Bail Out Failed (Homer: house, to buy, tax)

[OhBeeHave]

In order to build anything, you have to have a good foundation. The masons on this project came in and built a sub parr foundation upon which no one could build a solid structure.

As for the article I quoted being BS -- I'd like to see the stats as too how many minority and poor homeowners (who qualified for loans under the program, which they wouldn't have qualified for prior to it's legislation) are currently in default.

There are many things which came together to create this perfect economic storm -- I know not to blame one group. But when it comes to the mortgage aspect of this -- it is what it is.

Your point about your generation (and mine, too, for that matter) having the gotta have it now, not making larger payments on their CCs is true, too.

One thing people will hopefully come away with is a sense of priorities.

[dman72]

Originally Posted by max7418

I'm a wall street guy and my wife works for JP Morgan. We are both against this bailout, have taken steps to solidify our net worth, and just want the chips to fall. Thats what capitalism is all about. The reason we got here IMHO has to do with 2 main reasons:
1. Democrats pushing banks into lending to people who could not pay their loan. This has been discussed alot on business channels and the notion that this happened is an utter lie to democrats.
2. The second and more important reason is wall street securitizing of loans. All throughout history loans were given to people based on their ability to REPAY the loan. Wall street banks reversed this and qualified people based on their own ability to PACKAGE and RESELL the loan.

Most of my friends who worked in the mbs business have been layed off months ago. Three of my friends who didn't even have titles were making $400,000 plus bonuses in 2004-2006 time frame working on these desks. Anyway read up about the mbs market if you are interested in how we got here.

Right, the MBS guys were layed off months ago but they already made a killing.

I honestly think that someone down this slippery slope committed a fraud and needs to have their assets seized.

There is some truth to part 1, and it goes deeper because many crooked mortgage guys (probably not Democrats) saw this as an opportunity to get away with giving loans to anyone who walked in the door. The original intention was to make it easier to get into a home..do you really think that having a 20% down payment is necessary to be able to a afford a mortgage? However, that intention gave crooks an opening to make a fortune in commissions on bad loans, and then it moved on down the line.

[max7418]

Originally Posted by dman72

Right, the MBS guys were layed off months ago but they already made a killing.

I honestly think that someone down this slippery slope committed a fraud and needs to have their assets seized.

There is some truth to part 1, and it goes deeper because many crooked mortgage guys (probably not Democrats) saw this as an opportunity to get away with giving loans to anyone who walked in the door. The original intention was to make it easier to get into a home..do you really think that having a 20% down payment is necessary to be able to a afford a mortgage? However, that intention gave crooks an opening to make a fortune in commissions on bad loans, and then it moved on down the line.

Honestly I don't know who should have their assets siezed. There is so much blame to go around. Heck the guys I know worked at Credit Suisse, Bear Stearns, Nomura, and Merrill. My friend at Credit Suisse knew this was going to happen over a year ago. He told me that they were told by the heads of their desk to not bid at all for most mbs's. Basically He and his coworkers knew they were done long before CS let them go.

As to your point of not needing a 20% down payment I fully agree. Both houses I have bought were done with 10% down. The reason I will continue to put down as little as possible is because I believe I can get a better rate of return on that other 10% through investments etc. Unfortunately most people who got into their option arms, 3 % down mortgages were not thinking this way but instead were putting down all the money they had. This is why before anyone gets a mortgage, verification of not just income but liquid assests should be a priority.

Anyway as much as I think democrats had alot to do with pushing home ownership to 69% of america, I still think mbs is where there real damage was done. Again anytime in the history of the world credit was only given based on the borrowers ability to repay the loan. This all changed with the explosion of mortgage derivatives. I mean mbs only scratches the surface of what these mit and harvard math geeks now working at I-banks created.

[ClarkStreetKid]

Originally Posted by dman72

The original intention was to make it easier to get into a home..do you really think that having a 20% down payment is necessary to be able to a afford a mortgage?

Affording a mortgage boils down to being able to afford the monthly payment over a given period of time. Many of those who got into a home because it became easier, didn't meet that criteria.

[OhBeeHave]

Anyway as much as I think democrats had alot to do with pushing home ownership to 69% of america, I still think mbs is where there real damage was done. Again anytime in the history of the world credit was only given based on the borrowers ability to repay the loan. This all changed with the explosion of mortgage derivatives. I mean mbs only scratches the surface of what these mit and harvard math geeks now working at I-banks created.

Great point. One needed the other in order for this whole crisis to occur. Greed appears to be the cornerstone in this equation.

[Jrprofess]

[quote=

There are many things which came together to create this perfect economic storm -- I know not to blame one group. But when it comes to the mortgage aspect of this -- it is what it is.
quote]

OhBee, I enjoy your many posts...but you can't say "I know that to blame one group" and then proceed to do so regarding mortgages... (teasing)

This is an easy credit issue. The mark to market issue has to do with cratering home values...foreclosures in a minority area like Brentwood have little to do with the lowering of home values in an area like Smithtown. Home ownership increased because there was MONEY to be made. This overextension, lack of savings, easy credit fiascos go across every ethnicity. There was zero REGULATION, and that was thanks to the Republicans...why, because there was too much money to be made. The mortgage issue is not the result of a singular fair housing act (Republican spin) or the evil Republican President (Dem spin), it was everybody's fault. I liked that the house republicans said no (although crying that Pelosi hurt their feelings is silly) but am now annoyed that the Senate tucked in a bunch of tax credit extensions and silly pork (something about race tracks and arrowheads??) to appease those same Republicans. Be mad at the whole thing...I wish we could put government salaries on a lay-away plan until they start doing something constructive.

[dman72]

[quote=Jrprofess;5515125]

Originally Posted by

There are many things which came together to create this perfect economic storm -- I know not to blame one group. But when it comes to the mortgage aspect of this -- it is what it is.
quote

OhBee, I enjoy your many posts...but you can't say "I know that to blame one group" and then proceed to do so regarding mortgages... (teasing)

This is an easy credit issue. The mark to market issue has to do with cratering home values...foreclosures in a minority area like Brentwood have little to do with the lowering of home values in an area like Smithtown. Home ownership increased because there was MONEY to be made. This overextension, lack of savings, easy credit fiascos go across every ethnicity. There was zero REGULATION, and that was thanks to the Republicans...why, because there was too much money to be made. The mortgage issue is not the result of a singular fair housing act (Republican spin) or the evil Republican President (Dem spin), it was everybody's fault. I liked that the house republicans said no (although crying that Pelosi hurt their feelings is silly) but am now annoyed that the Senate tucked in a bunch of tax credit extensions and silly pork (something about race tracks and arrowheads??) to appease those same Republicans. Be mad at the whole thing...I wish we could put government salaries on a lay-away plan until they start doing something constructive.

To play devils advocate, pork has always been a part of getting bills passed. The structure of this bailout bill is basically the same as the one that failed. The leaders just went to a few reps with some pork to get them to change their votes. This makes some people so angry, but this is a fundamental part of our system and has been for centuries!! If you wanted this to change, you would have to switch to a parliamentary type system, which would require re-writing the whole constitution.

[OhBeeHave]

JrProf you teaser! LOL

As for the quote ending in 'it is what it is' that was me leaving the ends loose and open to speculation. Fingers are pointing in every which direction, but somewhere there has to be the first misstep. Was it the Dems? Was it the Repubs? Was it greed and avarice on the part of investment firms? Will we ever really know?

It is obvious that I am not an economics wunderkind, so I am learning as I go.

I might have leaned on the Dems in this situation, but I am also grateful that the Reps didn't succeed in having Social Security privatized and in the hands of Wall St.

My question to toss out to everyone is this: seeing as more people could get mortgages than in previous years, did the onset of new mortgages help to artificially inflate the value of starter homes? (Supply and demand type situation?)

[TomMoser]

Originally Posted by OhBeeHave

My question to toss out to everyone is this: seeing as more people could get mortgages than in previous years, did the onset of new mortgages help to artificially inflate the value of starter homes? (Supply and demand type situation?)

Absolutely, the easier qualification inflated the price (maybe not the "value") of all homes, not just starter homes. I would not call this "artificial inflation", however, as that implies something that someone could control outside of the existing market conditions.

[JustBored]

Originally Posted by OhBeeHave

My question to toss out to everyone is this: seeing as more people could get mortgages than in previous years, did the onset of new mortgages help to artificially inflate the value of starter homes? (Supply and demand type situation?)

Of course it did before you had 1 buyer who could afford your home, now you have 10...

This bailout really only prolongs the pain, Yes all this stuff credit will be tighter, people cant buy cars, stores lose access to credit, well maybe now people will only BUY things they can pay for in cash, and Instead of spending more than we make we'll actually save something.. so what you cant buy a new Flat Screen TV every year on 0 money down, no payments till 2010.. No Money? don't buy.

Pretty soon american dollars is going to be nothing but funny money.