Why Did Foreclosures Happen?

The Provocateur ^ | 07/04/2009 | Mike Volpe

[fiscon1]

Stan Liebowitz took on this question in a study he headed and he summarized his results today in the Wall Street Journal. He makes this simple conclusion: more than anything no or negative equity caused the burgeoning foreclosure crisis.

[SnakeDoctor]

People bought houses that exceeded their means, and didn’t pay the mortgage.

Blame both the consumer for buying a house that they couldn’t afford, and the bank for making an unjustifiable loan to someone for a house they couldn’t afford.

SnakeDoc

[taxtruth]

Greedy realastate agents,banks,lawyers and city/town governments blew up this mess on the false premise there would nerver be a housing crash for profit.Ask yourself this,is your property tax being adjusted?

[dfwgator]

Simple. People who should have never gotten mortgages in the first place, got them.

[taxtruth]

What about people who owned their property outright and their property taxes tripled and the cities and towns will not even readjust their tax rate?My tax rate is much higher than the current market value.

[bitterohiogunclinger]

“For instance he puts the myth to rest that sub prime loans, and stated loans in particular, were the primary cause of the crisis.”
I don't see where the conclusion that sub prime loans did or didn't “cause” the crisis is validated. Sub prime loans were a large contributing factor to both the “housing bubble”, and we were told that the “toxic” assets that were sold off as packages in “derivatives” is what caused the crisis. Bankers, politicians, and people trying to scam the system is what caused the crisis. The mere fact that there are more “high credit score” people defaulting in total is not proof of cause. It only proves that a large number of people find themselves upside down on their mortgages and are walking away. We have been, and are being lied to about the crisis, much like everything else Congress does to take advantage of the “crisis”. Follow the money. Who has been paid off? The very people that put the “Chicago Scam Artist” into power.

[2harddrive]

PROTEST the valuation. SELL it and lease it back, if need be.

[taxtruth]

Problem,the town is not willing to do that #1.#2 Who’s going to purchase your property unless you sell for half price which many people are doing in my area and they can’t even sell?There are more 4sale signs in my area than stop signs.

[SeaHawkFan]

I say artificially high demand created by very lax lending standards, the CRA which “encouraged” banks to lend to unqualified buyers, Barney Franck and Chris Dodd; and fraud committed by lenders, brokers, Fannie Mae and Freddie Mac for the sole purpose of padding their individual wallets.

Because of all this fraud, I have no moral objection to anyone simply walking away from an upside down mortgage, or the withholding of mortgage payments until the property is foreclosed. They can save the money they don’t pay for a down payment when they are forced out of the property a couple years down the road.

[whitedog57]

I study this subject extensively. Its my job!

You buy a $800,000 home with 20% down in Las Vegas or Phoenix. You have a $640,000 mortgage. Your house price plunges to $400,000 (leaving you $240,000 upside down AND you lose your job). The borrower walks away from their home or asks for a short sale. Lenders hate the first but understand that short sales are a second-best solution.

The speculators got out fast. Now Barney Frank wants to ease borrowing standards for investment properties, the exact same thing that brought out many speculators in the first place!!! [The NAR is a powerful lobby and NOT our friend]. But many of the defaults now are the upside down / job loss combo.

This will not stop until unemployment stabilizes. Period.

The jumbo market is dead for the next 5 years. And the new banking bill will kill most mortgage lending UNLESS it is through FHA or Fannie/Freddie (which may get merged into FHA).

Get the picture? Only the lower income groups will be able to buy houses using debt (and then default). All others have to pay cash.

We are in for a long decline in housing prices. Don’t believe the pundits that the housing market will stabilize shortly.

Obama said he wanted to spread the wealth around. Now people that don’t pay taxes will be the only ones to get home loans. Typical Socialist twisted logic.

[taxtruth]

I see what you mean.

[TADSLOS]

All those newly minted shamnesty Americans are gonna need homes too. Payola for voting Obama back into office in 2012.

[TruthConquers]

The credit bubble stopped expanding because there was no more suckers in the race for ridiculous loans.

Once the expansion stopped, credit was not available for loans, people could not sell their homes, business on the edge had to lay off people, and that snowball is still rolling down an ugly slope to this day.

And the disruption in the credit markets from CDS explosions. BOOM!!!

[fiscon1]

Actually, a buddy of mine says that several high profile law suits by borrowers in stated loans was what stopped the continued expansion of credit.

I have also actually found that conservatives always exaggerate way too much CRA. No one has ever explained how CRA contributed to the crisis.

A much better explanation is the loose money policies of the fed.

[whitedog57]

Bingo! FHA/F&F won’t require any proof of citizenship.

So only felons, slackers, the corrupt get housing finance. The honest, hard-working Americans have to pay cash.

Someone said hate is a strong word. I REALLY HATE Obama and the Democrats. They are destroying this country and turning it into the old Soviet Union.

[whitedog57]

CRA simply widened the blast zone. It had little to do with the meltdown. I have seen the evidence.

What DID happen was 1) Fed monetary easing, 2) No supervision on the banks, 3) massive speculation in the housing/condo market, 4) Fannie and Freddie purchasing investment property loans (up to 9 or 10 for people!), 5) Fannie and Freddie trying to compete with specialty lenders by purchasing subprime ABS, 6) Fannie and Freddie purchasing Countrywide high-risk loans, etc

The government subsidized housing to a ludicrous degree. Various lobbying groups like the NAR, HAHB and others contributed to the disaster. Barney Frank said “Everything is OK with Fannie and Freddie.”

If I had to name two, its the Federal Reserve easing rates and Fannie and Freddie purchasing too many affordable housing loans.

[RideForever]

My understanding was that the long-standing law that separated insurance from banks was repealed for the sake of ‘efficiency’. The scam occurred when Feds rolled back regulations of financial institutions. Insurance for home loans became subject to the decisions of the banks that owned the insurance companies, and over time loans were approved without meeting documentation standards and then ‘insured’ by fiat of the bank. These toxic loans were bundled up with a few good loans and sold on the (unregulated) derivatives market.

Now that We the People ‘own’ AIG, the banks are removing the ‘toxic’ loans and selling them to AIG, and re-bundling the good loans and selling them for profit on the (unregulated) derivatives market.