Wachovia, Capital One Say Credit Conditions Worsen

http://www.cnbc.com/id/21706172 ^ | 11-9-07

[BUDDYCAT]

Common sense lending went by the way side when banks decided to lend off your "credit score". Some arbitrary number that no one can explain what it is based on, that can change one day to another, and has allowed people to obtain mortgages with virtually no credit history.

[SoothingDave]

The kind of idiot who knows that the laws will now come down on them harder for not paying the credit cards than for defaulting on the mortgage. Foreclosure takes time, a credit card company laying waste to your FICO score is nearly instant.

How do the laws "come down harder"? What laws are you talking about? I realize your credit score will be crap, but that's bound to happen anyway when you have more that's supposed to go out every month than comes in.

[Hydroshock]

In many states, once that house is sold at auction you have no more liability for the debt, this is state law. Now federal law gives you liability for taxes on the difference of what you owed verse what it was sold for.

[Nervous Tick]

Outstanding picture. Profound then and every bit as valid now.

I’m going to print it out and hang it on the wall.

[CaptainK]

I hear what you're saying. I've seen my FICO score rollercoaster month to month for the most capricious reasons.

Arbitrary is the word.

[RSmithOpt]

Very good analysis of what's at play. Most consumers are ignorant of the orchestration played by folks such as Buffet, Soros and the mega hedge fund managers.

As a response to your question:

"How can the economy expand if we don't have access to cheap credit ?

It's called real growth and supply and demand well managed by honesty of work, quality of work and efficiency.

Illegal immigration aside and immigration as a whole, real economic growth is tied my previous statement and the increase in population. A smaller government and the government running a balanced budget is a big key to to have cheap credit so industry and consumers do not have to compete for the dollars the government borrows.

[Nervous Tick]

>> You need to turn off the computer and get to work.

Ouch.

Yes sir.

(soon as I just run through the rest of the threads real quick like...)

[steve8714]

More than ahead. I just want to settle cheap in the bankruptcy.

[Condor51]

I was being facetious as to the Filing Bankruptcy comment (too financially flush to even consider it).

My point was Capitol One deserves all the non paying credit card holders they now have. They're almost like drug pushers

Here take this it's free, you'll like it and you need it. Come on take it, take it, take it. It's good for you, come on take it.

And all that Capitol One Junk Mail DOES seriously pi$$ me off. I'll even bet I get more in today's mail. The last junk mail packet came Tuesday so they're due.

[EVO X]

www.optoutprescreen.com

[mylife]

What ever happened to common sense lending?

They just got plain greedy

Whats in your wallet?

[mylife]

all that Capitol One Junk Mail DOES seriously pi$$ me off.

I can not abide their stupid commercials with the plundering vikings and barbarians. They are on constantly. How huge is their advertising budget?

[khnyny]

The 2005 bankruptcy laws being changed are a huge factor in this fiasco, but, here’s another interesting aspect: Wall Street Buy Back Agreements.

Mortgages Sold To Wall Street

“To reduce the risk of each individual mortgage, lenders package mortgages together and sell them on Wall Street. For example, a lender may sell a package of ten mortgages to Wall Street investors. The investors will benefit by collecting the mortgage interest. Of those ten, two may be subprime or of a higher risk level. Due to the fact that there are eight other mortgages packaged into the deal, it reduces the risk.

What has happened to many banks is that in their agreements with Wall Street investors, if there is a certain default ratio, they would need to buy back the loans. With the declining housing market, adjusting interest rates and other market factors, the default ratio has increased significantly. Wall Street investors enforced the buy back agreements which made banks buy back billions of dollars in loans. This effectively eliminated the bank’s ability lend and put them into bankruptcy.”

[khnyny]

http://www.freerepublic.com/focus/f-news/1923344/posts?q=1&;page=53#53

Wall Street buy back agreements. Oops.

[NVDave]

100% correct — those buyback agreements were the cause of several sub-prime lenders going bankrupt and out of business earlier this year before the really big turds starting hitting the turbines.

Many of these sub-prime lenders in California were operating on pretty tight margins and had no reserves to speak of - the owners were mining the books for their own benefit, and they didn’t hold any of their own paper. They just bundled and sold it to Wall St in vast quantities.

So when the investment banks and hedge funds started to see the default rates go above the covenant levels, they jammed the paper down on the sub-prime lenders, who would fold within a week of the jam-down.

[Unknowing]

I’m doing my best to give Capital One what they deserve: filing a dozen bankruptcy cases per week, all year.

[packrat35]

You’re making too much sense. Some here think everyone is wealthy and can pay cash for everything.

While I no longer have credit cards myself, some here REALLY don’t know how tight many familys operate at, and the doubling of payments along with the increased costs in food and energy bodyslammed many familys.

Interst rates went up to 33% when they made a late payment and now they are buried.

[doc30]

don't doubt what you're saying, but what kind of idiot pays off unsecured credit cards before he pays his mortgage? You got to have priorities.

The morons in the federal government who rewrote the bankruptcy laws are the idiots. Under Chapter 13, credit card debts get first dibs on payment. Mortgages got shoved to the back. So the court orders you, through congressional mandate, that you credit card debts are a higher priority for repayment than your mortgage debts.

What the gov't did was double everyone's minimum monthly payment. Which crunched a lot of people into choosing between mortgage and utilities versus credit card bills. Guess who loses out in that situation?

The problem is that under the new bankruptcy laws, the credit cards still need to be repaid, but if your home is foreclosed upon, you can get out of that debt. The changes in the laws were really, really stupid. It does not make any sense to have someone forced out of their home to pay credit card bills. The credit card companies could have saved themselves from a mess of their own creating by not extending credit to people who cannot afford to pay it back. Now, it s the mortgage companies that are getting screwed because they cannot get what is owed on property when they foreclose. The irony is that the these lenders are frequently one and the same. The problem is that the bankrupotcy laws, in a very unintended way, are screwing up the whole economy.

[doc30]

After the changes int eh bankruptcy laws made it nearly impossible to discharge CC debt, while the law allows you to walk from your house scott free in many state.

Not in FL. If you walk away from your house through foreclosure, you owe the difference between what the bank gets for it and what you owe on it, plus the bank's legal costs. It happened to a friend here and he wound up owing the balance plus $50K in legal fees. And she got half her paycheck garnished to cover it.

[aimhigh]

Wall Street buy back agreements.

This a piece of the puzzle I wasn't aware of. So how did the European banks get hit so bad? Did they buy the mortgages without buyback agreements?