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happiegrrrl
Trad climber
New York, NY
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Feb 24, 2009 - 09:19pm PT
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"Whatever happened to common practices such as carefully evaluating how much you can afford in terms of the down payment, monthly payment (including taxes and insurance) and overall interest paid over the life of the loan. You should not buy a home that requires a monthly payment — now or when the payment increases if it’s an adjustable rate loan — that is more than one-third of your monthly income."
It USED to be that, when you went to the lender, they went over your documents and told YOU how much they'd lend you. They wouldn't MAKE loans to people beyond the formulas they had established, depending on the person's financial records. They TOLD the borrower what they could borrow.
It wasn't so much that people were more responsible "back then," but that the lenders wouldn't accept the risk of lending the money. When the concept of packaging and reselling the mortages evolved, that level of risk to the lender went right out the window. No longer would they be stuck holding the bag, if the borrower defaulted.
Or so they thought; this financial disease has shown to be systematic, and we're barely yet beginning to see the symptoms of it.
I bet you a good number of the lenders who worked with the borrowers in the last 5 years wouldn't have been able to explain the terms of the loans they made any more than the people they made the loans to.
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pip the dog
Mountain climber
planet dogboy
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Feb 24, 2009 - 09:50pm PT
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Bachar,
Two things that might be of use to you:
[1] The mortgage relief portion of the new federal stimulus bill will help some mortgage holders in situations like yours. The as of yet unanswered question is what the specific requirements will be to define specifically who will qualify for that assistance. The specific regulations (and hence the full answer) are going to be released on March 3. Until then all anyone can do is offer best guesses, and I don’t think that is very useful.
So watch the news sources carefully for a coherent definition in plain English as to who specifically qualifies for mortgage relief, and what specific relief each of them qualifies for, in the days following March 3.
~~~
[2] I have friends in positions similar to yours who have found their local county treasurers/tax assessment office a very good source for useful and unbiased info – and it is free. These offices have pros on staff whose job it is to track (and in some cases implement) available mortgage relief. And while they know the banks and what they are doing, they don’t work for banks or other lenders. They should be among the first to translate the federal programs regulations once they are issued on March 3.
My friends have no specific experience with Mono county (they are in other states).
Here is the contact info:
Mono County Treasurer-Tax Collector Brian Muir
P.O. Box 124
Bridgeport, CA 93517
[voice] (760) 932-5494
[fax] (760) 932-5481
[email] bmuir@mono.ca.gov
Hope this proves useful. I’ll send along anything else I learn of that seems actually useful.
All the best, great one.
^,,^ (dogboy, michael, pip… whatever, I answer to all of them)
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bluering
Trad climber
Santa Clara, Ca.
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Feb 24, 2009 - 10:12pm PT
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I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?
Anybody?
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happiegrrrl
Trad climber
New York, NY
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Feb 24, 2009 - 10:38pm PT
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Bluering - I have been thinking about that particular issue. It seems that some are suggesting, as you, that it was banks being "forced" to loan to minorities and low income folks that has caused this credit crisis.
1) I believe the laws referred to were put in place a hell of a lot longer ago than, say, five years. Isn't that true?
2) If it were the minorities/low-income level people who were the cause of this fall out - how come it wasn't occurring on any level of concern until only this last few years? And how come it is people who wouldn't fall into those categories that are reporting the problems now?
3) What yearly salary are we talking about, anyway, when we say "low income?" I'm doubting it's $60 - $80K, and isn't that where the income levels of the majority of defaulters range?(totally pulled that outa my butt - but I believe it may be accurate. Feel free to refute it, anyone, with something they can document!) That's hardly the "low income" loans that were put in place since the 1980's.
4) If the problem lies in those pesky poor people getting handed loans because of US law - why is the housing market collapsing in other countries as well?(re: http://www.guardian.co.uk/business/2008/mar/31/northernrock.banking1);
I admit that I am not knowledgeable on the details of finance and the crisis we are in. I just did a tiny bit of surfing, and found a blog with this bit:
b. A safe mortgage is a maximum of 3 times the buyer’s yearly income, but mortgages have been 5 to 10 times incomes in the last few years, which have eliminated the current prospect of housing market.
The source: http://crekcm.blogspot.com/2008_12_01_archive.html
I note that because it specifically refers to "the last few years," which ...sort of coincides with the time frame of the "buy now or never, your home is guaranteed to increase in value" media/advertising ploy that was touted. Touted BY lending institutions, not by "anything for a story" National Enquirer writers.
I bet you there are a LOT of Supertopo folks suffering in silence because of the hateful abuse they expect to endure if they let others know they're in trouble. I don't know about you, but I would rather not find out so-and-so committed suicide one day, and it comes out they were in financial trouble and kept it to themselves. This is QUITE a possible scenario. So - for f*#k's sake, people.... THINK.
United we stand, and divided we fall.
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Lynne Leichtfuss
Social climber
valley center, ca
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Feb 24, 2009 - 10:38pm PT
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For some it's about trying to wait out this sheee until things get better.
Things Will Either:
*Get Better.
OR
*Stay the Same for a year or two....Hope not !
OR
*America will disappear as a major player on this planet.
WHAT WE CAN DO.....
*Take what we have and link with others to save and help each other best we can.
*Learn a new, better and more healthy life style. Do with less, spend less, grow your food, trade for goods, cut back on everything.
*Kinda like removing a tumor that grows in yo body and starts to take over. That is what all the sheee we have collected and let control our lives is. Lynnie has been pruned big time and it hurt, but now seeing the results.....
Just a Thought. Peace and Joy to You All, Lynne
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bluering
Trad climber
Santa Clara, Ca.
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Feb 24, 2009 - 10:54pm PT
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Happiegirl, Google the 'community reinvestment act' and look under the biased Wiki page. Scroll down to the amendments to the act from 1990 through 2002.
There's your problem.
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stevep
Boulder climber
Salt Lake, UT
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Feb 24, 2009 - 11:42pm PT
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Bluering, the CRA was only a small part of the issue. And please show me some stats that minorities are any more represented in foreclosures than whites.
I don't really have any sympathy for people who got in way over their head, but greedy brokers, flippers, and finance guys all also ignored risks and helped cause the problem. CRA had nothing to do with repackaging bad mortgage debt into overly risky investments. Nor did the CRA have anything to do with a lot of brokers selling condos to investors in places like Palm Beach or Las Vegas.
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Lynne Leichtfuss
Social climber
valley center, ca
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Feb 24, 2009 - 11:55pm PT
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stevep, there are people "out there" that bought homes with regular mortgages. The problem is the economy and loss of jobs. Who could have known this would come down?
Best thing people can do now is help one another survive...hey, that's what jesus said, help yo neighbor. If we all pull together the less loss.
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dirtbag
climber
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Feb 25, 2009 - 12:15am PT
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"I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?
Anybody? "
Hmmm...not sure I'm the best one to answer since I blamed both, but Drug dealers and loan sharks are a poor analogy. Drug dealers get paid on the spot and have an interest in getting their customers hooked on their product. Banks are supposed to be interested in maintaining their business, and not lend (meaning get paid later) money to people who realistically have no chance of paying them, such as the bus driver. But their business models didn't work well in that respect. They got greedy and gave to people who shouldn't have them. Banks are supposed to be the really, really smart ones in these transactions: they sure didn't act like it.
So why are you, bluering, so willing to give banks a pass?
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 25, 2009 - 10:15am PT
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Blue-It's a no brainer that people who borrowed more than they can pay are culpable. But, what leverage do banks have in getting their money back on foreclosed homes? As far as I know, the folks who foreclosed credit ratings take a big hit, but big deal. So you're looking at losing $200K or $300K on your home or walking away with a bad credit rating...Hmmmm...tough decision!
Banks weren't forced into this Blue, their greed to make a quick buck off off naive homeowners led to this housing meltdown. Greed trumps responsibility each and every time!
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darod
Big Wall climber
South Side Billburg
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Feb 25, 2009 - 10:30am PT
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bluering, spin, spin away...
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Feb 25, 2009 - 01:16pm PT
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I guess I'm really just trying to understand why housing prices dropped so drastcally. Other wise I could just sell my house.
Here's some interesting stuff about how lending really works....an excerpt from
Fiat World Mathematical Model
by Mike "Mish" Shedlock
Ponzi Financing
Borrowers have to pay interest on the amount borrowed. However, the interest and the debt cannot possibly be paid back except by an ever expanding Ponzi scheme of lending. That scheme can last only as long as everyone believes the debt can be paid back and the market value of that debt keeps rising.
It's a faith based system in which banks extend loans and hold the credit on the books (or in many cases off the books in various structured instruments). The banks are thought of as being well capitalized as long as the value of credit on the books in relation to their reserves meets some ridiculously low minimum set by the Fed.
This is how the system works, using the term "works" loosely.
Day of Reckoning
The day of reckoning comes when asset prices start falling, defaults soar, and the value of credit on the books starts plunging. That day of reckoning has arrived.
And if leverage is high enough, as it was with Bear Stearns and Lehman, the institutions are wiped out overnight. Citigroup (C), Back of America (BAC), Fannie Mae (FNM), Freddie Mac (FRE) and AIG are essentially in the same position of Lehman except the taxpayers via the Treasury are funding the bailouts.
Read the article:
http://globaleconomicanalysis.blogspot.com/2009/02/fiat-world-mathematical-model.html
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JLP
Social climber
The internet
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Feb 25, 2009 - 01:34pm PT
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"I guess I'm really just trying to understand why housing prices dropped so drastcally."
I think the correct question is why did they rise so fast. Buy low, sell high. Most do the opposite.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 03:43pm PT
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i have been avoiding this site for the simple reason that i am so sick of seeing the right wing drivel stack up around here- just as it has in this thread.
blueguy wants you to blame the minorities?
that's just great.
so rich fat white bankers destroy the economy by way of massive over-leveraged bets on the unlikely continuation of ongoing expansion of an obvious bubble in the wider US housing market, and it's all the fault of unedumucated blacks and browns... ain't this a great country?
(now i will try to make this simple for all the racists, opps- i mean all the "republicans"- ya'll try to keep up).
i'll tell you why minorities were over represented in the subprime market- because there are so many minorities who are gainfully employed and would/will never make enough to be anything but renters, and that represented a new market for banks and mortgage finance companies to exploit. they needed to expand into new and available pools of borrowers because they created so much demand for the securities they were selling, often internationally, which were essentially large groups of loans that had been "bundled" into something that could be bought and sold, or invested in by others.
why would banks do this?
why would morgtage companies sell loan products to people who could not afford them?
1)because they had their republican pals (read: phil gramm http://www.slate.com/id/2194933/ , former TX senator and john mccain's primary financial policy advisor for much of the '08 campaign) slip in some language to an important bill, at the very last minute, and in the last months of clinton's 2nd term, that erased longstanding legal barriers (which had been put in place after the great depression) and allowed the union or merger of separate types of financial institutions, like insurance companies, banks, and mortgage finance companies. "deregulation".
and 2) the above allowed them to offer loans without consequences if those loans failed. that simple fact changed everything in the mortgage business. now everyone got paid based on volume. they made money on the loans no matter what the quality of the loan was, and they made lots of money if they made (and sold) lots of loans. that gave all the various lenders a financial incentive to lower the requirements upon borrowers, and they of course lobbied the republicans (who were in power in both the house and senate for 6 of the 8 yrs of the 2 bush terms) to lower their regulatory standards and more easily offer loans and guarantees that grease the skids in the mortgage industry. that was the reason unscrupulous lenders- even some so-called "predatory" lenders- targeted new markets for their mortgage products. it had to be so because they needed more and more loans to bundle into more and more securities, and then sell to eager investors. and internationally, everyone wanted a piece of the US housing market, simply because it was so successfully growing for so long. WaMu, for example, had been a conservative lender for decades, but in the bush years became widely known for their large volume of risky loans. why? profit incentive, period.
so why is this political?
make no mistake, "they" did this on purpose, and not because they thought it would destroy everything, but because they knew it would allow them to make lots of money. that's all they (republicans) are about- making all the money they can, period.
and by the way, that republican rallying cry of "deregulation" is simply the effort to allow people, companies, or even industries to do whatever they want to seek a greater profit, and eventually that just equates to gambling. gambling that the pollution won't be that bad, gambling that the lead paint in toys won't be a problem, gambling that untested drugs won't have unintended or unknown side effects on the public, gambling that the food we eat will be safe even if there are fewer inspections of food processors, gambling that highly leveraged bets on unsustainable expansions won't go sour, these are all risk/benefit or cost/benefit calculations that "the market" might make a different evaluation on than the people or their elected representatives might.
btw- those (of you?) who are ideologically bound to the republican party for some other reason than making all the money they can are sheep who are just as abused by them as the religious right has been. but truth be told, most republicans openly admit that the GOP drumbeat of ever lower taxes (thus making more money) is their primary attachment to their party. so interested in that promise are most that they don't even care if the "lower taxes" mostly go only to the very wealthiest americans (psychologically they apparently believe they will someday be worth hundreds of millions of dollars).
so why was republican ideology to blame for all of the subprime mess? because they deregulated the banks with a wink and a nod, and they made gold from straw with the statistics on increased home ownership in america. the sub-prime fueled expansion of home ownership during the bush years allowed "them" to argue that flat or even decreasing wages, coupled with the erosion of labor unions, workers rights, and employee benefits in general, were not indicative of an economy that was unfair or unkind to the middle class and disproportionately skewed to the advantage of the wealthy, whose income and net worth continued to expand at rates even faster than during the regan years (which had previously represented the fastest transfer of wealth to the top 1% within any society on earth since the period immediately preceding the french revolution).
seriously, how many times did you hear bush chime in about "home ownership in america is on the rise!" ? remember "the ownership society"? that was all they could offer the working public. in the absence of the housing bubble, there was no economic growth in america in the bush years, so they fueled phantom economic "growth" with home equity credit, and they filtered the new cash off the top in the form of tax cuts for the wealthy.
it's really not that complicated.
bleeeech-
nevermind that.
you are right- it must be all those damn uppity negroes being irresponsible, all trying to buy houses they cannot afford!
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Roughster
Sport climber
Vacaville, CA
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Feb 25, 2009 - 03:51pm PT
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Great post Matt
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dirtbag
climber
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Feb 25, 2009 - 03:53pm PT
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Go Matt, go!!!
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 25, 2009 - 04:27pm PT
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I'd say that's more realistic, Matt. But, I'll have to agree with Fatty, it wasn't just the repubs fault, dems were just as compliant in this housing "Ponzi Scheme". Where do we start holding people accountable...I'd say at the top (i.e. CEO's who gained the most from this mess) and not the bottom...
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apogee
climber
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Feb 25, 2009 - 04:29pm PT
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Matt-
Nevermind fattrad- he doesn't just drink the koolaid, he brews it himself.
Great post. Keep up the good work!
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TradIsGood
Chalkless climber
the Gunks end of the country
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Feb 25, 2009 - 04:29pm PT
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Matt, hate to let you in on this, but one of the biggest pieces of sub-prime is home equity loans (second mortgages). That is where somebody uses the equity that he built up in his house to pay off his credit card or buy things he "needs" to have now.
Maybe you were thinking of Alt-A, also known as liar loans, no income verification loans, etc.
Not sure where you got the idea that racism had anything to do with the problem. Geographically, what areas have been the most punished? Hint, one is Florida. You might live in one of the others.
Do you think minorities are more likely to make bad borrowing decisions than non-minorities?
Do you have any evidence that blacks and browns are "over-represented"? If not, then all your argument is wasted.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 04:30pm PT
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DadIsBad-
I "got the idea" from upthread posts that sought to blame minorities for taking loans they could not afford.
specifically:
"I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?"
As to the rest of your comment-
The presence or lack or racism on anyone's part does not in any way impact my argument, which is that the engine was a deregulation enabled bubble that rose on the opportunity for banks and lenders to make loads by selling bundled loans, an opportunity that was put in place on purpose by a republican senator's late amendment. Please recall how many reports we once heard about investors who didn't even know their investments included sub-prime paper.
FT-
While it may not be that simple, it's also not that complicated.
You also believe we should have invaded Iraq, and that we did so because we were truly afraid of them, as opposed to being interested in exploiting their resources and hosting our armies there for several decades. I suppose you would make the statement: "it's not that simple."
I beg to differ.
more UBS/Phil Gramm info may be on the way to a news stand near you:
http://www.nytimes.com/2009/02/25/business/worldbusiness/25ubs.html
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