Posted on 09/25/2008 5:33:24 PM PDT by Checkers
If you want to get a good handle on the kind of toxic waste Hank Paulson and Congress think we need to buy, read “Behind the Housing Crash: Confessions from an Insider” by Aaron Clarey (better known as “Captain Capitalism”). Clarey was an analyst for several banks in Minnesota from 1998 to 2007 and he witnessed the utter destruction of lending standards over the last decade.
Clarey makes an important point — there would be no crisis if individuals and businesses who had promised to pay back their loans were doing so. The vast majority of those who are not paying back their loans are not victims – they are irresponsible. There are also a lot of careless banks, lenders, politicians and investors who enabled unworthy borrowers to get these loans. Why American taxpayers must pay for this nonsense still has not been adequately explained by the White House, the Treasury or leaders on Capitol Hill.
(Excerpt) Read more at corner.nationalreview.com ...
Yes, for these loans that require a small down payment, the buyer just treats the payments as rent. When the rent gets too high, they just stop paying and move. No great loss.
The "idiot buyer" (Joe Sixpack) got to live in a nicer house than he could afford for several years. Then he declares bankruptcy, turns in the house, but gets to live there from 6 to 18 months without paying one cent. Then he gets to purchase or rent a new home at a huge discount.
The "idiot lenders" (the ones with the MBA's) get the government to take over the responsibility for there reckless lending programs.
The idiot politicians have been on the banking lobbyists gravy train since day one.
Who is left ......... Ah, yes, you and me - the ones who were frugal, purchased what we could afford, stayed within our limits and tried to build for the future. We are the ones who will pay for all of this. Everyone comes out just fine, except us.
Now, we have to re-examine the question: Who are the rel idiots in this mess?
It can matter if you are buying, too. Let's say you are purchasing a home for $200k but there are a lot of foreclosures in the area. The bank owned properties often sell for below market value. This drops the value of the house you are buying. If it goes too far below the purchase price, this affects the amount the bank will loan you and you have to make up the difference with a larger down payment.
And it can hurt if you want a home equity line of credit. Our house lost $50k in value due to numerous foreclosures in the area. The banks were selling them for very low prices. So, that decreased the amount we can borrow on the house.
Low prices can hurt a lot of people. I speak from experience on both of the above.
Anyone heard this tid bit:
Economic crisis President Bush mortgage speech 2002
http://www.youtube.com/watch?v=eW9viaJatpo
In a lot of places they just laugh at you and tell you to wait until the next reappraisal.
actually if the 20% is a second mortgage made on the excessive value of the house.
Here is how it works.
The house is REALLY worth (for easy math) 80k.
The bank get on of their “approved list” of appraisers to value the house at 100k.
The buyer goes to a down payment lender who gets a second mortgage for the down payment of 20k.
Thus the home is 100% loaned, the bank bundles the loan with other simmilar high risk loans. (because the valuation is a total fake to 100% loan to value which some banks are not allowed to make)
some of these buyers are illegal aliens used as straw men to generate raw material for bundles.
As you know a mortgage is lent against the value of the house. The bank accepted the appraisal of a professional appraiser independent of the bank and the buyer. Banks keep folks on staff who bird dog appraisers to make sure they are honest.
If the buyer can't make the payments and defaults, the bank takes possession of the property.
They knew the risk when they accepted the appraisal.
Defaulting on a mortgage is NOT bankruptcy, nor is it good public policy having folks homeless on the open highway.
Now, why would another bank mortgage a different property if someone had defaulted on a higher mortgage? Well, because maybe they can pay the lower mortgage for a less costly home.
That way the bank gets at least one home off its books and starts receiving income for a mortgage.
Homes are not meant to be short term investments. It is only since the stock market made big gains and then became erratic and investors started looking around for other places to put their money that people started viewing their family home as an investment.
I’ve seen one hundred thousand dollar swings in real estate in So. Cal, up a hundred in one year and back down the next. You just have to look at the long term and hope that you don’t get transferred or lose your job on the down turn.
Why would the guy declare bankruptcy if all he wants to do is unload a mortgage he can’t afford? You just move out of the house and go someplace else. There are plenty of cheaper houses around these days. Should be no problem at all.
Here is another problem.
Countrywide has outsourced their phone banks to india.
It is IMPOSSIBLE to negotiate or deal with those “operators” outside of their script.
it is all sad.
You also have short sale negotiations where there is no concept of REAL valuation.
It is just easier to go bankrupt rather than deal with non-english speaking and delusional note holders.
My wife and I are thinking of buying a home in East Tennessee, do you think now might be a good time to start looking???
So he is trying to pawn off 100% of the problem on the defaulters (which is a big chunk, but not the whole issue). What about the $Billions of basically phony paper known as derivatives that were bought and sold without the REAL capitol to make good on that trash paper. When those funky sales were made while trying to use 80:1 leverage... it doesn’t take but a small straw or hiccup to bring the whole fragile ball down.
The derivatives are where regulatory function failed completely.
Maxine Waters on Cavuto today, and his sacrastic quips which went over her head, were absolutely priceless. She was lambasting banks who don’t “simply” lower someone’s payment when they say they can’t afford it!
You can't just walk away from a mortgage. You still owe the bank.
Without a bankruptcy, the debtor still owes the bank for any deficiency (debt - auction sale price and expenses). Bankruptcy eliminates this debt as well as all of the credit card debt and nearly all other debt.
I saw some of that interview today too. I wrote down something she said because I wasn’t sure I heard her correctly.
This is how it goes down.......
We sold our home in Ohio and moved to a new home in SC. When we went into our lender for the permanent loan they only counted my husbands SS and none of my income (which was the bulk of the repayment) I pointed out that my husbands SS was $200 less than the payment, she said don’t worry about it, the computeer ok’d it. Thank God we are responsible adults aned meet our obligations, but how many out there just let their homes default because they could?
I blame Freddie and Fannie , who allowed computers to make common sense decisions which scewed results of input;........what a mess
I remember like yesterday the massive outcry by mortgage lenders begging and pleading with the government not to be forced to have to make those loans, while they raked in their huge fees. They complained so loudly, didn’t they? I mean the poor dears were just forced by the government to accept a waterfall of outrageous fees while they pumped through bad mortgage after bad mortgage. Such innocent victims of all this...
All that is my sarcastic way of saying, the government didn’t force the market to do a thing. The government didn’t invent derivatives. The government didn’t force leverage at 40:1.
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