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I'm in the mortgage industry and I can tell you that the housing bubble was created by loose regulations. Stuff like stated income etc, but the blame should go all around because borrowers knew they were giving false incomes in order to qualify. We will not see another housing bubble of that level because of all the new regulations. It's very strict now, but of course there will be more housing bubbles, but not on the same scale.
Isn't there a commercial real-estate bubble going on now?
Here in my town of Wake Forest, NC they're building a bunch of new office buildings and industrial parks even though many of the older ones are unoccupied or under occupied. What's making matters worse is that the town now wants to build another fire station (at a cost of roughly $2,500,000) to service these new vacant structures.
Most pundits I listen to and respect say there'll never be another residential real-estate bubble because we're going to have a glut of inventory as Baby Boomers retire and divest themselves of their McMansions or relatively large homes.
Weren't subprime loans already becoming a problem before the repeal of Glass-Steagall? Subprime lending was warned about in the early to mid 90's before Glass-Steagall was repealed in 1999.
I didn't go through the videos but what exactly is predatory lending? I'm guessing lending to people / companies at high interest rates? I mean where does personal responsibility rank? If I want / need a loan, I'm not going to take one that financially doesn't make sense.
Then people say the crisis was started bc banks were too lax with lending, as mandated by the Clinton administration
actually loan rates were pretty low, what was considered predatory lending was interest only loans that had a balloon payment at the end of ten years equal to the principle that was not paid in the first ten years, but most people never read the loan contract far enough down to see the balloon payment clause, and how to avoid it, or they thought they would be able to flip the house before the balloon payment reared its ugly head.
Quote:
Originally Posted by bmw335xi
I'm in the mortgage industry and I can tell you that the housing bubble was created by loose regulations. Stuff like stated income etc, but the blame should go all around because borrowers knew they were giving false incomes in order to qualify. We will not see another housing bubble of that level because of all the new regulations. It's very strict now, but of course there will be more housing bubbles, but not on the same scale.
yep, loose regulations, and everyone averting their eyes to the truth of the incomes of people wanting the loans so they could flip the house and possibly make money on the flip because of the rise in housing prices. there is plenty of blame to go around for the housing bubble, and everyone involved has to take a big bite of the crap sandwich.
Weren't subprime loans already becoming a problem before the repeal of Glass-Steagall? Subprime lending was warned about in the early to mid 90's before Glass-Steagall was repealed in 1999.
It opened the floodgates, along with bi-partisan initiatives to push broader home ownership espeically among poorer people. I remember seeing Jesse Jackson Jr. and Bush 2.0 both championing it.
To the OP, I think there is blame to go around to the banks, politicians AND the consumers....it's just that the banks are the "easy" target because politicians are of course going to blame somebody and it's not going to be themselves or the voters.
I personally know a number of people that got caught up in housing speculation. Their entire family (they are somewhat wealthy) would buy into condo developments in Chicago and then just flip it 3 months later for another 30k or whatever. They had several TV shows and numerous books touting how to make EASY MONEY doing just this.
It's not much different from the day trading craze except those people didn't have the banks to take the bulk of the blame.
Everybody got greedy.
It's especially hard to blame just the banks when the foreclosures\crisis was heavily concentrated in certain geographical areas.
A portion of GS was repealed via the Gramm, Leach, Bilby Act, a Republican initiative, signed into law by Clinton. Greenspan had championed for this, since the 80's. A year before this bill became effective, Greenspan gave the green light for the merger of Citibank and Travelers based on his interpretation of GS. The he went to work on Congress.
While there has always been a market for sub prime loans and derivatives backed by them, conservative investors did not buy them because they were not investment grade. When the independent credit rating agencies assigned them an investment grade rating, the flood gates opened. Pension plans, insurance companies, mutual funds, domestic and global banks and FNMA/ FHLMC could invest in them. In doing so, they became the source of funding that fueled sub prime loans which inflated the asset bubble. All bubbles eventually pop.
As an aisde, FNMA/FHLMC market share substantially declined as the bubble inflated. They avoided the guaranteeing the worst of the sub prime mess.
Had GS remained intact, investment in the junk would have been isolated from commercial banking and it would have been understood that the FDIC did not guarantee the deposits in the investment side of the bank. There is no certainty that a bail out would not have ensued, anyway.
6 years later and Congress has not taken action to restore that portion of GS that was repealed. Neither side seems particularly interested.
Too many people made or hoped to make too much money to acknowledge that all asset bubbles eventually burst. This included the banksters, global investors and consumers who used their home equity as an ATM card. This included consumers who bought more house than they could afford and believed in never ending double digit annual appreciation. This was mania.
And then there was Greenspan who characterized the bubble as froth in the market.
Yeah Im watching the China stuff now. Thats going to get crazy. I am concerned that it will lead to....military adventurism by China as a way to distract its population. Should be interesting times.
Keep in mind the "US" investors (largely institutional again)that are heavily invested there. It's global. The US simply off shored there. These "Chinese" corps are all over the govt investment funds.
I'm in the mortgage industry and I can tell you that the housing bubble was created by loose regulations. Stuff like stated income etc, but the blame should go all around because borrowers knew they were giving false incomes in order to qualify. We will not see another housing bubble of that level because of all the new regulations. It's very strict now, but of course there will be more housing bubbles, but not on the same scale.
I'm curious - the woman in the first video said the bank made her refinance 4 times and she got about $20,000 cash out of those re-fi's. Is it normal for Banks and Mortgage companies to contact people and force them into refinancing a loan? How exactly do they do that? You are correct, the woman used her dead husband's income on the loan and she must have known he was dead - it certainly doesn't excuse the lender, but she had to have known.
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