Three months? Those mortgages are due to reset to higher interest rates for the next two years. Don't think for a second that authorities can contain it. The banks repackaged the mortgages as assets and sold them to other financial houses. Then the financial houses borrowed against those "assets" to ten to twenty times what they were priced. Worse yet, they weren't priced at the market, the banks pulled numbers out of their asses. Trillions of worthless debt now overhang our economy, more than the GNP. This is not a small deal.

Heck Of A Job Georgie !!

-Sarge

What the fuck does George have to do with this. George certainly has fucked up a bunch of shit sandwiches but blaming him for low interest rates is absurd. For that you have to say "Heck of a job Alan".

My brother, Bush has done all evil since 2000 and is setting us up for the very near future. As the finances of all Americans fall into the abyss we can pounce and millions will convert to our ways and follow Allah.

Translation...I am a blind partisan who can't NOT tie bush to all of my ills.

Yeah moss can't blame this one on Bush. Too low interest rates, too high values on houses, to easy credit. Too many greedy people on both the banks side and the creditors side.

Bush better not use my tax dollars to bail out these greedy subprime lenders or their subprime loan borrowers. A fair number of those subprime borrowers were in the country illegally but many banks/lenders (like Wells Fargo), in their greed, accepted two-bit IDs like the matricular counsular cards to give huge loans to those they knew were credit ris and/or did not have employment wages to protect them from a rise in interest rates.

No one can accuse me of being a Koolaide-drinking, Bush voting, Neocon retard, but even I can't blame this one on Junior. He's been too busy flattening Iraq and slandering the other 70% of America to pay much attention to things like this. Too bad, record home-ownership would have actually been a pretty good legacy, as opposed to record forecosures.

to pay much attention to things like this.


George does seem the type who avoids the unpleasant until he's smacked upside the head.

Oh what is the big deal!

They should thank God they still have there jobs.

Eberly

Ted He has always had His Daddy cover for Him. Until NOW bwhahahahahaha

Larry

Money surely even you can see that Bush does not control monetary policy.

Tao

Are you sure about that?

He does seem to be able print as much as he needs for the Iraq Adventure.

Perhaps I am a koolaid drinking neocon (but I doubt it) but it seems to me that it was the bleeding heart liberals who were crawling up one side of the banks and down the other for not lending to low income people and minorities "ohhhh you are so mean, you are not giving mortgages to low income people and minorities, that is so unfair - stop it" so they go ahead and give mortgages to low income and minorities and now they are sons of bitches cause the low income and minorities can't pay the loans back. The problem is that said persons instead of buying a modest home with their new found mortgage went out and bought themselves a McMansion which they never would have been able to afford with a regular mortgage. Your average family with two adults and two kids does not need more than 1,500 square feet. So why are they buying 3,000+ square foot houses which they simply cannot afford? Okay rant over.

Money surely even you can see that Bush does not control monetary policy.

Posted by TaoWarrior at 2007-09-22 09:55 PM | Reply | Flag

Really!

Now that statement is quite ambiguise, who requested 50 billion dollars for Iraq? Who signs the final papers? Who chooses the Fed. Reserve chairman? Who changes the way statistics are formulated in posting economic numbers? Who creates Free trade AGREEMENTS not treaties?

But I understand why you choose to be so ambiguise.

Litlebrit,

It sure sounds like you are all for economic class separation of rich available, poor not so much. Well, guess what? You have it RIGHT now!

Translation...I am a blind partisan who can't NOT tie bush to all of my ills.
Translation: Eberly doesn't recognise a troll when he reads one.

The sub-prime debacle is just what happens when you let the financial market "regulate" itself. The mortgage writers could have worked for ENRON's accounting department, the way they manipulated financial reports. Anybody who would loan taxi-fare to a NINJA- "No Income, No Job or Assets", never mind a couple hundred grand for a mortgage on an over-valued property is either stupid or crooked.
I vote crooked.

Well, we'll see if this leads to yet another bailout of financial companies much as occured in the S & L scandal, which Fred Thompson successfully lobbied on behalf of.

Why do Republicans scream about 'personal responsibility', yet when a corporation screws up they get bailed out. Pension plans that are underfunded get bailed out by the Pension Guarantee Fund, you name it.

Just call it what it is: Corporate welfare

But, there's nothing wrong with that, right righties?

Why not just bail the finance companies out. They will.

This is nothing more than a LAND GRAB.

Those people who default lose the home but the finance companies will get bailed out and gain the home all at the tax payers expense.

History is repeating itself and no one even mentions it.

Just have to laugh.

Good. The stupid fuckers might learn something from this fiasco, like DON'T BUY THINGS YOU CAN'T AFFORD! Dumbasses.

Money - you are earning 20K a year, you buy a 250K house, guess what, eventually you are going to figure out that you cannot afford a 250K house, did it stop them from buying them? No! Don't give me the poor v. rich shit, won't work with me. My house is 1200 square feet, and guess what, I can afford it! Your mortgage, whether it is at the outset or when it adjusts (if you got an ARM) should never be more than 25% of your net monthly income, if it is, then you have bought more house than you can afford. Guess what DON'T BUY THE HOUSE!

PS) Just in case you missed the stat, the majority of people living in "poverty" in the US have more living space than the majority of middle class folks in Europe. Something to think about.

PS) Just in case you missed the stat, the majority of people living in "poverty" in the US have more living space than the majority of middle class folks in Europe. Something to think about.

The fact that you would say something so meaningless tells me you don't know what you are talking about.

And just in case you missed the stat, it is far far easier to get out of poverty in Europe than it is in the U.S. but you don't seem to think this stat matters much do you!

Poverty increased by 2.2 million people last year but great yahoos, inflation and unemployment is way way low.

You won't even understand this stat as it relates to this thread even.

Average house size in America is 2350 sq ft and the average price of a home in the U.S. is $305,000 dollars.

Yep, this has nothing to do with rich poor thing.

the majority of people living in "poverty" in the US have more living space


So back in the old country they're all huddled in their hovels, is that it?

Or could it be population density. No doubt my ancestors came here looking for land (space) and business. Europe was filling up, and continues to do so.

I guess the good news is that we may be poor, but we've got room to stretch our legs.

Just a data point.
I am a government employee, living in the Baltimore-D.C. corridor. I bought my house for 320K about two years ago (built in 1955, 1800 square feet, certainly something I should be able to afford given the fact that both my wife and I have masters degrees and I am a masters level Electrical Engineer and she is a professional educator). Oh, and by the way, we bought this home with a traditional mortgage, so the adjustable rate hike isn't going to affect us. Anyway, we are looking at the demise of our financial future because of all the people who bought with adjustable rate, interest only mortgages and are going to walk away from a foreclosure because they bought outside their means. With the overall decrease in property values, we are going to take it in the shorts! Thank God for the BRAC, it may be the only thing that saves us.
I don't see how this is much different that the buying on margin that caused so many problems in the 1920's crash. From what I see, the only difference is where folks chose to invest their money. If someone can explain why I should feel sorry for all of those folks that have been living in their McMansions while I try to live within my means in a modest home, I would love to hear the justification.

Ozark,

I was leaving that up to him to figure out.

I don't see how this is much different that the buying on margin that caused so many problems in the 1920's crash. From what I see, the only difference is where folks chose to invest their money.

About time someone understand the similar problem. This problem will grow as the population will be less likely to consume which now is the foundation of our economy.

Well, we'll see if this leads to yet another bailout of financial companies much as occured in the S & L scandal, which Fred Thompson successfully lobbied on behalf of.


Johnny McCan't made out pretty well in that little Republican scam too, as I remember.
But Clinton got a bj, so the S&L scam doesn't matter.

The banks repackaged the mortgages as assets and sold them to other financial houses. Then the financial houses borrowed against those "assets" to ten to twenty times what they were priced. Worse yet, they weren't priced at the market, the banks pulled numbers out of their asses. Trillions of worthless debt now overhang our economy, more than the GNP. This is not a small deal.

Posted by Ray
* * * *

Completely false, and I'm starting to understand your problem. The banks aren't allowed to make loans off their assets, but their liabilities. Demand deposits and CD's--liabilities to banks--are what they have in reserves to loan UP TO 10 times.

BTW: a loan is always an asset to a bank, and as soon as they as sold to another institution, they disappear from the originating bank's books, thereby freeing up the reserves which secured said loans to make others. Most originating banks, see--make their money off the points and closing costs, NOT on the carrying interest. They're only too happy to pass that on to the CMO market.

Long story short, you don't know what the hell you're talking about.

NG,
We can only hope that there is some sort of bailout that helps our faltering homeowners. As much as I loathe the fact that they are going to get bennies from being financially irresponsible, the long term effects of massive foreclosures are even worse for those who choose to live responsibly. Although it is unlikely, I hope for a bailout or large scale class-actions against those companies who lended to consumers, knowing they would not be financially solvent enough to meet their mortgage payments. Then, all I will have to do is kick myself for not buying a 600K house when all I could afford was one that cost 300K rather than looking at a 200K resale when I move.

RiR,
I agree with your assessment of the motivations behind current lenders. That doesn't change the fact that they have been irresponsible in lending far more than individuals can be expected to repay, banking on the eventual foreclosure and the profits from resale. You can cite closing costs as the #1 source of income for mortgage companies, but I am sure that it will quickly change to profits made from resales on foreclosed properties.

Ray, it occurs to me after re-reading your post, that I misunderstood you, so I apologize. You weren't making a point about loans, but about the CDO and CMO market.
For your information, the maximum leverage that can be applied to a collateralized mortgage obligation is 200%, and that level takes very clever hedging in the options market which must be able to demonstrate that your actual leverage is 95%, or 1.95 times. It's still a big problem to the holders of these tranches--most of whom seem to be overseas, as it turns out--the Wall Street banks managed to unload their positions at the end of the last quarter--but it's nowhere near the 20-30 times you said.

Once again, a dweeb doesn't seem to know what he is talking about.

Mortgage-backed securities repackaged subprime mortgages into investments, thus allowing them to be sold on the stock market. It also helped spread the cancer of subprime mortgages to investors throughout the U.S. and the rest of the world.

That doesn't change the fact that they have been irresponsible in lending far more than individuals can be expected to repay, banking on the eventual foreclosure and the profits from resale. You can cite closing costs as the #1 source of income for mortgage companies, but I am sure that it will quickly change to profits made from resales on foreclosed properties.

Posted by Unbiased_Voter
* * * *

No way. Only a suicidal lender would write loans hoping for a foreclosure. These loans are nonconforming, which means that they have been mortgaged up to 125% of the market value. It's impossible to get market value in a foreclosure sale, let alone a premium--otherwise they wouldn't be considered bad loans by the banks at all.
No, the banks were betting on the same thing the borrowers were: that the homes would continue to rise in value, and that borrowing rates would either stay the same or fall. And they went 0 for 2.

Mortgage-backed securities repackaged subprime mortgages into investments, thus allowing them to be sold on the stock market.

Posted by moneywar
* * * *

Congratulations. You've just described a CDO, which is what I've been talking about all along. So who is the dweeb, exactly?

I've heard of appraisers being banned by banks. And most banks don't like to deal in sub primes anyway.

Mortgage brokers are different because they really don't carry a reserve, they're just agents from any number of banks. And the sub prime market is their meat.

Household Finance and others made a killing selling high interest fixed, or seconds, but when the variable rates got popular they dove in.

It wouldn't be a problem if rates only varied a point or so but 2 or 3 really whacks the budget.

Even worse, the refi market pushed property values as consumers and brokers wanted to stretch the equity, each wanting more in a cash out. This is smart if you can support a 10 to 15 yr repayment, if for no other reason that equity floats with the market but dropping your interest below 4% is like printing a few bucks on the side.

Unfortunately a lot of the cash out refi's were of a necessity. Medical bills top the list. Legal, like divorce, or job loss are common factors.

Some people just do dumb things. But this is where stretching the equity AND taking the variable rate because the only fixed you could get was 8.75%--that should have been a warning. If the banks would only fix at 8 or more then they were factoring for high rates.

The tough part comes when a refi was made out of desperation and now the bell tolls again.

So who is the dweeb, exactly?

Doesn't seem to rank with Geek, and others, but then the finance guys are always a bunch of tight ass...DWEEBS.

Just knowing what a CDO is makes you suspect number one RightieTighty.

We could take a vote.

Answer: Is RightieTighty a DWEEB???

yea or nay

No way. Only a suicidal lender would write loans hoping for a foreclosure. These loans are nonconforming, which means that they have been mortgaged up to 125% of the market value. It's impossible to get market value in a foreclosure sale, let alone a premium--otherwise they wouldn't be considered bad loans by the banks at all.

I don't buy it. Its the same reason that there are lenders outside of every military installation that offer "special" car loans for E-2 and above. Understanding that vehicles depreciate by approx 25% when they drive off the lot, these organizations offer low (adjustable) interest rates that generally end up with our servicemembers getting hosed. The whole "adjustable rate interest only loan" phenomenon has to be based on a risk assessment that ensures lenders make back whatever they have lent regardless of the current housing market. Otherwise it is a bad investment for them. I don't claim to have intimate knowledge of the mortgage industry, but I know that they still make out, no matter what the outcome for the average homeowner. My guess is that we will see massive profits in that industry over the next few years despite a down turn in the housing market.

Kinda like the petroleum industry. Anyone else notice that oil is at its highest cost per barrel ever (80$+) and yet gas is still under 3$ a gallon? Kinda makes you think about the rate hikes tied to the increase in oil costs over the last couple of years.

It's been a long time since I've been called a dweeb.

More recently it's been "selfish", "self-centered", "asshole", "f---ing asshole", "f---ing selfish asshole", and "self-centered f---ing asshole".

Those were only by my ex-wives, though--and as you can see, their vocabulary was very limited, but their temper, alas, was not.

Among people who don't ever have to live with me, I'm pretty popular.

Otherwise it is a bad investment for them. I don't claim to have intimate knowledge of the mortgage industry, but I know that they still make out, no matter what the outcome for the average homeowner. My guess is that we will see massive profits in that industry over the next few years despite a down turn in the housing market.

* * * *

If they're making massive profits, why are 95 publicly-traded lenders now in bankruptcy?

Fair enough--if you think they're about to make a lot of money, start buying the stock of the small few that are left. Countrywide Financial comes to mind, ticker CFC--started the year at $45, now at $19 and change. So if there were big profits to be made, call your broker, and double down--you're obviously on to something that's eluding the rest of us.

The money's gone. The credit standards have tightened up. And the subprime market is done for the next five years or so, maybe a bit longer.

"Among people who don't ever have to live with me, I'm pretty popular."

Outside of our differences in political views...I think you're pretty cool!

Thank you Lisa. That'll get me through an otherwise dreary weekend.

Rcae -- Thanks for this post. At last some quantifiable data on the problem from a somewhat reliable source.

----
" About 57 percent of mortgage broker customers with adjustable-rate mortgages were unable to refinance into a new loan in August, according to a study by Campbell Communications, a market research firm in Washington.

Adjustable-rate mortgages to subprime borrowers account for 44 percent of all new foreclosures, according to the Mortgage Bankers Association in Washington.

``A lot of the folks who are in trouble are in trouble even before their mortgage rate resets,'' said Bert Ely, a banking consultant in Alexandria, Virginia. ``They can't refinance because they shouldn't have gotten their mortgages in the first place.''

Adjustable-rate mortgages of all kinds worth $139.2 billion, the most ever, are scheduled to reset at higher interest rates in the next three months, according to First American LoanPerformance in San Francisco. Subprime adjustable- rate mortgages make up $84.4 billion of that total.

In the third quarter, $136.7 billion of mortgages were slated for reset, with subprime comprising $87.4 billion.

About 2.91 million subprime borrowers have adjustable-rate mortgages, about 90 percent of which will have reset at higher interest rates by the end of 2008, LoanPerformance said. "
----

So the data are consistent within a range. Only have to guess that a majority of those are in California, NYC, DC metro, Florida, and the rustbelt. That's where to look for home bargains in 12 months. Not a good time to try to sell in those markets for a while!

The subprime debacle is only the tip of the ice-span. Bit of ironical humor, since it is Alan Greenspan who has brought the country to the brink of financial disaster. First, Alan and his inner circle of buddies, read greedy little bastards, managed to get the Supreme Court to rule that a bank can charge the highest interest allowed by the state in which it is located. Most states have a cap on the interest that lenders can charge. But, in 1980, rules were put in place that allowed national banks, the ones that have the word
"national" or the term "N.A." in their name, and savings banks that are federally chartered to ignore state usury limits. Then the banks found that by monitoring your credit report monthly, sometimes on a weekly basis, if they found one zinger, they can raise your credit card rate to 28, 29, 30, 32, percent and rising. No matter whether the zinger is your fault, their fault, no fault, the banks will not change the rate once it's raised. Now, that means you are probably never going to pay off that credit card? Right? Well, enter Alan, my wife's a news reporter, Greenspan. The nation has to much debt and we need to bring it down. Why don't you banks raise the monthly payment rate? Man, that's like throwing a bone with a hunk of meat into a pack of hungry wolves. Raised the repayment rates. Okay, so that wasn't too bad, families adjusted. Until the dreaded oil crisis. Do you really think there was an oil crisis?? I digress. Now we have double the price for gasoline. Whoops, can't go to work if I can't buy gas. Something has to give. High interest, higher credit card payments, gas prices, then, tah dah, the mortgage readjusts and the interest rate doubles and triples. Now on top of higher credit card payments, gas prices doubled, higher cost of essentials, like food, the mortgage goes up a pant load, not to mention the greedly SOBs we call county politicians who also raised your tax base, creating another rise in your monthly house payment.

It's time to reign in the banks, readjust the payment schedule, curtail the issuance of credit cards, and return some sense of fiscal responsibility in our government. Oh, what the heck am I saying. And I bet you are convinced I believe in fairy tales and the sky is rosy pink in my world.

"What the fuck does George have to do with this."

"Yeah moss can't blame this one on Bush."

YEAH!

Seems to me that just last year you all were singing that the number of new home owners was due soley to bushs policy!

I guess we can file this one with the rest of bushs great achivements that he was resposable for before he wasn't!

Heck Of A Job Georgie !!

Really George. Who knows what your motive was in forcing hundreds of thousands to sign up for loans they can't afford, but what is amazing is that you could do it at all. A man with this much mind control and they call you stupid?

I don't get this headline. These people aren't losing anything they can't afford anyway. The only thing they lost was their senses for taking out loans that they couldn't afford.

RR
It's still a big problem to the holders of these tranches--most of whom seem to be overseas, as it turns out--the Wall Street banks managed to unload their positions at the end of the last quarter--but it's nowhere near the 20-30 times you said.

I was reading that hedge funds were borrowing 10-20 times on their CDOs. Either way, the leverage makes them look good on the upside, but there is hell to pay on the downside. And we haven't discussed derivatives. I see estimates of several time the WORLD GDP. Ever watch dominoes fall? Ever hear about the Bubonic plague? Know how Ponzi Schemes end? Ever see the purchasing power of fiat money NOT go to its intrinsic value - zero?

America will never be the same again when this is all over.

Outside of our differences in political views...I think you're pretty cool!

I'd be missing out on a the company of a lot of cool people if I only hung around with those who agree with me. I'm sorry for you, Lisa.

But then I've notice that liberals are generally more insecure in their beliefs and desperately need to be preached to by the choir. It's my theory that is why you will seldom see a lefty on a right wing blog, but you'll find conservatives on a liberal blog.

Redneck you must be confusing me with someone else. I never gave Bush any credit for record home ownership he had as little to do with that as he does with the melt down.

Goat I think you may have missed what Lisa was saying because I think she agrees with you. As far as the no liberals on conservative blogs alot of that has to do with moderation policies, I have been kicked off several ok 2 conservative blogs for my views and I'm hardly a liberal.

Goat I think you may have missed what Lisa was saying because I think she agrees with you.

I re-read, and I think you are right, Tao. Subtlety is more -- well -- subtle in print.

I have been kicked off several ok 2 conservative blogs for my views and I'm hardly a liberal.M

I've been kicked off of one, myself. And if the guys at work had their way, I would be swimming the warm waters of the tropical Atlantic for my "liberal" views.

I almost got kicked off a third but not because of my "liberal" views but because I was hyping Ron Paul.

I've been kicked off of one, myself. And if the guys at work had their way, I would be swimming the warm waters of the tropical Atlantic for my "liberal" views.

You dirty hippy treehugger you :)

Ray,

Thanks for your many posts on this kind of subject. Although I struggle to understand what you're saying sometimes it seems to me that even if your predictions don't pan out they very well might because the conditions that you base them on are present, I was going to say real but it seems that is exactly what they often are not.

It's not as though this kind of thing hasn't happened before. South Sea Bubble, 1929, "creative" financing and the S&L crisis, Barings Bank, the dot com bust, day trading, Enron and "mark to market", the subprime/ARM idiocy, Northern Rock to name just a few of a long list that even a total novice like me can come up with. My opinion for what it's worth is that if you don't know what you're doing, and even if you do "know", stick to what has been known to work for hundreds of years and don't go chasing rainbows.

Blue

It's a shame there is so little discussion on this topic, because the other topics on this site don't begin to compare to the effect on our lives.

People in the financial industry like RiR were trained in the Keynesian model of economics which rewards consumption and inhibits production. As a result, the shortfall in production was made up with debt. The amount of accumulated debt is too large to be paid off. It can only grow until it hits a breakpoint.

Whenever government initiates the gradual destruction in the value of money, it eventually always has catastrophic consequences. There is not one exception since in monetary history. In my opinion, because the imbalances and distortions are far more out of whack compared to the late 1920s, there is a good chance we will experience something worse than the 1930s.

We cannot know if there will be severe inflation or rapid deflation or how the timing of events will unfold. This could take a decade before it hits bottom. Either way, to anybody who will listen, I urge you to get out of dollar based assets like stocks and bonds, get out of debt and buy as much precious metals as you can afford. Homes are certain losers.

These four sites open up a world of thought you won't read about in the MSM.
mises.org
321gold.com
dollarcollapse.com
financialcollapse.com

Correction - financialsense.com

My opinion for what it's worth is that if you don't know what you're doing, and even if you do "know", stick to what has been known to work for hundreds of years and don't go chasing rainbows.

The false assumption is that what has worked since the end of WWII will continue to work. That is where people get trapped. As sure as night follows day, deflation follows inflation.

Ray,

Thanks for the web sites. I'll read them, think about it and get back in a year or so! About a year ago I came across an article linked out of Rense.com(I know, get out the tinfoil but...) which gave the lowdown on the inevitable subprime bust and how the "assets" were all being bundled in "commodities" and sold to hedge funds. That was all I needed to get out of the market till things settled down. I think I'll get back in at some point when it's to my advantage on the assumption that if things do hit rock bottom and go to hell in a handbasket we're all screwed beyond redemption anyway.

Besides although an American for all practical purposes I hung on to my British passport for ultimate fallback. Course they may be screwed too, and like a few days ago Bill Clinton said on Jon Stewart when given a similar hypothetical nightmare situation, I could always then slit my throat!

What would be the down side to the mortgage holders just leaving these loans at their current rate? I guess it would be that if they don't adjust ARMs for people who got in over their heads, they really shouldn't be allowed to adjust ARMs for people who will be able to pay.

But certainly, leaving the rates on these loans that would otherwise default as-is is more cost effective than foreclosing, dumping all these houses on the market at once, and getting a fraction of the loan amount at auction. The borrower may have a judgement on their credit as a result but you can't get blood from a stone anyway.

"Anybody who would loan taxi-fare to a NINJA- "No Income, No Job or Assets", never mind a couple hundred grand for a mortgage on an over-valued property is either stupid or crooked."

Northguy - Don't forget that these loans were given for 80/20 purchases (no money down) or 95% Loan to Value refinances. So when the default arises, the bank has zero chance of breaking even.

The banks/investors were very greedy and stupid in their actions. But it is hard for me to feel sorry for people who lied to buy homes they can't afford or who just kept running up their credit cards and refinancing their way out of it until all their equity ran out.

But then I've notice that liberals are generally more insecure in their beliefs and desperately need to be preached to by the choir. It's my theory that is why you will seldom see a lefty on a right wing blog, but you'll find conservatives on a liberal blog.


Posted by goatman at 2007-09-23 08:27 AM | Reply

BS - you so seldom see a lefty on a right wing blog because they get permanently banned the minute they express any view that doesn't march in kool-aid drinking, right wing lock step.

Ever try to post a view that doesn't kiss Bush's butt on Free Republic and be allowed to ever post again? You are here posting here because this is a more liberal blog that allows ALL thoughts and views -- even Bushlovers described as "moderates"

It's my theory that is why you will seldom see a lefty on a right wing blog, but you'll find conservatives on a liberal blog.

GOATMAN

Because they kick you off first time you stray from the 'Bush is great' 'GOP is great' party line on right wing blogs.

Liberal blogs are much more tolerant of righties. Look at Drudge. So many right wing assholes on a liberal site is something you wouldn't see in reverse on a right wing site.

Look at all the righties on this thread saying 'DON'T BUY SOMETHING YOU CAN'T AFFORD", yet no mention on any thread about the deficit spending of the Bush administration while cutting taxes and starting a TRILLION dollar war we borrow to fight.

Uh huh.

AU

How funny! Can you believe we picked the same Goatman sentence to respond to at the VERY SAME TIME. We were writing our posts simultaneously. And our responses were so similar too. Goatman was asking for it with that remark.

"It's my theory that is why you will seldom see a lefty on a right wing blog, but you'll find conservatives on a liberal blog."

Ditto CalifChris and Americanunity in resopnse to this.......

Also, the whole idea of only speaking in front of audiences who take a "loyalty oath" is certainly no the invention of "liberals". The current leaders of the GOP seem more afraid of outside ideas than any leaders in our history.

Good response, Sully.

CHRIS

Great minds think alike LOL

BS - you so seldom see a lefty on a right wing blog because they get permanently banned the minute they express any view that doesn't march in kool-aid drinking, right wing lock step.

Goatman seems like a smart guy, even for a con. I'm surprised he hadn't realized this.

I urge you to get out of dollar based assets like stocks and bonds, get out of debt and buy as much precious metals as you can afford. Homes are certain losers.


Ray, I'm curious. If all the things that you speculate may come true do come ture, where will the market be for the precious metals you're advising me to buy?

Its pretty obvious by the posts on here that most of you dont understand how mortgages work.

The brit dude had a point. They expanded the guidlines to let less qualified people get loans to help minorities and lower income people buy a home to help level the playing field. Well it turns out that people that make less money and aquire more debt have a harder time keeping up with payment. Suprise! SO... they default. The bank has already sold this loan to wall street so they dont get burned too badly unless it forecloses. Wall street takes the brunt of the losses. Even the home buyer makes out ok if they FK. They just wait another 3 years and hope they have a better job at that time.

The world would be a great place if everyone could buy a house but this just wont ever be the case. Reason is if everyone can get a loan then home prices rise and then it goes out of thier means again.

everyone calls the banks greedy because they offered lower income people loans? Gave them aRMS? fIXED rates were available but everyone is greedy and they ALL choose the ARM. Dont blame the bank for offering different choices.

This cycle happens every 13 years. I cant believe people act like its the end of the world. Now everyone who refused the 30 year fix (they all refused it for the lower payment of the ARM , dont kid yourself)cant refi because those 'greedy banks' took YOUR advice and stopped offering the ARM for these unqualified people and now they are lossing thier home because they arent making payments and cant refinance.

Which is it? Do you want banks giving unqualified i.e. lower income and poor managers of money loans? Or dont you? They dont anymmore and that is why most of these defaults are occuring. By the way im a super liberal but I am also a realist.

So when miniority home ownership goes way down in the next 5 years dont start asking for special programs to help out. Then well end up back here again.

Bush had nothing to do with this, unless you fall in the delusional liberal or the new world order crowd. Actually this probably can be attributed to greedy bankers, and bad decisions on people who obviously can't pay the bill for the house. Heck I am one of those folks, who got in to one of the sub-prime loans, but I was a first time home buyer and got a fixed 30 year rate and I have a really good job. Now I do feel bad for the folks who are getting foreclosed on, but they made a gamble on the housing market staying the same or getting better, opps. This is actually something that has been coming for a while, look at homes in Cali, NY or any other major population center. Prices for homes were way over what they were actually worth, and for people to get in those markets they needed to take risky loans with wild APR rates. They gambled and they lost. All of this will right it self in a few years, hopefully!

I don't get this headline. These people aren't losing anything they can't afford anyway. The only thing they lost was their senses for taking out loans that they couldn't afford.

Posted by goatman at 2007-09-23 08:15 AM | Reply | Flag

You can say this and then follow with:

Your very name on a retort, Moneywar, has proven sufficient grounds for doubt. This is no different.


Yep, these people are not losing anything but a little pride right!!!!!!!!

Like I said, He is a BUSH boy bot and clearly shows his cold attitude here.

good.

perhaps now they'll learn to manage their money like the rest of u.s., no?

not to be unforgiving, but we have people in our own family who've fallen for this lending mess. i have a hard time feeling sorry for them, especially since we've been repairing our credit for seven+ years (RATHER THAN FILE BANKRUPTCY!!!) and paying cash for EVERYTHING...so i have a difficult time feeling sorry for anybody who fell for this ruse.

Question: How many of you actually know people who have lost their home, or are in danger of losing their home? Because if you are friends with anybody in this situation it puts a whole different emotional spin on what is happening to hundreds of thousands of hard working American families during the GWB presidency.

Yep, these people are not losing anything but a little pride right!!!!!!!!

But look at what they gained -- A lesson: Don't buy that which you cannot afford, no matter how attractive.

Granted, most people know this by the time they are adults, but I'm sorry, I shouldn't be responsible for the ignoramouses that don't. That they learn the hard way is not my problem.

Question: How many of you actually know people who have lost their home, or are in danger of losing their home? Because if you are friends with anybody in this situation it puts a whole different emotional spin on what is happening to hundreds of thousands of hard working American families during the GWB presidency.

First of all, I don't know what the president has to do with it, but I'm becoming to suspect there is an unwritten rule on the DR that one must bash Bush, no matter how unrelated the thread.

But anyway, yes, I know such a person. Me. When I bought my first house, I had the option for an attractive ARM that was tied to the prime. But I thought ahead and wondered what would happen if the prime got to a rate that I couldn't afford my house? So I scrimped for several years with a new wife, new baby, new life in general. It hurt for a while, but now the house is payed for.

Also, I drove shitty cars because I couldn't afford new ones. Granted, in N Dallas where your car and status is everything, I looked like a rube.

But I lived within my means. What is wrong to expect any one else to do the same? ANd if they don't, why should I -- who have paid my dues and had no one helping me -- have to bail them out?

Yep, these people are not losing anything but a little pride right

Having the government bail you out of your stupid decisions isn't a loss of pride?

Wow, moneywar, I knew you and I had different values, but I had no idea yours were this low. "please, uncle sugar -- bail me out of this mess I got myself into so I don't lose my pride!"

But look at what they gained -- A lesson: Don't buy that which you cannot afford, no matter how attractive.

Granted, most people know this by the time they are adults, but I'm sorry, I shouldn't be responsible for the ignoramouses that don't. That they learn the hard way is not my problem.

Posted by goatman at 2007-09-24 02:13 AM | Reply

Is that the same lesson all the rich investors learned during the S&L failure (and bailout by the cons) in 80's?

Hey correct Me if I am wrong but won't the taxpayers be eating the costs no matter if they lose their homes or not?? Or am I full of shit??

Larry

why should I -- who have paid my dues and had no one helping me -- have to bail them out?

GOATMAN

That same question should be asked of those corporations losing money who underfund their pension plans while paying CEO's millions and then want the Pension Guarantee Board to pick up the tab, or numerous other examples.

Face it Goatman, the GOP supports corporate welfare.

Face it Goatman, the GOP supports corporate welfare.

Yes they do. That is one of the many big beefs I have with the republicans and one of the many reasons I refuse to fully embrace them.

But they also support personal responsibility. That is one of their few great attributes.

But they also support personal responsibility. That is one of their few great attributes.

So do the Democrats. Bill Clinton was the one who initiated welfare reform after all.

Personal responsibility would be easier if the GOP hadn't tried to cut college grants and change up the student loan program. Life is a lot easier with a college education with all the 'living wage' jobs disappearing overseas (with tax credits to the corporations doing so.

Right now, Bush is against $21 Billion for education and cops on the streets while wanting yet another $200 Billion for the war.

But they also support personal responsibility. That is one of their few great attributes.

At least that's their mantra. Don't seem to see it in action so much.

But they also support personal responsibility. That is one of their few great attributes.

Posted by goatman at 2007-09-24 08:49 AM

Is that the same "personal resposibility" that Scooter Libby and his pardon exudes?

Or the same "personal responsibility" that David "the John" Vitter is being held accountable for?

So do the Democrats. Bill Clinton was the one who initiated welfare reform after all.

Posted by AMERICANUNITY

* * * *

LOL. Really? That's not really the way I remember it.

First of all let me say that I feel badly for anyone who suffers from losing a home to unfortunate circumstances in their lives.

We are all, to some degree or another, a stroke of bad luck away from seeing some really hard times. They come in all shapes and sizes, either a financial hit due to losing a job, being sued or comming down with an extreme medical condition.

Making the right decisions in life does not insulate or insure anyone from experiencing some really hard times. Anyone who cannot admit that at any point they could be broke and homeless is a fool in my opinion.

At times in my life I have lived very fiscally cautious and at times I have not, the older I get the more I seem to be leaning on the cautions side.

I own part of a business and make pretty good money. I still live in a very modest house (1800 square foot two level) and we own a cabin on some land as well. Both are fairly modest.

I could afford to sell my current house and buy a 3,000-5,000 square foot home but choose not to. My reasoning is that I would rather own what I have now than go ito great debt for a bigger house.

Some of the people who are part of this sub prime blowup probably were not as educated as they should have been when making a decision to get such a risky loan, however some of the people knew EXACTLY what they were doing and were relying on the continued housing boom to take them thru. These people were taking a risk just like buying stocks or any other investment. They just lost out on the deal.

I still feel sorry for them (as much as they would for me if my decesions caused me to go belly up) but admit that my sympathy only goes so far.

I worry about the overall ramifications of this on our country more than anything.

Money - you are earning 20K a year, you buy a 250K house, guess what, eventually you are going to figure out that you cannot afford a 250K house, did it stop them from buying them?

Posted by Litlebritdifrnt at 2007-09-22 11:07


I'm really curious, are you just making a point by exaggerating or do you have any evidence that people making $20k/year were actually approved for a $250k mortgage?

Katie,

I am betting on no factual evidence whatsoever on that claim.

Actually I would like to know where this bank is, I want to borrow some money from these stupid bastards.

2112,

Most of America is one major health issue away from bankruptcy which I beleive is one of the major causes of bankruptcy in the United States.

However, what we need is further laws protecting the banking industry.

"those 'greedy banks' took YOUR advice and stopped offering the ARM for these unqualified people"

No, the investors who bought these crap loans are getting burned and will no longer buy them. So the banks have to tighten their guidelines for while in order to regain investor confidence in mortgages. It isn't that they no longer want to put anyone into any loan and then sell it to some sucker. They just can't do it anymore. It has nothing to do with taking anyone's "advice".

I do believe that people who got in over their heads - either by buying a home they can't afford or by constantly running up their cards and refinancing until their mortgages became to high for them to pay - are responsible for their own actions. You spend more than you make and you will lose everything.

But that doesn't mean that the banks gave them these loans to help them. They gave them these loans because they could make money selling those loans at the time. They really didn't care about the eventual implications.

Sully,

Banks were in love with the fees they can charge on these loans.

In very few instances you can find where the terms were switced prior to closing. You can google articles about borrowers that requested 30 year fixed and when they got to closing it was interest only or an ARM. What do you do then? I walk away. They should have as well, but not everyone is smart enough to smell when they have been had.

Money - you are earning 20K a year, you buy a 250K house, guess what, eventually you are going to figure out that you cannot afford a 250K house, did it stop them from buying them?

Posted by Litlebritdifrnt at 2007-09-22 11:07


I'm really curious, are you just making a point by exaggerating or do you have any evidence that people making $20k/year were actually approved for a $250k mortgage?

Posted by katieberry

* * * * *

Not to be touchy, but he didn't say they took a $250k mortgage, just that they bought a $250k house. And with a big enough down payment, it's possible with any kind of income.
Point taken, though.

Congress nor the President is dealing with the National Debt. Deficit Spending has gone on long before Bush and the current Congress. The past few years may be the worse we've ever seen, but not first time nor the last.

Spending properly and paying down the debt of previous administrations has never seen any effort.

You have to go back very far to find the US without a National Debt.

The creation of money belongs in the hands of Congress, not banks. In no way should the gov't ever borrow money and pay if back with interest. It should borrow upon itself.

It would be interesting to know which banks were most guilty of taking on such high risks. I bought my first home about a year ago; I went to 4 or 5 banks and only one mortgage officer really discussed ARMs (and he did make some valid points), the rest generally pushed traditional mortgages, and always deferred any decisions to the "underwriters".

What really surprised me about the whole process was how VA Loans were not nearly the bargain I was expecting (my income was high enough to go with a traditional mortgage).

Does anyone happen to know if an ARMs requires PMI? It seems like it's the insurance companies that offer PMI are the one's that are really going to take the hit with the current crisis.

Does anyone happen to know if an ARMs requires PMI? It seems like it's the insurance companies that offer PMI are the one's that are really going to take the hit with the current crisis.

I bought my first home in 1994. I had an ARM and PMI. At the time any mortgage with less than 20 equity (represented by the lesser of the purchase price or the appraisal) required PMI and I thought it was pretty expensive.

The vast majority of these larger loans I'm aware of were made without PMI by utilizing a loophole where one could take out the mortgage and immediately take out a 2nd mortgage to cover the 20% equity requirement. The borrower still has the same obligation but "technically" they have a 80/20 ratio on the original mortgage. Banks knowingly performed this act all the time.

Deficit Spending has gone on long before Bush and the current Congress.

Posted by Petrous at 2007-09-24 02:04 PM | Reply |

70% of the current national debt has been created since Reagan took office.

Not to be touchy, but he didn't say they took a $250k mortgage, just that they bought a $250k house.

Posted by rightisright at 2007-09-24 01:55 PM | Reply

Yeah, loads of people that earn $20k per year have a couple of hundred thousand laying around.

Just saying. The poster's original point was that hundreds of thousands of people bought homes that weren't justified by their incomes. Which is certainly true.

"You can google articles about borrowers that requested 30 year fixed and when they got to closing it was interest only or an ARM. What do you do then? I walk away. They should have as well, but not everyone is smart enough to smell when they have been had."

726 - There are two major reasons why people signed those loans (in addition to being suckers):

On purchases, the borrower stands to lose a large deposit if they fail to close on the house in time. The seller is not going to care that you got involved with an unethical loan officer. There is also the fear of "losing the house".

On refinances, the borrower is often in a situatiin where they desperately need the cash out they are to receive. They probably also failed to pay their mortgage during the month the loan is closing, using the loan officer's advice. If they don't close on the loan, they are going to have a late pay on their current mortgage, making the terms they will be offered next time around even worse.

If you call a cheating loan officer to complain, they will just tell you that the bank changed their underwriting guidelines and this is the best they can do. They can't make money on the deal if they give you what you were promised so they'll let you walk away if you refuse to close under the new terms. Most people don't know what recourse they have in this case. In my experience, borrowers who really nickel and dime to the point where an honest broker can't make money by servicing them will usually end up with a dishonest broker who tells them whatever they want to hear until closing time.

I'm not saying anyone should sign when they are being cheated at the table (although in my state you get 3 days to rescind anyway). I would not sign. But it isn't as clear cut as you might think.

The vast majority of these larger loans I'm aware of were made without PMI by utilizing a loophole where one could take out the mortgage and immediately take out a 2nd mortgage to cover the 20% equity requirement.

----

I financed with 80/15/5 to avoid PMI. 80 and 15 loans are fixed, of course.

Deficit Spending has gone on long before Bush and the current Congress.

Posted by Petrous at 2007-09-24 02:04 PM | Reply |

70% of the current national debt has been created since Reagan took office.

Posted by 726

Who controlled the House & Senate during that 70%?
The President doesn't write bills.

Everyone, yes it was an exaggeration, the point I was trying to make (as pointed out by righty) is that people simply bought houses that without the lower rate of the ARM they could not afford. Had they gone with a 30 year fixed they would have had to have bought a cheaper house. It is a sad fact that some people simply do not earn enough, or have decent enough credit to buy a house. Here in my area of NC the average price of a new build is $250K, that is way out of the budget of the majority of people in this area particularly active duty military (Sgt and below). That is why our housing market for pre-existing houses 200K and below is on fire right now, and homes in that price range are on the market for about 1 week, unfortunately that is a limited inventory and eventually larger sections of our local population will be priced out of the market.

The crisis in the Western part of the State is similar in that teachers who teach in the Charlotte (Mecklenburg County) school system have absolutely no hope of buying a home there, they are all out of their price range, so the teachers are leaving the system in droves and going to work in systems where they can afford to live.

The solution to this is not to mess with the mortgage system, it is to encourage builders to build AFFORDABLE housing as opposed to McMansion after McMansion.

I could afford to sell my current house and buy a 3,000-5,000 square foot home but choose not to. My reasoning is that I would rather own what I have now than go ito great debt for a bigger house.


That's exactly where I am 2112. I live in a modest house (about 1650 ft^2) with a 15 yr mortgage I outright own another that I rent. I paid it off in 15 years. I never allow more on the credit card than I can pay off in a month. Likewise, I never buy anything I can't pay cash for. I have lived fiscally responsible and for a lot of my life I didn't have half what most 25 YOs have today.

So I'm going to have a hard time bailing out this "it's all about me" generation just because I have the money to do so because live fiscally responsible and they don't.

To all the responders who said things like, "Well what about corporate bailouts?" and even those who were bold enough to hint that I support such a thing.

What about corporate bailouts? They are wrong, too. So don't try to connect my fiscal responsibility to the corporations who are taking advantage of laws passsed by legislators that you (we) put into office. I don't own a corporation and I have not asked for a dime in behalf of one.

225,000 is the equivalent of saying there are only 2 million illegals in the country.

mark this post, that number will... JUMP! JUMP!

rir - we personally know a couple who purchased a home (1,100 sq. ft.) in a poor neighborhood on a small lot for $185,000 in norcal with a combined credit score of 650 and between them make less than 60k.

some people are just so desperate to own a home.

some others we know have refinanced their existing homes in the same town to the hilt and used their homes as lines of credit to buy boats and vacations.

in the last couple of months, many of them have gone to refi and found their homes are worth 1/5 to 1/4 less than when they refinanced last year.

good thing there are no multi-storey buildings for them to jump out of...just think not being able to go on vacation this coming year...oh. my.

actually, Most banks would have made that 250k loan making 20k a year. If you had a good credit score of 680 and were self employeed (owned a restaurant, plumbing biz etc.) and you stated that you made 90k in 2005. The banks took that no problem. You had good credit which means you werent foolish with money in the past. IN fact you could have gotten the same low rate as someone with full documentation of thier income.

For instance, how do you know that the plumber might have made 140k the year before and was traveling in 2005 so he didnt make as much. Should he not qualify just because you dont think he made that much? That was the thinking anyway... Now they wont go over 90% loan to value with stated income which is probably much better. Just not good for people with super credit that got an adjustable at 95% ltv that wont be able to ever refinance thier loan even if they can afford it. They are just stuck now...

oh and whoever thought banks were in business to 'help' people. Or that anyone is in business to 'help' people . then you are probably that gullible person that got taken advantage of..