to illustrate how significant residential real estate loans were to commercial bank assets.

The term "mortgage lender" is what those in the um...mortgage lending industry call themselves. You know that government regulartor rarely use the same language as real people, right? That's why in the military a hammer is not a hammer but a "kinetic impact device."

Okay, but who are the "mortgage lenders" you mean. The thrift institutions that specialize in mortgages? The smaller finance companies that specialize in mortgages? Again, you're being somewhat vague by using a term that really only means "a lender who issues mortgages" without going more into the context of it. That might not seem important, but it is when you look at the overall context of the credit market and how the mortgages involved play into it.

Actually, I'm pretty sure they just call it a "hammer."

Again: there is no "crisis," no matter if we go round and round and round and round and round about whether the tittle or jot is in the right place in this or that or the other word. The reality is that banks are not leading the "crisis" because banks due to their nature and their regulation (much stiffer than that imposed on mortgage lenders for a variety of reasons strecthing all the way back to the 1930s) have not been making the sorts of risky residential (key term) mortgage loans that mortgage lenders have been able to.

I haven't said there is a crisis. I've said that it is more than a "minor market correct," but that was more in reference to the general subprime/housing issue.

It isn't so much a matter of who is "leading" anything as who is impacted by it. Any major mortgage issuer, including commercial banks, will be impacted by foreclosures on their mortgages and the resulting tightening of credit underwriting (due to the perception of increased default risk), along with the impact on the securities market. Clearly, a company that specializes in mortgages will be affected more (as they have less - or no diversification), but it doesn't follow that banks have nothing to do with this, as you keep stating.

Ergo, it's companies like Countrywide, massive MORTGAGE lenders (through whom you cannot get a loan for your next car or for that beautiful engagement ring, nor will they open a checking or passbook account for you, nor will they offer to you a host of investment vehicles such as mutual funds and money market accounts, etc., etc.--the lend on real estate, and in this case we are talking about RESIDENTIAL real estate and I frankly don't know how I can be any more clear) who are suffering the brunt of the "crisis" that isn't.

It's interesting that you mention Countrywide, which is a financial holding company that primarily includes a thrift institution (Countrywide Bank) in its operations, after you said you weren't talking about thrift institutions. See what happens when you use terms like "mortgage lender" along with terms like "thrift institution." You're moving from the very general to the relatively specific without being clear about it, and it just causes confusion.

Countrywide Bank was actually previously a commercial bank, but converted to a thrift. Not sure when they converted their charter, but that would probably affect the distribution of the mortgage lending pie to the point where thrift institutions might actually account for the majority of mortages in the US (if it was after 2003, it would obviously affect my data).

It's also interesting that you mention Countrywide because they've actually been having issues with the liquidity of their mortgage-backed securities, along with problems with mortgage non-payment.

As to why I make "everything" so political (you, are the one coming unhinged, not I, so it's not emotional to me, regardless of how you, in your own pique, must project that it is instead, I who is "emotional") it's because what is going on with the "crisis" IS political.

When I say that this is not political, I am talking about the financial, business, and economic element of it. This is the business skepticism section. If you want to talk about political posturing based on the premise of the mortgage situation, why not take it to politics?

So when you type stuff in all caps, accuse others of "shrieking" and distorting information/lying, and rant about the "leftists," that isn't being emotional? I'm sorry, that's my mistake then. I generally associate such things with increased emotion.

I wasn't previously aware that trying to clarify issues of technicality counted as coming "unhinged."

This is just another attempt on the left, through their 5th column, the American media, to manufacture a "crisis" ahead of the election, that they can both blame on the Republicans and make it appear as if they, looking out for the little guy, are riding to the rescue. Of couse, all that Congress' meddling in this minor market correction will do is guarantee it's becoming a REAL crisis...at which point they will be able to, through their media, again, point and say "see!??? SEEEEEEEE!!!!????"

You can keep calling it a "minor market correction" all you want, but the fact of the matter is that this subprime situation will have (and is having) a lasting effect on the broader credit market. Crisis? No, certainly not at this point. Minor? No, this is definitely something that deserves to be looked at, and possibly warrants more systemic correction, either in terms of company policy or government regulation (this is already happening, it seems, like it or not).

As far as all that stuff about manufacturing a crisis and leftists and Republicans and all, why not go into that in politics? I happen to think that anyone taking the current credit crunch and using it for political posturing is a massive jackass, but that's kind of moving outside the scope of this forum. I was under the impression that this subforum was to discuss the more nuts and bolts business/finance/economics aspects of the mortgage/credit situation.

[Tokenconservative]

[QUOTE=JonnyFive;3282155]Yes, "mortgage lenders" as you are using the term would be finance companies that specialize in the lending of mortgages. As finance companies aren't regulated by the Federal regulations governing banks (as they aren't banks) the rest of your statement follows as obvious.

1. If that's the case (and it is...as I've been telling you for 20 posts) why run around in circles shrieking about these terms...oh, that's right, because it's easier to say Tokie's s dumby!! than to engage in the debate, eh?

Fine.

2. I didn't say RESPA has anything to do with real estate transactions. Why do you do this? I don't care how RESPA applies to RE agents, my concern was how it applies directly to mortgage lending. What difference does this make, anyway?

3. The reality remains that these other types of lenders are not the ones, generally, who made these risky loans....they may have bought some on the secondary market and are now firing VPs left and right, but in the main, it's independent mortgage lenders who were monkying around with this stuff, not thrifts, not banks and not commercial banks, even if some of these have subsidiaries, partners, etc. who were. They are not at risk. This is why they set companies up like this.

4. None of the numbers you provide break it out. The reality is that something on the order of 90% of all residential (that IS what we are talking about) mortgages are being made on time. Of the remaining 10% only something on the order of .50% of 1% are in the "at risk" category of being both something like an ARM or HELOC AND being made on someone who is likely not going to be able to handle their cap rate. So all the billions here and billions there don't really matter. What matters is who sold what to whom, and the largest numbers of these "at risk" loans and "at risk" borrowers belong to the mortgage lenders, not the banks, thrifts, etc.

5. Why is it any more than a minor market correction when the foreclosure RATE is currently lower than it was in 1999? What did you call it in 1999? What did the left-advocacy media call it then? Today it's is being called a "disaster" and a "crisis" all over the media, including the financial media. Are they all wrong? I believe they are, and for political reasons are calling it these things. What do you believe?

6. Countrywide is a family of such companies that if you did deeply enough might have a apple cider stand at its foundation. This doesn't change the fact that it's residential lending side is what it is and pissing around about whether it's a thrift at root or a cider stand makes no difference whatever...it's bad paper is still held by the mortgage side. By the way, good luck unwinding Countrywide to its core.

7. The "crisis" is political, that's why I'm talking politics here. If a higher foreclosure rate in 1999 was not a "crisis" or "disaster" or indicator that the economy is headed down the toilet, why is it now? Hmmm... let's see, what's different now? Anything you can think of? And before you say: both are election years THINK about that. The intention today, ahead of the election, is to convince Americans that our economy, under a Republican, is in the toilet. Not sure if you are an American, or how aware you are of how this works, but the tendency here is for Americans to vote D when the economy is in the dumps. Right now, despite all economic indicators to the contrary, the left-advocacy "news" media have done yeomanlike work for their masters in the DNC: most Americans are "worried" about the economy. By the time Novemeber gets here, most will be "scared witless" if the media and the DNC have anything to say about it. Now when you consider that the "news" media in America is primarily a 5th column for the leftist movement here, in whose favor would it work if they were to convince Americans that their OK, if not rocketing economy is actually spiraling down the porcelain convenience?
Any guess will do.

Tokie

[kallsop]

One of the mediocre 6:30pm news shows (ABC, NBC or CBS, they are all the same) had a short segment on a family that was facing something like a $600 per month increase in their mortgage. The house looked like something from the Falcon Crest TV show, if you are old enough to remember that. A huge McMansion house, manicured green lawns. Outside were two newer Lexus SUV's. The kids were going to private schools. How on earth were they going to cope?

They could start by living within their means. It was really pathetic that one of ABC/CBS/NBC chose this family for the segment because this must have been some TV bigwigs idea of financial disaster. The poor family might have to downgrade from a 4000 square foot house and trade in the Lexus SUV for a US vehicle. Worse, the kids might have to go to public schools outside of their gated community. Horrors!

Now out there in the real world, far away from the limousine nitwits, there are families of more modest means that are looking at losing their homes and without good escape options. Should the government protect these folks from their bad decisions, or let the market run its course? How much are YOU willing to have your taxes increased to bail out those that purchased homes they couldn't afford? If you purchased a home you could afford, where's your windfall or is this benefit only for the posers? What's the cost to do nothing? (housing price collapse, bank shareholder losses, etc.)

Usually I hear about how homes are too expensive and how can younger families get ahead? Good news for you - costs are coming down. Yes, that is a little tongue in cheek but the perpetual doom and gloom mob are tiresome and there is always more than one side to a story.

[Tokenconservative]

One of the mediocre 6:30pm news shows (ABC, NBC or CBS, they are all the same) had a short segment on a family that was facing something like a $600 per month increase in their mortgage. The house looked like something from the Falcon Crest TV show, if you are old enough to remember that. A huge McMansion house, manicured green lawns. Outside were two newer Lexus SUV's. The kids were going to private schools. How on earth were they going to cope?

They could start by living within their means. It was really pathetic that one of ABC/CBS/NBC chose this family for the segment because this must have been some TV bigwigs idea of financial disaster. The poor family might have to downgrade from a 4000 square foot house and trade in the Lexus SUV for a US vehicle. Worse, the kids might have to go to public schools outside of their gated community. Horrors!

Now out there in the real world, far away from the limousine nitwits, there are families of more modest means that are looking at losing their homes and without good escape options. Should the government protect these folks from their bad decisions, or let the market run its course? How much are YOU willing to have your taxes increased to bail out those that purchased homes they couldn't afford? If you purchased a home you could afford, where's your windfall or is this benefit only for the posers? What's the cost to do nothing? (housing price collapse, bank shareholder losses, etc.)

Usually I hear about how homes are too expensive and how can younger families get ahead? Good news for you - costs are coming down. Yes, that is a little tongue in cheek but the perpetual doom and gloom mob are tiresome and there is always more than one side to a story.

All TV types live this way, and so they really "relate" to people like this, and as these networks know their market: other libs, who also tend to be very "comfortable" or even rich (most in here, for example don't work, but live very well off trustfund divvies).

And frankly, these people are actually more representative of the "crisis" than this left-advocacy network "news" piece accidentally let on.

We are SUPPOSED to believe that it's Joe and Jane Working Stiff, ONLY who did stupid things with mortgages.

Um, nope. It's across the boards, though the tendency is for poorer, less educated folks to be victimized (when that is actually the case) by sharpies in the mortgage industry, and don't kid yourself, that's a large section of the current "crisis."

But the "live w/in your means" advice applies acrosss the boards, too. People like these are out to impress someone, and they are up to their eyeballs in debt and probably just barely making it. A puny $600 increase, may well cause them to lose this mansion they couldn't afford to begin with (upkeep on a place like that is in the $10-12k/year range...where are they getting that from? Mom? Like most libs do?).

Lower income families do have "escape" options. Short-sale, deed-in-lieu (of foreclosure)...mortgage companies are working with these people, not because they want to, but because fed and state authorities are watching. They can then move to a rental house and start building their credit back up (5-7 years) toward buying again, lessons learned (hopefully)!

Also, keep in mind that it's not just Buffy and Chaz who are greedy. Lots of lower-income borrowers saw the $$ signs and signed on the dotted line, uncoerced in any way, thinking they could pay for a boat, or cabin in the woods, or club membership or Vegas vacation with the equity in their house.

Real estate pricing in many areas is undergoing correction (it does that. Those who believe it only goes up and up are morons) and yes, in many places that means it's a buyer's market. Again, buyer beware...if you can't afford the house, regardless of how good the price is, don't buy it.

Tokie

[JonnyFive]

1. If that's the case (and it is...as I've been telling you for 20 posts) why run around in circles shrieking about these terms...oh, that's right, because it's easier to say Tokie's s dumby!! than to engage in the debate, eh?

"Shrieking," eh?

I never said you were a "dumby" at all.

2. I didn't say RESPA has anything to do with real estate transactions. Why do you do this? I don't care how RESPA applies to RE agents, my concern was how it applies directly to mortgage lending. What difference does this make, anyway?

The problem is that you picked a singularly strange act to apply to this discussion. RESPA very generally governs aspects of RE transactions (including the role of the mortgage lenders) to prevent things like kickbacks to lenders or brokers. It doesn't serve as an official definition of "mortgage lender" or anything else, which seems to be how you were invoking it.

I'm guessing you mentioned it because it's something you're familiar with, but it has very little to do with the current discussion. It doesn't serve to define mortgage lenders generally (beyond defining them for the purposes of the act itself), and it doesn't apply specifically to the lenders either. I'm left wondering why, specifically, you bothered to mention it at all.

I was able to find that out with five minutes of basic research, so you certainly should know it if you are familiar with the RESPA.

3. The reality remains that these other types of lenders are not the ones, generally, who made these risky loans....they may have bought some on the secondary market and are now firing VPs left and right, but in the main, it's independent mortgage lenders who were monkying around with this stuff, not thrifts, not banks and not commercial banks, even if some of these have subsidiaries, partners, etc. who were. They are not at risk. This is why they set companies up like this.

I keep saying that the secondary markets are a very big part of this, and this is why.

Actually, the larger lenders have been having some issues due to the default risk of their loans, although I'm sure they aren't as exposed as specialist lenders, for painfully obvious reasons.

However, as I pointed out before, the sheer volume of subprime loans necessarily implies that the small lenders are not a majority of this.

Also, the small volume lenders are not institutions that can cause any measurable economic shifts by adjusting their underwriting stance, while a massive lender like, say, Countrywide could.

4. None of the numbers you provide break it out.

You mean my volume numbers? Actually, all of the numbers I've provided for '03 have been residential real estate loans only, with the exception of the numbers for finance companies. If what you just said here is claiming otherwise, you are simply incorrect.

They don't breakdown first/second mortgages or anything, but I never claimed they did.

The reality is that something on the order of 90% of all residential (that IS what we are talking about) mortgages are being made on time. Of the remaining 10% only something on the order of .50% of 1% are in the "at risk" category of being both something like an ARM or HELOC AND being made on someone who is likely not going to be able to handle their cap rate. So all the billions here and billions there don't really matter. What matters is who sold what to whom, and the largest numbers of these "at risk" loans and "at risk" borrowers belong to the mortgage lenders, not the banks, thrifts, etc.

The entire category of subprime loans is at increased risk. They may not all be at imminent risk of default, but the default risk plays a part in the loan underwriting.

I thought we'd cleared up that "banks and thrifts" is a subset of "mortgage lenders."

I'm not especially concerned with the massive default risk taken on by small specialist lenders to ultra-high-risk borrowers. I'm more concerned with the implied consequences of a harder underwriting stance that may be initiated by an increased level of default risk - or perception of default risk - on subprime loans. I don't only care about the ones that are foreclosing, but the ones that lenders see as potentially more likely to foreclose.

5. Why is it any more than a minor market correction when the foreclosure RATE is currently lower than it was in 1999? What did you call it in 1999? What did the left-advocacy media call it then? Today it's is being called a "disaster" and a "crisis" all over the media, including the financial media. Are they all wrong? I believe they are, and for political reasons are calling it these things. What do you believe?

I've said this a few times, but I'll say it again: I believe that the over-extension of credit to suboptimal risks in the housing market constitutes a potential economic problem of potentially moderate severity. I do not believe it constitutes a crisis at this point, nor do I believe that it can simply be dismissed as a minor correction. I believe that the current situation is the product of several decades of rising prices combined with overly soft underwriting practices.

I'm far more concerned with the perception of the foreclosure issue on the part of the lenders than the actual rate of foreclosure, as strange as that may sound. Risk management is a funny combination of what you know happened, know is happening, and what you think might happen in the future. Right now, the third part is where the possible problems lie (devaluing MB securities and the resulting capital issues, for example).

I agree with you that hyping up the problem can make it worse. I don't believe it is the "left-advocacy" media, so much as a natural tendency by people to sensationalize issues.

6. Countrywide is a family of such companies that if you did deeply enough might have a apple cider stand at its foundation. This doesn't change the fact that it's residential lending side is what it is and pissing around about whether it's a thrift at root or a cider stand makes no difference whatever...it's bad paper is still held by the mortgage side. By the way, good luck unwinding Countrywide to its core.

All I said was that you're misstating the financial organization of the residential real estate market by implying that thrifts and commercial banks have nothing to do with it. Countrywide's residential lending (apple stand aside) is tied to its operations as a thrift (securities investment on the MB securities market, for example), just as the mortgage issuing arm of Bank of America is tied to its operations as a comercial bank.

Countrywide isn't actually as hard to dissect as you seem to think. There are several different organizational sub-entities tied together under the general heading of a financial holding corporation. This is a very common means of organizing financial institutions, as it allows them to engage in a variety of diverse activities under a corporate organizational umbrella. You see this sort of thing a lot with US commercial banks, as it allows them to engage in investment practices that would otherwise be prohibitted by banking regulations in the US.

7. The "crisis" is political, that's why I'm talking politics here. If a higher foreclosure rate in 1999 was not a "crisis" or "disaster" or indicator that the economy is headed down the toilet, why is it now? Hmmm... let's see, what's different now? Anything you can think of? And before you say: both are election years THINK about that. The intention today, ahead of the election, is to convince Americans that our economy, under a Republican, is in the toilet. Not sure if you are an American, or how aware you are of how this works, but the tendency here is for Americans to vote D when the economy is in the dumps. Right now, despite all economic indicators to the contrary, the left-advocacy "news" media have done yeomanlike work for their masters in the DNC: most Americans are "worried" about the economy. By the time Novemeber gets here, most will be "scared witless" if the media and the DNC have anything to say about it. Now when you consider that the "news" media in America is primarily a 5th column for the leftist movement here, in whose favor would it work if they were to convince Americans that their OK, if not rocketing economy is actually spiraling down the porcelain convenience?
Any guess will do.

Yeah, if you could actually provide some evidence to support any of this, that would be great.

While the "crisis" might be political, the "problem" of foreclosures is not. As I said above, there are issues with actual foreclosure rate (not an issue right now that I can see), and there are issues with the perception on the part of the lenders of default risk.

[Tokenconservative]

"Shrieking," eh?

I never said you were a "dumby" at all.



The problem is that you picked a singularly strange act to apply to this discussion. RESPA very generally governs aspects of RE transactions (including the role of the mortgage lenders) to prevent things like kickbacks to lenders or brokers. It doesn't serve as an official definition of "mortgage lender" or anything else, which seems to be how you were invoking it.

I'm guessing you mentioned it because it's something you're familiar with, but it has very little to do with the current discussion. It doesn't serve to define mortgage lenders generally (beyond defining them for the purposes of the act itself), and it doesn't apply specifically to the lenders either. I'm left wondering why, specifically, you bothered to mention it at all.

I was able to find that out with five minutes of basic research, so you certainly should know it if you are familiar with the RESPA.



I keep saying that the secondary markets are a very big part of this, and this is why.

Actually, the larger lenders have been having some issues due to the default risk of their loans, although I'm sure they aren't as exposed as specialist lenders, for painfully obvious reasons.

However, as I pointed out before, the sheer volume of subprime loans necessarily implies that the small lenders are not a majority of this.

Also, the small volume lenders are not institutions that can cause any measurable economic shifts by adjusting their underwriting stance, while a massive lender like, say, Countrywide could.



You mean my volume numbers? Actually, all of the numbers I've provided for '03 have been residential real estate loans only, with the exception of the numbers for finance companies. If what you just said here is claiming otherwise, you are simply incorrect.

They don't breakdown first/second mortgages or anything, but I never claimed they did.



The entire category of subprime loans is at increased risk. They may not all be at imminent risk of default, but the default risk plays a part in the loan underwriting.

I thought we'd cleared up that "banks and thrifts" is a subset of "mortgage lenders."

I'm not especially concerned with the massive default risk taken on by small specialist lenders to ultra-high-risk borrowers. I'm more concerned with the implied consequences of a harder underwriting stance that may be initiated by an increased level of default risk - or perception of default risk - on subprime loans. I don't only care about the ones that are foreclosing, but the ones that lenders see as potentially more likely to foreclose.



I've said this a few times, but I'll say it again: I believe that the over-extension of credit to suboptimal risks in the housing market constitutes a potential economic problem of potentially moderate severity. I do not believe it constitutes a crisis at this point, nor do I believe that it can simply be dismissed as a minor correction. I believe that the current situation is the product of several decades of rising prices combined with overly soft underwriting practices.

I'm far more concerned with the perception of the foreclosure issue on the part of the lenders than the actual rate of foreclosure, as strange as that may sound. Risk management is a funny combination of what you know happened, know is happening, and what you think might happen in the future. Right now, the third part is where the possible problems lie (devaluing MB securities and the resulting capital issues, for example).

I agree with you that hyping up the problem can make it worse. I don't believe it is the "left-advocacy" media, so much as a natural tendency by people to sensationalize issues.



All I said was that you're misstating the financial organization of the residential real estate market by implying that thrifts and commercial banks have nothing to do with it. Countrywide's residential lending (apple stand aside) is tied to its operations as a thrift (securities investment on the MB securities market, for example), just as the mortgage issuing arm of Bank of America is tied to its operations as a comercial bank.

Countrywide isn't actually as hard to dissect as you seem to think. There are several different organizational sub-entities tied together under the general heading of a financial holding corporation. This is a very common means of organizing financial institutions, as it allows them to engage in a variety of diverse activities under a corporate organizational umbrella. You see this sort of thing a lot with US commercial banks, as it allows them to engage in investment practices that would otherwise be prohibitted by banking regulations in the US.



Yeah, if you could actually provide some evidence to support any of this, that would be great.

While the "crisis" might be political, the "problem" of foreclosures is not. As I said above, there are issues with actual foreclosure rate (not an issue right now that I can see), and there are issues with the perception on the part of the lenders of default risk.

Here is exactly what I love about "debate" of this sort.

You take a relatively straight-forward issue: is there a foreclosure "crisis"?

Instead of looking at that and taking a position, yea, or nay, it's much more desirous of those with a certain...political bent, let's call it, to Google 50 terms of minutia and quibble over a misplaced comma or demimal than to address the question in it's simplest terms.

Let's try it again: since the 1999 foreclosure rate was (presently) 2 percentage points higher than is the one today, how and why does today's lower foreclosure rate suggest a "crisis" when the higher one in 1999 did not?

Now, let's parse the above and make sure there are no mispellings or some such, because THAT's the important (diversionary) issue, huh?

Tokie

[JonnyFive]

Let's try it again: since the 1999 foreclosure rate was (presently) 2 percentage points higher than is the one today, how and why does today's lower foreclosure rate suggest a "crisis" when the higher one in 1999 did not?

First off, I'm not going around screaming about a "crisis" at this point.

However, if you want to know why the current situation might be more of a problem than the simple foreclosure rate might indicate, you're going to have to step outside the very limited bounds of looking only at the rate of foreclosures.

Even if you want to ignore all the other components of the subprime problem, which would be an utterly moronic thing to do, you might want to consider the rate of increase of foreclosures, where they are in the market, and the potential role that will have on both investor behavior and loan underwriter behavior.

Those are the things that can drive down mortgage-backed segments of the financial markets, which will have a broader economic impact. I've mentioned the secondary markets several times, including in that fairly lengthy post you tried to reply to with a couple paragraphs of ranting about how I am nitpicking.

As far as the general impact on financial institutions, you can check out the Wiki'd list here (citations are provided). Notice the large number of banks, particularly investment banks, that are effected by this even though they are not all issuers of mortgages:

http://en.wikipedia.org/wiki/2007_Subprime_mortgage_financial_crisis#Impact_on_ financial_institutions

I keep saying that the secondary mortgage-backed markets are important, and hopefully this will provide a more concrete illustration of how that plays out.

Default risk (risk of foreclosure) and perceived default risk are important elements of the valuation of these securities, but they're only a very small slice of the overall problem. By constantly taking the issue and trying to sandwich it up against the simple foreclosure rate of 1999 while talking about "leftist" hysterics, you're really missing the forest for the trees.

[Tokenconservative]

First off, I'm not going around screaming about a "crisis" at this point.

However, if you want to know why the current situation might be more of a problem than the simple foreclosure rate might indicate, you're going to have to step outside the very limited bounds of looking only at the rate of foreclosures.

Even if you want to ignore all the other components of the subprime problem, which would be an utterly moronic thing to do, you might want to consider the rate of increase of foreclosures, where they are in the market, and the potential role that will have on both investor behavior and loan underwriter behavior.

Those are the things that can drive down mortgage-backed segments of the financial markets, which will have a broader economic impact. I've mentioned the secondary markets several times, including in that fairly lengthy post you tried to reply to with a couple paragraphs of ranting about how I am nitpicking.

As far as the general impact on financial institutions, you can check out the Wiki'd list here (citations are provided). Notice the large number of banks, particularly investment banks, that are effected by this even though they are not all issuers of mortgages:

http://en.wikipedia.org/wiki/2007_Subprime_mortgage_financial_crisis#Impact_on_ financial_institutions

I keep saying that the secondary mortgage-backed markets are important, and hopefully this will provide a more concrete illustration of how that plays out.

Default risk (risk of foreclosure) and perceived default risk are important elements of the valuation of these securities, but they're only a very small slice of the overall problem. By constantly taking the issue and trying to sandwich it up against the simple foreclosure rate of 1999 while talking about "leftist" hysterics, you're really missing the forest for the trees.

First of all, there's not a lot you can find on Wiki that I will take at face value. I guess I'll take their own caution about taking anything there at face value at face value...

Second, if you can't encapsulate what you've discovered at Wiki, then it's not much of an argument.

Third, the foreclosure RATE (not the screaming headlines about the actual numbers of homes foreclosed...or were you unaware of the building boom of the last decade or so?) is the important number, that I hope YOU will not (as you are) dismiss out of hand in favor of all the left-advocacy shrieking.

Fourth, yes, this is impacting the secondary and securities markets, both of which allowed themselves to become too involved in these kinds of loans.

Fifth, the numbers of mortgages being made on time as a percentage of the whole is around 90%. of those not being made on time, something around 1% are the kind we are talking about here. About half that number are expected (for various reasons) to default over the next year when most of the "at-risk" mortages from 2, 3 and 5 years ago will cap out.

Most rational observers are seeing an national foreclosure rate "capping out" (heh,heh) at somewhere under 8%, probably not higher than 6% though...about the same rate as the go-go year of 1999.

Sixth, the media were not howling "CRISIS!!!!!" and "LOOMING DISASTER!!!" in 1999, as they are today.

There has to be a REASON for that.

Care to take a guess?

Finally: do you or do you not believe a large scale, virtually across-the-boards howling by the mainstream print and broadcast media claiming that our economy is tanking, and that the foreclosure "crisis" is putting "most" Americans out of their homes and under bridges will or wil not impact the national zeitgeist if you will, concerning our economy; do you know what a positive feedback loop IS in economics?

Tokie

[JonnyFive]

First of all, there's not a lot you can find on Wiki that I will take at face value. I guess I'll take their own caution about taking anything there at face value at face value...

Those little numbers by the figures link the sources. I made sure to mention the citations, as your distrust of Wikipedia is legendary.

Second, if you can't encapsulate what you've discovered at Wiki, then it's not much of an argument.

I did - there are numerous companies that have posted losses connected to their involvement with the mortgage markets. Why do you not read what I write?

Third, the foreclosure RATE (not the screaming headlines about the actual numbers of homes foreclosed...or were you unaware of the building boom of the last decade or so?) is the important number, that I hope YOU will not (as you are) dismiss out of hand in favor of all the left-advocacy shrieking.

No, I have absolutely no interest in the left-advocacy shrieking, just as I have little to no interest in your placating "everything is fine, go to sleep little babies" approach to the discussion.

I didn't say anything about the raw numbers of foreclosures either. I specifically noted that the important factor in terms of the securities markets is twofold: the actual default risk (based on the foreclosure rate, but not the same as the foreclosure rate) and the perceived default risk (much harder to define, as its essentially a vague estimate of a tighter estimate).

Those are the factors that will influence both underwriting practice and investor behavior. The current subprime problem isn't about MILLIONS OF PEOPLE LOSING THEIR HOMES OMG ITS A DISASTER!!!%%!!! (that is sarcasm, I am not actually shouting), it's about the impact of the increasing rate of default risk on the underlying securities markets that are tied to the impacted investments, as well as the potential spillover impact on the overall credit market.

Fourth, yes, this is impacting the secondary and securities markets, both of which allowed themselves to become too involved in these kinds of loans.

Yes, I agree.

Fifth, the numbers of mortgages being made on time as a percentage of the whole is around 90%. of those not being made on time, something around 1% are the kind we are talking about here. About half that number are expected (for various reasons) to default over the next year when most of the "at-risk" mortages from 2, 3 and 5 years ago will cap out.

As I explained, this doesn't necessarily imply that the investor behavior will remain unchanged.

I'm not questioning your figure because it's not actually that relevant to what I'm saying, but I'd prefer to see a source for it of some kind.

Most rational observers are seeing an national foreclosure rate "capping out" (heh,heh) at somewhere under 8%, probably not higher than 6% though...about the same rate as the go-go year of 1999.

Any particular reason why you picked those numbers? Sources, or is this just your opinion?

Also, what percentage of subprime investments are foreclosing? What percentage of them are considered at risk?

The fact that investors in the mortgage-backed securities are posting losses because of them should probably clue you in that there is at least some perception of increased default risk out there.

Sixth, the media were not howling "CRISIS!!!!!" and "LOOMING DISASTER!!!" in 1999, as they are today.

I don't remember if they were or not.

There has to be a REASON for that.

Care to take a guess?

There could be multiple reasons for that. One of the main ones is that the media coverage of the problem isn't as sensationalist as you portray it, but I can write that off as hyperbole.

One of the other reasons could be that this issue is genuinely larger than the simply rate of foreclosure due to the heavy investments in subprime, high-risk loans. You agreed with me that creditors are over-extended in those markets, so it would follow logically that problems in those markets will cause problems for those creditors, and by extension problems for anyone else relying on the financial performance of said creditors.

Probably not a disaster of epic proportions, but enough of an issue that the generally sensationalist news media will take it and label it a "crisis."

Finally: do you or do you not believe a large scale, virtually across-the-boards howling by the mainstream print and broadcast media claiming that our economy is tanking, and that the foreclosure "crisis" is putting "most" Americans out of their homes and under bridges will or wil not impact the national zeitgeist if you will, concerning our economy; do you know what a positive feedback loop IS in economics?

Yes, I do know what it is. It's actually quite ironic that you mention this, as you seem to be ignoring that the same principle applies to the perceived rate of change on the foreclosure rate and investor confidence.

I think you greatly exaggerate the way the media portrays the subprime problem. I haven't seen any claims that this will put "most" Americans out of their homes, nor have I seem claims the American economy is "tanking" in any meaningful sense of that word.

The role of the media as a catalyst to negative economic change in this situation is probably greatly over-stated. Negative media attention may help to cool off consumer investment in the real estate sector, but there are other factors (like, you know, diminishing returns in that market sector) that would contribute far more to that. Moreover, the companies that are making the real hard-core investments in the real estate sector aren't making their decisions based on what some jackass at the NYT thinks is happening with the real estate sector.

[MilwaukeeMike]

We shouldn't. If we truly believe in free markets, we should let this mess sort itself out. The short and dirty is there are a lot of assets out there at overvalued prices. One side wants a dollar for a given asset, but no one is willing to buy it for more than .30 cents on the dollar. That's the problem. If we bail out the people who made bad decisions and calculated risk wrong, we are essentially telling them it’s alright to make bad business and investing decisions in the future because we will bail you out. What should happen is firms who illegally forced consumers to sign bad mortgages should be punished.

[Tokenconservative]

We shouldn't. If we truly believe in free markets, we should let this mess sort itself out. The short and dirty is there are a lot of assets out there at overvalued prices. One side wants a dollar for a given asset, but no one is willing to buy it for more than .30 cents on the dollar. That's the problem. If we bail out the people who made bad decisions and calculated risk wrong, we are essentially telling them it’s alright to make bad business and investing decisions in the future because we will bail you out. What should happen is firms who illegally forced consumers to sign bad mortgages should be punished.

Unfortunately, it's not that simple. Why? It's an election year (and has been for the past 3 years running).

So, this "crisis" (that isn't) is taking on much more importance than it otherwise would as various politicos milk it to show they are "doing something to alleviate the suffering of victimized American working men and women!!"

Of course, all they are doing is feathering their own political nests. There's nothing Congress can really do. The bill they've been toying with is typical close-the-door-after-the-horse-has-run pandering. They are using coercion on various Fed agency heads to get them to come out and also shriek at the lenders to "do something, anything!" as these frightened agency bosses hope to protect their own jobs when Osama or Hitlery comes to office.

But yeah, I agree that any lender who threatened to break the kneecaps of borrowers who did not sign up for risky loans should be punished.

Tokie

[Tokenconservative]

Those little numbers by the figures link the sources. I made sure to mention the citations, as your distrust of Wikipedia is legendary.

I did - there are numerous companies that have posted losses connected to their involvement with the mortgage markets. Why do you not read what I write?

No, I have absolutely no interest in the left-advocacy shrieking, just as I have little to no interest in your placating "everything is fine, go to sleep little babies" approach to the discussion.

I didn't say anything about the raw numbers of foreclosures either. I specifically noted that the important factor in terms of the securities markets is twofold: the actual default risk (based on the foreclosure rate, but not the same as the foreclosure rate) and the perceived default risk (much harder to define, as its essentially a vague estimate of a tighter estimate).

Those are the factors that will influence both underwriting practice and investor behavior. The current subprime problem isn't about MILLIONS OF PEOPLE LOSING THEIR HOMES OMG ITS A DISASTER!!!%%!!! (that is sarcasm, I am not actually shouting), it's about the impact of the increasing rate of default risk on the underlying securities markets that are tied to the impacted investments, as well as the potential spillover impact on the overall credit market.

As I explained, this doesn't necessarily imply that the investor behavior will remain unchanged.

I'm not questioning your figure because it's not actually that relevant to what I'm saying, but I'd prefer to see a source for it of some kind.

Any particular reason why you picked those numbers? Sources, or is this just your opinion?

Also, what percentage of subprime investments are foreclosing? What percentage of them are considered at risk?

The fact that investors in the mortgage-backed securities are posting losses because of them should probably clue you in that there is at least some perception of increased default risk out there.

There could be multiple reasons for that. One of the main ones is that the media coverage of the problem isn't as sensationalist as you portray it, but I can write that off as hyperbole.

One of the other reasons could be that this issue is genuinely larger than the simply rate of foreclosure due to the heavy investments in subprime, high-risk loans. You agreed with me that creditors are over-extended in those markets, so it would follow logically that problems in those markets will cause problems for those creditors, and by extension problems for anyone else relying on the financial performance of said creditors.

Probably not a disaster of epic proportions, but enough of an issue that the generally sensationalist news media will take it and label it a "crisis."

Yes, I do know what it is. It's actually quite ironic that you mention this, as you seem to be ignoring that the same principle applies to the perceived rate of change on the foreclosure rate and investor confidence.

I think you greatly exaggerate the way the media portrays the subprime problem. I haven't seen any claims that this will put "most" Americans out of their homes, nor have I seem claims the American economy is "tanking" in any meaningful sense of that word.

The role of the media as a catalyst to negative economic change in this situation is probably greatly over-stated. Negative media attention may help to cool off consumer investment in the real estate sector, but there are other factors (like, you know, diminishing returns in that market sector) that would contribute far more to that. Moreover, the companies that are making the real hard-core investments in the real estate sector aren't making their decisions based on what some jackass at the NYT thinks is happening with the real estate sector.

1. Okay, we agree that Wikipedia is at best a questionable source. Look, I am not going to nit-pick your figures. You seem to know what you are talking about and don't seem to an utter loon; I'll take your word for it that the numbers and data you post are reasonably accurate and fair; I don't require a link--LIIINNKKKKKKKKK!!! That's pedantic nonsens that's just simply no fun.

2. There are numerous butchers, bakers and candlestick makers who have posted losses...this year and every year. The media leaves the public with the view that there are oh, maybe 500 companies in the whole world, and that 390 of them are "crooked" lenders. I don't see the media posting screaming headlines about them, or noting the fact that every year lots and lots...and lots of companies post losses. And lots and lots and lots post gains. And lots post neither.

3. It's not a matter of my "placating." It's a matter of reality. Every other important indicator (consumer confidence is fading...hmm...wonder why...) is suggesting that we may be facing a minor slowdown in growth (hmm...that's never before happened in an election year....), but that it is expected to be short-lived and that in all but the very worst RE markets, the worst is already over. Today, in my local paper the headline is screaming RE PRICING IS DOOOWWWNNNNN!!!
(2% over this time last year). You have to dig into the story to see where the expert they spoke to is actually very upbeat and is talking about how this is to be expected with the over-inventory of new-builds and the slightly elevated numbers of REO properties on the market, but that he expects it all to rocket right back up again in the BUYING season (for some reason they never seem to mention RE pricin in oh...July).

4. Good. So long as you (alone in here, apparently) understand that the numbers of FCs, even if you happen to be one of them, matters not at all. The percieved default risk IS harder to guesstimate, which is all it is, and if employment levels remain about the same, and wages continue going up with economic growth, then that risk will decline. This is not Econ. 400...it's pretty simple stuff...but for some reason "business" reporters can't seem to understand it...or can they? They seem to screaming TEOTWAWKI!!!! TEOTWAWKI!!! whenever I read about RE locally, or nationall. Now, either they are ignorant to the nth degree, or they are working very, very hard to erode consumer/borrower confidence ahead of the election. Which could it be? A mixture of both, I'd wager, slanted very sharpely to the left-advocacy side. Otherwise, why do what that article in my local paper did today? The expert is upbeat, the HL is screaming TEOTWAWKI!!! You chalk that up to general media sensationalism...I don't. I have a more realistic take on it.

5. I can't predict investor behavior. If I could, I would be on a beach in Bermuda, not facing another 6 inches of global warming I'll be shoveling off my drive this evening. I can predict this about RE: they ain't making any more. And I can predict this about Americans: we like to have our own little patch of dirt.

6. I've heard these numbers from several sources now. Do I have a link--LIINNNNKKKK!!? Take a guess.

7. It IS as sensationalistic as I portray it where I live and on the national level. Maybe not so much where you are...lucky you. Here, even people who should know better (pros) are wetting themselves even as they are inking new deals each and every day.

8. The % percieved as at-risk, nationwide is something under 1%. It's doubtful that at the very peak of all these at-risk loans capping out (this spring/summer) the RATE of foreclosures will go any higher than 6%. Now, if the unemployment rate wer 15-30%, sure..that'd be higher. Do you know anyone who is out of work?

9. Do you mean they are posting projections of losses or are posting reports on actual, current losses? If it's projected, it means about as much as me saying that my crystal ball says there will never be another foreclosed house in America! I hope you undestand that people make money whether there are losses or gains...right?

10. I live in a market recently identified by Fannie Mae as "declining"--virtually the entire RE market here (they sliced one little politically protected area out of that). I also happen to know they are working with numbers from 1-2 years ago when we did experience some depreciation. And because of what I know, I also know that most neighborhoods here are enjoying either stable values or wildly rocketing appreciation. Very FEW n'hoods are experiencing any DEpreciation... Did our local papers question this Fannie Mae dicate? Nope. Both just screamed it from front page headlines. Now, think about this: you are the director of Fannie Mae. You are gifted with second sight and can see that there won't be a Republican in the White House after 01/21/09 and that in all liklihood, the Dems will greatly outnumber Reps in Congress, too. What do you do? Tell the strict truth "we can't make any claims about that stuff because we are 1-2 years behind in our analysis..." or do you say "We KNOW!!!!! that this market is in decline and YOU HAD BETTER NOT DOUBT US!!!"?

If you want to keep your 6-figure job after 1/21/09...I mean. Which do you do?

Tokie

[JonnyFive]

(snip) That's pedantic nonsens that's just simply no fun.

Thank you.

2. There are numerous butchers, bakers and candlestick makers who have posted losses...this year and every year. The media leaves the public with the view that there are oh, maybe 500 companies in the whole world, and that 390 of them are "crooked" lenders. I don't see the media posting screaming headlines about them, or noting the fact that every year lots and lots...and lots of companies post losses. And lots and lots and lots post gains. And lots post neither.

Well, there's a couple parts to this. Part of it, I'm sure, is that the losses of small companies are rarely notable, while the bigger companies make for a sensational story.

I really don't get the impression from the media that there are a lot of "crooked" lenders out there. I don't know what papers you read, but I haven't seen anything particularly prominent that suggests that the current problems with the housing market are due to dishonest lending.

3. It's not a matter of my "placating." It's a matter of reality. Every other important indicator (consumer confidence is fading...hmm...wonder why...) is suggesting that we may be facing a minor slowdown in growth (hmm...that's never before happened in an election year....), but that it is expected to be short-lived and that in all but the very worst RE markets, the worst is already over. Today, in my local paper the headline is screaming RE PRICING IS DOOOWWWNNNNN!!!
(2% over this time last year). You have to dig into the story to see where the expert they spoke to is actually very upbeat and is talking about how this is to be expected with the over-inventory of new-builds and the slightly elevated numbers of REO properties on the market, but that he expects it all to rocket right back up again in the BUYING season (for some reason they never seem to mention RE pricin in oh...July).

Like I said, I'm not of the mind that this is a "doom is coming" scenario. I think the news meda tends to sensationalize, but I haven't really noticed a stronger-than-usual level of negative reporting. Most of the articles I've read on the housing market are quite low-key, and the stories seem to be getting pushed back to the financial/real estate/business sections now.

I'm a bit concerned about some of the bigger investors in derivative securities and the larger loan-issuers facing financial problems because of this.

4. Good. So long as you (alone in here, apparently) understand that the numbers of FCs, even if you happen to be one of them, matters not at all.

Not so much that it doesn't matter, but it matters a lot less than what the companies making the loans perceive the risk of foreclosure is. They'll use actual foreclosure numbers in part to make that decision, but not that exclusively.

The percieved default risk IS harder to guesstimate, which is all it is, and if employment levels remain about the same, and wages continue going up with economic growth, then that risk will decline.

That is a possibility, if the employment and wage levels are applicable to the particular segment of the market looking for a loan. Perhaps obviously, if they economic situation improves for the people seeking loans, the underwriting stance of the companies issuing them will soften.

This is not Econ. 400...it's pretty simple stuff...but for some reason "business" reporters can't seem to understand it...or can they? They seem to screaming TEOTWAWKI!!!! TEOTWAWKI!!! whenever I read about RE locally, or nationall. Now, either they are ignorant to the nth degree, or they are working very, very hard to erode consumer/borrower confidence ahead of the election. Which could it be? A mixture of both, I'd wager, slanted very sharpely to the left-advocacy side. Otherwise, why do what that article in my local paper did today? The expert is upbeat, the HL is screaming TEOTWAWKI!!! You chalk that up to general media sensationalism...I don't. I have a more realistic take on it.

I don't really see that level of "end of the world" screaming in the papers, especially now that the whole problem is old news. Countrywide has recently posted another financial loss, and there are rumors about it possibly considering bankruptcy, but I haven't noticed the papers jumping all over that one.

I know you don't like to provide links, but if you have specific examples of the sort of "screaming" you mention, I would really appreciate it if you could maybe link to them. I'm not trying to be pedantic, but I haven't noticed that sort of hysteria from the media, and I'm wondering who is saying that sort of thing.

The other thing that leads me away from the whole "left advocacy" conclusion is the nature of the issue itself. This particular problem isn't particularly tied to who is the president, or who is in Congress. This isn't really an issue anyone on "the left" has taken up as a particular platform either.

5. I can't predict investor behavior. If I could, I would be on a beach in Bermuda, not facing another 6 inches of global warming I'll be shoveling off my drive this evening. I can predict this about RE: they ain't making any more. And I can predict this about Americans: we like to have our own little patch of dirt.

No, you can't predict investor behavior pefectly. You can try to model it to make rough predictions, but you're right that this won't guarantee anything.

As to the general real estate market, maybe an issue for another thread.

6. I've heard these numbers from several sources now. Do I have a link--LIINNNNKKKK!!? Take a guess.

Yes, I know, you don't do links. Unfortunately for you, by refusing to provide details you seriously undermine what could be an excellent source of discussion, especially if you have the breakdown for subprime and non-subprime mortgages.

You don't need a link, per se. If you can name a source, I'm willing to spend some time digging it up.

7. It IS as sensationalistic as I portray it where I live and on the national level. Maybe not so much where you are...lucky you. Here, even people who should know better (pros) are wetting themselves even as they are inking new deals each and every day.

Well, I don't know where you live (and don't care either), so I can't comment on that.

I live in New York City, which is pretty much Liberaltown, USA, and there hasn't really been much sensationalist coverage lately. Even the NYT is pretty quiet about the whole subprime thing now. Hell, even their business section has moved on to other things now, and the front page stuff is all election '08.

8. The % percieved as at-risk, nationwide is something under 1%. It's doubtful that at the very peak of all these at-risk loans capping out (this spring/summer) the RATE of foreclosures will go any higher than 6%. Now, if the unemployment rate wer 15-30%, sure..that'd be higher. Do you know anyone who is out of work?

Is this percentage of subprimes or all mortgages? When you say "at risk," do you mean "at increased risk" or "foreclosure a strong possibility?"

Yes, actually, I know several people who are out of work.

But that's not really pertinent to our discussion, is it? I never said the unemployment rate was particularly high, nor did you.

9. Do you mean they are posting projections of losses or are posting reports on actual, current losses? If it's projected, it means about as much as me saying that my crystal ball says there will never be another foreclosed house in America! I hope you undestand that people make money whether there are losses or gains...right?

No, they're posting actual losses, I'm not talking about projected financial loss. When I was talking about the perception of increased default risk, I was referring to the fact that the underwriters on the loans and various involved investors will generally adjust their behavior to accomodate the perception of possible losses.

One of the fundamental elements of economics is that expectation can have profound impacts on behavior. Everyone in the market tries to predict what will happen (even if they aren't successful), and that influences their choices on the market.

10. I live in a market recently identified by Fannie Mae as "declining"--virtually the entire RE market here (they sliced one little politically protected area out of that). I also happen to know they are working with numbers from 1-2 years ago when we did experience some depreciation. And because of what I know, I also know that most neighborhoods here are enjoying either stable values or wildly rocketing appreciation. Very FEW n'hoods are experiencing any DEpreciation... Did our local papers question this Fannie Mae dicate? Nope. Both just screamed it from front page headlines. Now, think about this: you are the director of Fannie Mae. You are gifted with second sight and can see that there won't be a Republican in the White House after 01/21/09 and that in all liklihood, the Dems will greatly outnumber Reps in Congress, too. What do you do? Tell the strict truth "we can't make any claims about that stuff because we are 1-2 years behind in our analysis..." or do you say "We KNOW!!!!! that this market is in decline and YOU HAD BETTER NOT DOUBT US!!!"?

Why would the director of Fannie Mae care who was in the White House or Congress? It would have little to no impact on the mortgage-backed securities market that FM makes most of its money from, unless certain members of Congress were talking about specific regulations governing mortgage banking.

FM hasn't been a government agency for fourty years, so I'm guessing their reliance on the whims of the current majority party are somewhat nonexistant.

My guess is that if FM issued some kind of report indicating a decline, it's because they believed that there would be a decline in whatever segment of the market they were talking about that had some relevance to their business. How did you determine that their information was outdated? You mean they used, say, info from 2004 and 2005 but skipped 2006 and 2007 completely?

Also, it's a separate issue from what the local paper said, which is again a separate issue from why they said it. What value would this have in terms of the proposed "left-advocacy?" What if voters chose to believe that electing a limited-government, economic-growth Republican to office would be better for the economy?

Also, if the goal is to promote a left-wing agenda in Congress or the White House, why haven't the articles on this issue played up the President's role in this (which is nothing, really), or the role of the Republicans in Congress (again, nothing, really) or something? They could have at least underhandedly suggested that this is due to the war on Iraq driving up oil prices or something, but the articles I've read have focused on lending practices.

If you want to keep your 6-figure job after 1/21/09...I mean. Which do you do?

Keep your private company profitable, as your six-figure job is in no way correlated with the party of the person in the White House.

[MilwaukeeMike]

Unfortunately, it's not that simple. Why? It's an election year (and has been for the past 3 years running).

So, this "crisis" (that isn't) is taking on much more importance than it otherwise would as various politicos milk it to show they are "doing something to alleviate the suffering of victimized American working men and women!!"

Of course, all they are doing is feathering their own political nests. There's nothing Congress can really do. The bill they've been toying with is typical close-the-door-after-the-horse-has-run pandering. They are using coercion on various Fed agency heads to get them to come out and also shriek at the lenders to "do something, anything!" as these frightened agency bosses hope to protect their own jobs when Osama or Hitlery comes to office.

But yeah, I agree that any lender who threatened to break the kneecaps of borrowers who did not sign up for risky loans should be punished.

Tokie

Oh, I know I was over simplifying the situation. Collateralized debts give seasoned traders problems, let alone the average retail investor. I agree that this being an election year we are likely to see some sort of a bail out program that will likely cause more problems down the road.

[Tokenconservative]

Oh, I know I was over simplifying the situation. Collateralized debts give seasoned traders problems, let alone the average retail investor. I agree that this being an election year we are likely to see some sort of a bail out program that will likely cause more problems down the road.

It's an extraordinarily complex situation. Just unraveling which lender is a subsid of which bank which is owned by which investment company which is owned by which Prince, exactly, in Dubai...is maddening.

Those who believe that politics plays no role in any of this, and that those who are in the top tiers of the agencies that deal with this stuff are not reading the tea leaves and hoping they are guessing correctly, and doing what they believe the socialists who will be in charge next January will approve of are either agressively ignorant or Pollyainish to a degree that makes discussing this stuff with them very difficult.

Tokie

[MilwaukeeMike]

It's an extraordinarily complex situation. Just unraveling which lender is a subsid of which bank which is owned by which investment company which is owned by which Prince, exactly, in Dubai...is maddening.

Those who believe that politics plays no role in any of this, and that those who are in the top tiers of the agencies that deal with this stuff are not reading the tea leaves and hoping they are guessing correctly, and doing what they believe the socialists who will be in charge next January will approve of are either agressively ignorant or Pollyainish to a degree that makes discussing this stuff with them very difficult.

Tokie

What's even crazier is these CDO's have been packaged so complexly and distributed across the globe so widely, that anyone who thinks this mess is done is nuts. There are more shoes to drop, and it will start when the big financials release their earnings. The problem is people don't really know where all these collateralized debt obligations went and if could they appear on banks/financials/hedge funds balance sheets across the globe. The problem is, which I over simplified, the banks are unwilling or at least trying to hold out as long as they can, in writing down their CDO's. Either because they feel they may be able to sell them at a higher price still or are afraid that by writing the CDO’s down they will cause a downward spiral that will make them worthless. Worst yet, some sly banks, cough cough Citi, have packaged the Mc-mortgages with good mortgages from qualified consumers, which further complicates things. I'm just glad I'm not in the mortgage department at AIG, Citi, Bear Stearns, or Etrade. Of course, the "bright brains" in DC think the slolution is to bail people out. The fed should be regulating the mortgage industry so this kind of thing doesn't happen. I read one story were a couple in Cali who both worked at McDonalds got an $800,000 mortgage with no money down, no back ground check; from Country Wide....

By the way, CFC (Country Wide) has made me some money these last few months as it has been a short traders dream come true. I'm going to short that thing until it hits $0, to punish them for putting us into a recession because of their predatory lending tactics.

[Tokenconservative]

Thank you.

Well, there's a couple parts to this. Part of it, I'm sure, is that the losses of small companies are rarely notable, while the bigger companies make for a sensational story.

I really don't get the impression from the media that there are a lot of "crooked" lenders out there. I don't know what papers you read, but I haven't seen anything particularly prominent that suggests that the current problems with the housing market are due to dishonest lending.

Like I said, I'm not of the mind that this is a "doom is coming" scenario. I think the news meda tends to sensationalize, but I haven't really noticed a stronger-than-usual level of negative reporting. Most of the articles I've read on the housing market are quite low-key, and the stories seem to be getting pushed back to the financial/real estate/business sections now.

I'm a bit concerned about some of the bigger investors in derivative securities and the larger loan-issuers facing financial problems because of this.

Not so much that it doesn't matter, but it matters a lot less than what the companies making the loans perceive the risk of foreclosure is. They'll use actual foreclosure numbers in part to make that decision, but not that exclusively.

That is a possibility, if the employment and wage levels are applicable to the particular segment of the market looking for a loan. Perhaps obviously, if they economic situation improves for the people seeking loans, the underwriting stance of the companies issuing them will soften.

I don't really see that level of "end of the world" screaming in the papers, especially now that the whole problem is old news. Countrywide has recently posted another financial loss, and there are rumors about it possibly considering bankruptcy, but I haven't noticed the papers jumping all over that one.

I know you don't like to provide links, but if you have specific examples of the sort of "screaming" you mention, I would really appreciate it if you could maybe link to them. I'm not trying to be pedantic, but I haven't noticed that sort of hysteria from the media, and I'm wondering who is saying that sort of thing.

The other thing that leads me away from the whole "left advocacy" conclusion is the nature of the issue itself. This particular problem isn't particularly tied to who is the president, or who is in Congress. This isn't really an issue anyone on "the left" has taken up as a particular platform either.

No, you can't predict investor behavior pefectly. You can try to model it to make rough predictions, but you're right that this won't guarantee anything.

As to the general real estate market, maybe an issue for another thread.

Yes, I know, you don't do links. Unfortunately for you, by refusing to provide details you seriously undermine what could be an excellent source of discussion, especially if you have the breakdown for subprime and non-subprime mortgages.

You don't need a link, per se. If you can name a source, I'm willing to spend some time digging it up.


Well, I don't know where you live (and don't care either), so I can't comment on that.

I live in New York City, which is pretty much Liberaltown, USA, and there hasn't really been much sensationalist coverage lately. Even the NYT is pretty quiet about the whole subprime thing now. Hell, even their business section has moved on to other things now, and the front page stuff is all election '08.

Is this percentage of subprimes or all mortgages? When you say "at risk," do you mean "at increased risk" or "foreclosure a strong possibility?"

Yes, actually, I know several people who are out of work.

But that's not really pertinent to our discussion, is it? I never said the unemployment rate was particularly high, nor did you.

No, they're posting actual losses, I'm not talking about projected financial loss. When I was talking about the perception of increased default risk, I was referring to the fact that the underwriters on the loans and various involved investors will generally adjust their behavior to accomodate the perception of possible losses.

One of the fundamental elements of economics is that expectation can have profound impacts on behavior. Everyone in the market tries to predict what will happen (even if they aren't successful), and that influences their choices on the market.

Why would the director of Fannie Mae care who was in the White House or Congress? It would have little to no impact on the mortgage-backed securities market that FM makes most of its money from, unless certain members of Congress were talking about specific regulations governing mortgage banking.

FM hasn't been a government agency for fourty years, so I'm guessing their reliance on the whims of the current majority party are somewhat nonexistant.

My guess is that if FM issued some kind of report indicating a decline, it's because they believed that there would be a decline in whatever segment of the market they were talking about that had some relevance to their business. How did you determine that their information was outdated? You mean they used, say, info from 2004 and 2005 but skipped 2006 and 2007 completely?

Also, it's a separate issue from what the local paper said, which is again a separate issue from why they said it. What value would this have in terms of the proposed "left-advocacy?" What if voters chose to believe that electing a limited-government, economic-growth Republican to office would be better for the economy?

Also, if the goal is to promote a left-wing agenda in Congress or the White House, why haven't the articles on this issue played up the President's role in this (which is nothing, really), or the role of the Republicans in Congress (again, nothing, really) or something? They could have at least underhandedly suggested that this is due to the war on Iraq driving up oil prices or something, but the articles I've read have focused on lending practices.

Keep your private company profitable, as your six-figure job is in no way correlated with the party of the person in the White House.

1. Exactly. Enron employed how many? Hmmm....

2. Crooked is too strong a word. Unethical is what's being tossed around. Thank you for playing Pedantry!

3. The announcement that FM was tagging this area (falsely) as "declining" market was front page on both our dailies.

4. No. I am talking about employment as it relates to "at-risk" loans currently out there. If unemployment were as rampant as the libs wish it were, this could indeed mean real problems for people who are on the edge and could not hope to catchup payments if they fall behind since they also could not find a job. If you can't find a job today, in America, it's because you are not trying.

5. I don't do links for a variety of reasons. If you disbelieve me, that's fine. I studied journalism for a time, and I produced published papers on a host of issues surrounding bias in "news" reporting way back in the early 1990s, when it was nowhere near as blatant and left-advocacy as it is today. I know it when I see it.

6. If you believe that this is not "tied to" who will be president or who will be in charge of Congress then you have a very shallow understaning of how politics works in America. In "bad" economic times, Americans tend to vote D, because Ds promise to "give" us things. If the general perception is that the economy sucks (and can you honestly tell me that the media are not conveying that idea to Americans, even tho most indicators suggest that at worst, we might be experiencing a SLIGHT downward trend in a few very minor areas?).

7. You may not know or care where I live, but my reasons for not providing any personal information should be quite obvious. If not, let me explain: I tend to make people who tend to react violently (the far "right" nutcases and liberals) angry.

8. Because of where you live and because of your own ideology, it's not surprising that you don't "see" the left-advocacy of the news. The NYTimes own ombudsman a year or so ago admonished the paper for this very thing, and the publisher did what? Fired here, I believe.

9. I would be pretty surprised if you live in NYCity...metro area population of what...20 million?--and there was nobody who was out of work. Of those you know..they have no hope virtually whatsoever of regaining employment...of any kind?

10. "At-risk" in this discussion applies to ALL ARM, Option-ARMs that will be adjusting to their cap rate over then next 18 mos or so, and it can include HELOCs, too.

11. You know that expectation plays an enormous role in economics, but don't see how the media ginning up fear about the economy could impact the economy?

12. Fannie Mae is so closely-regulated by the fed. gov't they may as well be a gove agency. If the president does not like the person running the place, that person is gone. Ergo, it is in their best interest to make nice and do what they think those who can so seriously damage them want them to do.

13. Fannie Mae is relying on data they have analyzed from 1-2 years ago here, to call this a "declining" market. I know that the data are wrong because I work in the industry in this market and a region-wide "decline" is simply not occuring TODAY. It was 1- 1-1/2 years ago. Or do you seriously believe an agency like FM is JIT? The value to left-advocacy, as I've stated a dozen times, is that people vote D when they belive the economy is in the pits.

14. UWs are adjusting. They are being told to tighten things up and are doing so. That's just what happens every time there is a correction of this sort.

15. Playing up the role: The left-advocacy media must walk a narrow line. They can't actively LIE (too much), so screaming "Bush IS TO BLAME!!!" would have to be supported, something they can't do. They can, and do, IMPLY that the "Republicans" with their loosey-goosey regulatory views and who want to help their "rich friends" get richer are behind the "loosened" (hmm...that happened under. um...Clinton, but they don't mention that...they leave it up to implication) lending regs that have led to the "crisis!"

Tokie

[Tokenconservative]

What's even crazier is these CDO's have been packaged so complexly and distributed across the globe so widely, that anyone who thinks this mess is done is nuts. There are more shoes to drop, and it will start when the big financials release their earnings. The problem is people don't really know where all these collateralized debt obligations went and if could they appear on banks/financials/hedge funds balance sheets across the globe. The problem is, which I over simplified, the banks are unwilling or at least trying to hold out as long as they can, in writing down their CDO's. Either because they feel they may be able to sell them at a higher price still or are afraid that by writing the CDO’s down they will cause a downward spiral that will make them worthless. Worst yet, some sly banks, cough cough Citi, have packaged the Mc-mortgages with good mortgages from qualified consumers, which further complicates things. I'm just glad I'm not in the mortgage department at AIG, Citi, Bear Stearns, or Etrade. Of course, the "bright brains" in DC think the slolution is to bail people out. The fed should be regulating the mortgage industry so this kind of thing doesn't happen. I read one story were a couple in Cali who both worked at McDonalds got an $800,000 mortgage with no money down, no back ground check; from Country Wide....

By the way, CFC (Country Wide) has made me some money these last few months as it has been a short traders dream come true. I'm going to short that thing until it hits $0, to punish them for putting us into a recession because of their predatory lending tactics.

It's like elephant sex...it all happens waaaay up high.

Glad you are able to make money off it, and CW is only getting worse, by the way, permitting automation to take over most of their UW and appraisal needs.

This is very likely why that McDs worker couple got that loan.

I spoke to someone I think knows about the issue of witholding, and for reasons that went over my head, it appears that this is not likely, though it is one CT that's being floated out there.

The reality is, these foreclosure represent a liability, but not a big enough one for most of these lenders to even notice, really. The only reason they are playing this game at all is because it's an election year and the leftists in Congress are seeing blood in the water--and chumming for more. Hell, even The Ah, Rhevahrund Jessah is now involved, speaking about how this is damaging "his people" more than others.

Sheesh.

When an 18-wheeler smashes a 'possom on the road, the vultures and other carrion-eaters arrive poste-haste and in great numbers.

Tokie

[JonnyFive]

This is getting pretty long, so I'll try to skip the small-talk parts. Also, I'll not respond to the general "libs want more unemployment" etc. comments. I'd like to discuss that, but it's kind of outside the realm of our current discussion and I don't have unlimited time.

Finally, I'm going to mostly stop with the whole back-and-forth about "left advocacy" media in general. I agree that there is media bias, but I think it trends towards sensationalist and simplification bias, not left-advocacy. I think Token will generally disagree with me on that, so I don't think it would be valuable for us to keep swapping "yes it is, no it isn't" lines.

6. If you believe that this is not "tied to" who will be president or who will be in charge of Congress then you have a very shallow understaning of how politics works in America. In "bad" economic times, Americans tend to vote D, because Ds promise to "give" us things. If the general perception is that the economy sucks (and can you honestly tell me that the media are not conveying that idea to Americans, even tho most indicators suggest that at worst, we might be experiencing a SLIGHT downward trend in a few very minor areas?).

Do you have evidence that people generally vote Democratic when they see the economy as being bad?

You've flipped the causality on me too. I said that who was President had little to do with the markets we're talking about, not the other way around. I'm concerned with potential effects on the problem, not effects on who is President. If you want to talk about that instead, start another thread - it's probably a more general topic.

8. Because of where you live and because of your own ideology, it's not surprising that you don't "see" the left-advocacy of the news. The NYTimes own ombudsman a year or so ago admonished the paper for this very thing, and the publisher did what? Fired here, I believe.

Token, you really don't know much about my ideology at all, as I generally steer clear of political stuff here. If you're implying that I'm a liberal, then I'm afraid you're quite incorrect (unless you really define "liberal" to mean "anyone that disagrees with me," but I don't think you do).

Of course the NY Times displays left-leaning bias. However, that bias doesn't seem to have politicized their reporting of the foreclosure or subprime issues.

9. I would be pretty surprised if you live in NYCity...metro area population of what...20 million?--and there was nobody who was out of work. Of those you know..they have no hope virtually whatsoever of regaining employment...of any kind?

I never said they lived in New York at all.

That's not what you asked anyway, you simply asked if I knew anyone out of work.

10. "At-risk" in this discussion applies to ALL ARM, Option-ARMs that will be adjusting to their cap rate over then next 18 mos or so, and it can include HELOCs, too.

Well, we're talking about mortgages specifically, so I don't know why you would include HELOCs.

Also, you haven't answered my question yet: do you mean "slightly increased risk of default" or "in imminent danger of default?"

Why include all ARMs rather than subprimes (which are generally what this whole issue is about)? There are probably ARMs increasing to the cap rate where the default risk wouldn't increase at all, and their inclusion could paint a misleading picture of the market risk.

11. You know that expectation plays an enormous role in economics, but don't see how the media ginning up fear about the economy could impact the economy?

I don't think the media is really "ginning up fear" on this. They played the story, made a fuss of it, and then moved on to other things. The media hardly even talks about it now, because nothing sensational is happening.

I was mostly talking about investor and lender expectations, but I apologize for not making that clear.

12. Fannie Mae is so closely-regulated by the fed. gov't they may as well be a gove agency. If the president does not like the person running the place, that person is gone. Ergo, it is in their best interest to make nice and do what they think those who can so seriously damage them want them to do.

This doesn't appear to be true. Fannie Mae is not regulated particularly more closely than any other securities company, and their only special tie to the Federal government is a Federal line of credit, which ties their debt into the Federal government debt by way of extension (they can draw on Federal credit to back up their own), but this doesn't extend to the President being able to directly dictate who leads the company. In terms of organization, they are a private financial institution.

If you want to claim a special relationship between FM and the President/government, you will need to provide evidence of that. I can find no indications that they have a special connection beyond their credit line. They may have some government members on their board as well, although again this doesn't imply special levels of regulation.

13. Fannie Mae is relying on data they have analyzed from 1-2 years ago here, to call this a "declining" market. I know that the data are wrong because I work in the industry in this market and a region-wide "decline" is simply not occuring TODAY. It was 1- 1-1/2 years ago. Or do you seriously believe an agency like FM is JIT? The value to left-advocacy, as I've stated a dozen times, is that people vote D when they belive the economy is in the pits.

JIT? You mean "just in time," as in the manufacturing methodology? Or did you mean to imply something else?

What is your evidence that FM was relying on outdated data? Were they talking about the overall market, or one area in particular? Is it possible that the local paper took something and applied it over-broadly?

There's just too many factors here. I don't expect you to tell me where you live, so I can't research the details on my own, and you don't do links or anything, so I doubt you'll provide me with more substantial proof. There's just too much technical nuance here for me to simply take you at your word, so I'm afraid we may have hit an impasse on this particular issue.

14. UWs are adjusting. They are being told to tighten things up and are doing so. That's just what happens every time there is a correction of this sort.

I agree. As an underwriter (insurance, not loans, but most of the generalities are pretty similar), I understand the underwriting cycle quite well.

15. Playing up the role: The left-advocacy media must walk a narrow line. They can't actively LIE (too much), so screaming "Bush IS TO BLAME!!!" would have to be supported, something they can't do. They can, and do, IMPLY that the "Republicans" with their loosey-goosey regulatory views and who want to help their "rich friends" get richer are behind the "loosened" (hmm...that happened under. um...Clinton, but they don't mention that...they leave it up to implication) lending regs that have led to the "crisis!"

But I haven't heard those kind of implications in the reporting of the real estate stories. Maybe you could tell me where you read those things so I could look them up myself?

Of course, there is the separate issue that I don't really believe Republicans in general do a much better job of cutting spending, limiting government, or making things more efficient. I think they, in general, do just as much BS tax-spend crap as the Democrats, but they wrap it up in a package of lies about limited government.

Individual Republicans may favor limited government, but the party as a whole doesn't do a very good job of it.

[Tokenconservative]

This is getting pretty long, so I'll try to skip the small-talk parts. Also, I'll not respond to the general "libs want more unemployment" etc. comments. I'd like to discuss that, but it's kind of outside the realm of our current discussion and I don't have unlimited time.

Finally, I'm going to mostly stop with the whole back-and-forth about "left advocacy" media in general. I agree that there is media bias, but I think it trends towards sensationalist and simplification bias, not left-advocacy. I think Token will generally disagree with me on that, so I don't think it would be valuable for us to keep swapping "yes it is, no it isn't" lines.



Do you have evidence that people generally vote Democratic when they see the economy as being bad?

You've flipped the causality on me too. I said that who was President had little to do with the markets we're talking about, not the other way around. I'm concerned with potential effects on the problem, not effects on who is President. If you want to talk about that instead, start another thread - it's probably a more general topic.



Token, you really don't know much about my ideology at all, as I generally steer clear of political stuff here. If you're implying that I'm a liberal, then I'm afraid you're quite incorrect (unless you really define "liberal" to mean "anyone that disagrees with me," but I don't think you do).

Of course the NY Times displays left-leaning bias. However, that bias doesn't seem to have politicized their reporting of the foreclosure or subprime issues.



I never said they lived in New York at all.

That's not what you asked anyway, you simply asked if I knew anyone out of work.



Well, we're talking about mortgages specifically, so I don't know why you would include HELOCs.

Also, you haven't answered my question yet: do you mean "slightly increased risk of default" or "in imminent danger of default?"

Why include all ARMs rather than subprimes (which are generally what this whole issue is about)? There are probably ARMs increasing to the cap rate where the default risk wouldn't increase at all, and their inclusion could paint a misleading picture of the market risk.



I don't think the media is really "ginning up fear" on this. They played the story, made a fuss of it, and then moved on to other things. The media hardly even talks about it now, because nothing sensational is happening.

I was mostly talking about investor and lender expectations, but I apologize for not making that clear.



This doesn't appear to be true. Fannie Mae is not regulated particularly more closely than any other securities company, and their only special tie to the Federal government is a Federal line of credit, which ties their debt into the Federal government debt by way of extension (they can draw on Federal credit to back up their own), but this doesn't extend to the President being able to directly dictate who leads the company. In terms of organization, they are a private financial institution.

If you want to claim a special relationship between FM and the President/government, you will need to provide evidence of that. I can find no indications that they have a special connection beyond their credit line. They may have some government members on their board as well, although again this doesn't imply special levels of regulation.



JIT? You mean "just in time," as in the manufacturing methodology? Or did you mean to imply something else?

What is your evidence that FM was relying on outdated data? Were they talking about the overall market, or one area in particular? Is it possible that the local paper took something and applied it over-broadly?

There's just too many factors here. I don't expect you to tell me where you live, so I can't research the details on my own, and you don't do links or anything, so I doubt you'll provide me with more substantial proof. There's just too much technical nuance here for me to simply take you at your word, so I'm afraid we may have hit an impasse on this particular issue.



I agree. As an underwriter (insurance, not loans, but most of the generalities are pretty similar), I understand the underwriting cycle quite well.



But I haven't heard those kind of implications in the reporting of the real estate stories. Maybe you could tell me where you read those things so I could look them up myself?

Of course, there is the separate issue that I don't really believe Republicans in general do a much better job of cutting spending, limiting government, or making things more efficient. I think they, in general, do just as much BS tax-spend crap as the Democrats, but they wrap it up in a package of lies about limited government.

Individual Republicans may favor limited government, but the party as a whole doesn't do a very good job of it.

No, actually, I would not agree that the media is less left-advocacy than they are senstationalistic. They are both, in pretty equal parts, but this conversation (I thought) was about the way(s) in which that very faction of the leftwing is being used, willingly and at its own behest (there is no CT, here) to erode consumer confidence and paint a picture of economic doom and gloom ahead of the election, as a means of getting a socialist in the White House and to retain those already there, and get even more in Congress.

If you think this conversation is about something else, then yeah...it should probably end here.

No, I don't have any evidence that people vote D in bad time, nor have I any evidence that if you put your hand on a hot stove burner you will get burned. It's common sense and has been the case all my life.

Causality and Presidents: the issue here is what the left-advocacy media is misreporting, obfuscating, misrepresenting and flat out lying about in order to help get a socialist elected.

FM and regs: yer telling me they ...weren't. Now, because they were caught at exactly the kind of incompetence any large agency of this sort is typically mired in, they have been slapped at least moderately hard and are eager to please their new masters in DC...

Politicizing reporting: I don't know what your political ideology is, and you have not said, but I tend to believe (from experience) that those who can, with a straight face say that a publication like the NYTimes doesn't slant it's news (all kinds...and surely you must know how closely related economic and politics are in the US) to the left, then you are either a thoroughly doctrinaire lib, left of Chomsky, not a very discerning reader, or someone who does not fully understand what "slant" and "bias" are and/or how they can present in various media.

Pedantry: Of course you know someone "out of work." Hell, I am "out of work" right now (it's the nature of my bidness...virtually closes down just before Christmas until late January hereabouts and has forever). When leftist talk about "the unemployed" they don't mean Wall Streeters between 7-figure gigs, having just been snatched away from Brokerage A by a lucrative deal at Brokerage B, and their taking a couple of weeks to sail off Bimini...I thought I was talking to someone who understood these distinctions. Please tell me if that is not the case.

HELOCs are mortgages, and as with ARMs and Option-ARMs the "at risk" status is not a given. Some are, most are not. No, I am not going to take the time to find links to all this stuff. It's typically not stuff I get online, anyway. Besides which, much of the slant and bias stuff is a matter of interpretation. I published a number of things on this issue in the political reporting cycle of the 1992 election and it was an eye opener for me, too. But now that I know what to look for, I see it when it's there.

The point of this debate is not whether an ARM with a 7.6% rate that will cap at 9.8% this March will do this, that or the other thing, and parsing the specific numbers of who has such mortgages. It's what the left-advocacy media in this election year is doing, which is extracting a pound of lies from an ounce of truth.

I read NYTimes wire service copy on this issue nearly daily, and about spit my coffee out over the blatant leftist-slant. Again, if you can't see that, I'm not sure I can educate you on how to do so.

Post (not link) a story from the NYTimes on this issue and we can go through it line by line if you like.

Tokie

[ServiceSoon]

Do you have evidence that people generally vote Democratic when they see the economy as being bad?He has no evidence to support this idea. How about this. If the media could convince the people that the current economy is crappy and it is the fault of the current administration then you could easily get the votes you need for the other party.

[Tokenconservative]

He has no evidence to support this idea. How about this. If the media could convince the people that the current economy is crappy and it is the fault of the current administration then you could easily get the votes you need for the other party.

Well, at least you now understand how it works.

Tokie

[ServiceSoon]

Well, at least you now understand how it works.

TokieWHo benefits and who is penalized when the democrats have the power!!! ?