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Your examples are specious exaggerations, at best. Very few people, very few, are as you describe. Total nonsense. We are talking about millions of everyday working Americans, most of whom lost their jobs in the economy's crash, not millions upon millions of speculators. Find me an example of anyone getting into a $700,000 dollar house on a $40,000 annual salary. No one pulled that off. You may like to knee-jerk over a few sensationalized examples in the media. Perhaps knee-jerking is your exercise program.
As for the very small minority of people who bought to flip? Who would buy high to flip a house? Right: no one. That's not how 'flipping' works. Flipping works with undervalued wrecks that need some kind of work, at least cosmetics. That doesn't represent any significant percentage of the homes in foreclosure today. The homes that are in foreclosure are homes that owners are trying to save. Houses bought to flip were walked away from long ago. And there weren't many in the percentage of the problem we are talking about. Total nonsense.
Adjustable rate mortgages don't accelerate overnight. They are sometimes as low as three-year ARMs. Mostly they were five year. Buying to join the rest of the market by living in, and holding, a home for five years and then selling to upgrade is not nuts or criminal -- IF the market is truly accelerating, as brokers and bankers were showing buyers that it was. The crime was at the top where the designers of these programs knew full well the market couldn't continue. Joe Sixpack doesn't know from beans except what he is being sold starts when he turns the keys he has been given to drive it off the lot.
I have seen it personally. There's no getting around it - if you bought a house you couldn't afford, too bad. They got ARMs that would adjust a few years down the road - they figured they'd cash in on it before the interest rate adjusted, did some cheating on the paperwork, and voila, not hard to get a mortgage you can't afford in the long term (I saw this in court more than a few times).
Even if the value of the house was exaggerated, you should not have gotten a loan you can't afford. If it's now underwater, that's on you, not me and the other tax payers. If you can't afford it, well guess what, that's between you and the bank, not you and the tax payers.
Hell, why don't we just buy everyone a house?
This is no different than bailing out the banks - stupid people getting greedy, and now they're learning that it's fine to be stupid and greedy, because the rest of us will fix your problem for you. If we keep excusing this kind of behavior, it won't stop.
Your examples are specious exaggerations, at best. Very few people, very few, are as you describe. Total nonsense. We are talking about millions of everyday working Americans, most of whom lost their jobs in the economy's crash, not millions upon millions of speculators. Find me an example of anyone getting into a $700,000 dollar house on a $40,000 annual salary. No one pulled that off. You may like to knee-jerk over a few sensationalized examples in the media. Perhaps knee-jerking is your exercise program.
As for the very small minority of people who bought to flip? Who would buy high to flip a house? Right: no one. That's not how 'flipping' works. Flipping works with undervalued wrecks that need some kind of work, at least cosmetics. That doesn't represent any significant percentage of the homes in foreclosure today. The homes that are in foreclosure are homes that owners are trying to save. Houses bought to flip were walked away from long ago. And there weren't many in the percentage of the problem we are talking about. Total nonsense.
You must not have been paying much attention to the housing market in the 2004-2008 period. There were many, many examples of people buying $700k+ houses on meager incomes. Maybe $40k is a slightly extreme example (although I'm sure it happened), but people were routinely paying upwards of 10x their annual income for a house. They were able to do this because underwriting standards and downpayment requirements became nearly nonexistent.
Even with the nonexistent standards, cash flow problems would normally have made it impossible for borrowers to make the payments on the loans, but fortunately "interest only" and "option ARM" mortgages rode to the rescue. These products, along with house prices inflating at 20%+ per year enabling people to borrow against the equity, allowed the can to be kicked down the road for a while. But anyone with a pocket calculator could see that this wouldn't work long-term: 20% annual increases over even a ten year period would mean that house prices would multiply by 6. Over a 20 year period, they would multiply by 38. I flat out do not believe that there was anyone on earth who thought that was possible. Thus, I maintain that they were all counting on being able to flip before the party ended.
"How did a strawberry picker earning $15,000 a year qualify for a loan of $720,000? The answer, say the experts, lies in a lending industry that got too innovative for its own good."
This country and this state are trying to recover from 8 horrific years of disastrous Bush/Republican policies, and 7 years of Republican Arnold's incompetence. Stands to reason that this move was necessary. I'm sick to death of all these sideline economic "experts" here.
Pubs don't have a clue and specialize in having a foot in their mouth, while their heads are either buried in an arse or in the sand.
You must not have been paying much attention to the housing market in the 2004-2008 period. There were many, many examples of people buying $700k+ houses on meager incomes. Maybe $40k is a slightly extreme example (although I'm sure it happened), but people were routinely paying upwards of 10x their annual income for a house. They were able to do this because underwriting standards and downpayment requirements became nearly nonexistent.
Even with the nonexistent standards, cash flow problems would normally have made it impossible for borrowers to make the payments on the loans, but fortunately "interest only" and "option ARM" mortgages rode to the rescue. These products, along with house prices inflating at 20%+ per year enabling people to borrow against the equity, allowed the can to be kicked down the road for a while. But anyone with a pocket calculator could see that this wouldn't work long-term: 20% annual increases over even a ten year period would mean that house prices would multiply by 6. Over a 20 year period, they would multiply by 38. I flat out do not believe that there was anyone on earth who thought that was possible. Thus, I maintain that they were all counting on being able to flip before the party ended.
Thank you. You actually just redescribed the root of the problem. Interest only, ARMs, and you forgot the negative amortization products. And where did these handy dandy tools for cheating the system come from? Joe Sixpack think them up and bring them to the bank and say "hey, here's an idea I had on how I can cheat you out of that loan on down the road"? Who's best with a pocket calculator? Joe? Or Benny the banker?
Joe brought nothing but enthusiasm. Joe had ZERO power to do anything -- and damn sure wasn't fooling financial professionals. Joe didn't EVER write those deals. Benny did. Every one of them. Benny used Joe like a tool. And Joe fell for the hustle. "Here Joe. Here's how you can have what everybody else is getting in on. You'll get a nice place and it'll make you rich soon and you'll move up". Like selling drugs.
Anyway, that scenario only accounts for a fraction of the deals gone sour. Most of the failures are ordinary working folks trying to follow the traditions of home ownership or other consumerism by borrowing against their existing properties -- and then losing their jobs to a bad economy crashed by the criminal policies of Benny and his buddies.
Very good that you can find an example of a ridiculous deal gone bad among ten million or so. The media loves those to create sensation. We're talking about ten million homes, not a handful of sneaky deals -- which handful, by the way were only possible with complicity from Benny.
Amazing how so many are so ready to condem the little guys while letting the sociopaths off with a "that's just business".
Thank you. You actually just redescribed the root of the problem. Interest only, ARMs, and you forgot the negative amortization products. And where did these handy dandy tools for cheating the system come from? Joe Sixpack think them up and bring them to the bank and say "hey, here's an idea I had on how I can cheat you out of that loan on down the road"? Who's best with a pocket calculator? Joe? Or Benny the banker?
Joe brought nothing but enthusiasm. Joe had ZERO power to do anything -- and damn sure wasn't fooling financial professionals. Joe didn't EVER write those deals. Benny did. Every one of them. Benny used Joe like a tool. And Joe fell for the hustle. "Here Joe. Here's how you can have what everybody else is getting in on. You'll get a nice place and it'll make you rich soon and you'll move up". Like selling drugs.
Anyway, that scenario only accounts for a fraction of the deals gone sour. Most of the failures are ordinary working folks trying to follow the traditions of home ownership or other consumerism by borrowing against their existing properties -- and then losing their jobs to a bad economy crashed by the criminal policies of Benny and his buddies.
Very good that you can find an example of a ridiculous deal gone bad among ten million or so. The media loves those to create sensation. We're talking about ten million homes, not a handful of sneaky deals -- which handful, by the way were only possible with complicity from Benny.
Amazing how so many are so ready to condem the little guys while letting the sociopaths off with a "that's just business".
Joe Sixpack had zero power to do anything? What mysterious force compelled him to sign the contract against his will?
There are a lot of extremes being presented here, none of which will see much help from this new program. I bought a house for $243k and my neighbors bought a similar one 12 years later at the height of the boom for $610K. The price went up to be sure, but it was a "bubble" price that was neither justified or maintainable. In retrospect we can see the whys and hows but at the time most people couldn't, not even most "experts". The average homebuyer did what they had to. I'm not talking about buying huge mansions while making peanuts or those who used their house as an ATM to finance their high flying lifestyle, but there were normal people with normal incomes and normal 30 year old 1500 sq ft houses. When the bubble burst and the price went down to $500k or so they were stuck, underwater, with no way to sell, take advantage of the falling interest rates, get out from under an ARM, whatever. Forget job loss (if you don't have income you straight up can't afford the house, end of story), it's just having been caught in the eye of the paperwork storm.
I'm not saying it's right and I'm not really one for principal forgiveness but since the banks did get a shat ton of money from the feds it would be nice if the people who did things right could catch a break and keep their homes while paying current prices since that is all anyone can hope for now. It's just a matter of who will be paying...the current homeowner or a new homeowner if one can be found at all.
Joe Sixpack had zero power to do anything? What mysterious force compelled him to sign the contract against his will?
No. You entirely miss my point and meaning. Joe Sixpack had no power to make the deals happen. He has no money or influence to work with. He was nothing more than a warm body for the industry to use as a shill. The money, the financing tools, the power to create and enact a deal all comes from the financial brokers and investors. Joe didn't screw them out of a thing ... didn't pull the wool over their eyes. Bankers aren't fools. And they aren't trusting either. They knew exactly what they were doing.
Anyway, do you think that only bad, dishonest people lost their jobs and thus found themselves in foreclosure? We had ten million 'flippers' out there looking to cheat you out of your $2 tax money?
The only people getting paid here are the bankers and investors. Many of them getting paid two and three times for their intentionally malicious engineering.
There are a lot of extremes being presented here, none of which will see much help from this new program. I bought a house for $243k and my neighbors bought a similar one 12 years later at the height of the boom for $610K. The price went up to be sure, but it was a "bubble" price that was neither justified or maintainable. In retrospect we can see the whys and hows but at the time most people couldn't, not even most "experts". The average homebuyer did what they had to. I'm not talking about buying huge mansions while making peanuts or those who used their house as an ATM to finance their high flying lifestyle, but there were normal people with normal incomes and normal 30 year old 1500 sq ft houses. When the bubble burst and the price went down to $500k or so they were stuck, underwater, with no way to sell, take advantage of the falling interest rates, get out from under an ARM, whatever. Forget job loss (if you don't have income you straight up can't afford the house, end of story), it's just having been caught in the eye of the paperwork storm.
I'm not saying it's right and I'm not really one for principal forgiveness but since the banks did get a shat ton of money from the feds it would be nice if the people who did things right could catch a break and keep their homes while paying current prices since that is all anyone can hope for now. It's just a matter of who will be paying...the current homeowner or a new homeowner if one can be found at all.
Correct.
Except the part of "experts not seeing" ...
Amazingly, many "expert" analysts, upon whom the public relied for information, say they never saw what was coming ... thus never rang the warning bells. But there were many inside the system who did see, in fact participated in the creation of these products. In the rush to greed, many who understood the bubble could not last got on board to cash in ... And it is those people I refer to at top billing. But it also worked its way down the line to every small time loan officer and mortgage and real estate broker. These are people who are professionally sophisticated and educated to the issues, and who thus carry the primary responsibility for ethical behavior. They looked the other way so they could cash in. And most made a stinking bundle doing it. Further, they fed the fire in advising their clients by quoting the success stories.
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Inevitable given Republican damage
