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 "col