Mortgage Market Bound for Ruin Again (2013, debt, purchase, companies)
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As long as people can afford the payments they sign up for, I think we are OK.
In my area, which was a foreclosure hotspot, droves of people were taking loans with unaffordable terms. That was the problem.
Like the vast majority of people in my area, I found myself substantially upside down a few years ago. I seriously considered "walking away", but in the end, I chose to stay put and keep making my mortgage payments. Why? The payments are affordable, so why not?
I'm glad you stayed put and honored the agreement you made. Walking away damages the system as much as people making unaffordable agreements.
One doesn't agree to a purchase and only pay when the circumstances are favorable.
It's not the mortgages that are the problem, but rather the trading of them as debt securities on financial markets. What needs to be done is to reenact the provisions of Glass-Steagall prohibiting proprietary trading by bank entities that were repealed by the Gramm-Leach-Bliley Act of 1999.
It's not the mortgages that are the problem, but rather the trading of them as debt securities on financial markets. What needs to be done is to reenact the provisions of Glass-Steagall prohibiting proprietary trading by bank entities that were repealed by the Gramm-Leach-Bliley Act of 1999.
It's a big issue because the banking lobby have been able to delay implementation of Dodd-Frank while introducing legislation to repeal it. There has to be a clear dividing line between banking that is insured, and market trading that is not. Otherwise, what happened before will certainly happen again; and you and I and everyone not responsible will end up paying for it - and for a very long time to come.
It's a big issue because the banking lobby have been able to delay implementation of Dodd-Frank while introducing legislation to repeal it. There has to be a clear dividing line between banking that is insured, and market trading that is not. Otherwise, what happened before will certainly happen again; and you and I and everyone not responsible will end up paying for it - and for a very long time to come.
Prop trading has greatly reduced at the banks since the crisis. They have all been shedding assets and moving away from it for some time. I'm not sure you have actually been paying attention
When I went to work in the banking industry many years ago I was staggered by the forced unfair political cleanup of the S&L crisis and the people I worked with promised I would be more shocked by the mortgage guidelines being forced by the federal government.
Sure enough it looked like traditional sound underwriting standards were pushed out by the feds and replaced with affirmative action goals but the bankers said we will manage as we are selling the loans to the government and in the secondary market.
Like any unsound strategy the whole thing collapsed and I have no doubt we will repeat again in some variation created by government.
Thank you for saying this. Just goes to prove the seeds of the 2008 financial crisis were sown more than a decade before it happened.
No, it was less than a decade; the "seeds of the 2008 financial crisis were sown" with Gramm-Leach-Lliley Act of 1999, and harvested with the enactment of the "safe harbor" provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
I actually think the seeds of the problems were in the CRA of 1977... this act and aggressive interpretations (and miss-interpretations) created problems in the mortgage industry for decades.
The CRA was not the problem. There is nothing wrong with government subsidized housing provided it is handled properly. Government programs for low-income housing have existed for decades at the federal, state and municipal levels. Those loans were serviced in-house and not sold as mortgage-backed securities. It was the housing bubble spurred on by the subprime lending made in 2004-2006; which securitized mortgages were traded by the banks on the financial markets that precipitated the crash in 2008.
Going to have to agree. FHA loans are not problems in of themselves. With incomes stagnant and housing prices still going up, I think that FHA is a middle-of-the-road solution to encouraging real estate ownership by people who are not part of the top 15%
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