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Read a book. To oversimplify, what people are writing down in this case is the value of mortgage- and other asset-backed securities (ABS's). These securities evidence a payment stream to be generated from the proceeds of the bundled mortgages (or other assets) that underlie them. When borrowers begin defaulting on those mortgages, there are no (or sharply reduced) proceeds from which the payment stream can be generated. The value of the ABS therefore either declines or vanishes. There is no offset. The value simply disappears. The money originally invested by the ABS holder went to an intermediary bundler as his recovery for the cost of purchasing and then packaging the original mortgages from lenders. The money paid by the intermediary to the lenders in order to acquire the mortgages to begin with is what created the liquidity from which the lenders themselves were able to make new loans.
I see what you're trying to do here. You're trying to use legalese in an attempt to confuse.
I bolded an incorrect statement. The value does not vanish. At most, the value diminishes slightly, due to legal costs and the cost of reselling the foreclosed property.
So now this mortgage mess is all Bushes fault?
Somehow he pulled Geenspan aside and forced him to lower the interest rates to 0%?
Who has said that Bush engineered it all? All that has been said is that the fact that the potential for crisis had risen sharply was well known by mid- to late-2003, and that Bush et al did nothing about it. As for Greenspan, for better or worse, he felt the Fed had an obligation to try to jumpstart a US economy that had fallen into a sorry state indeed. Especially given where it had been at the end of 2000.
Quote:
Originally Posted by RedNC
Seems to me that housing prices started to climb around 1997...
Housing had been doing what before 1997? Suppose you tell us when the last era of NON-climbing housing prices was.
Quote:
Originally Posted by RedNC
LIBOR and other interest only loans were all the rage in 1999.
LIBOR is an interest rate, not a loan type. The ratio of hybrid ARM's (that's the kind with resets) to 30-year fixed mortgages in 1998 was approximately 1-to-50. In 2004 it had risen to more than 1-to-4 and almost to 1-to-3.
Quote:
Originally Posted by RedNC
Housing prices had more than doubled by 2000.
Median sales price for new homes sold in the US in 2000: $169,000.
It was last at $84,500 in 1985.
Average sales price for new homes sold in the US in 2000: $207,000.
It was last at $103,500 in 1986.
Quote:
Originally Posted by RedNC
But, I guess when things finally fall apart you conveniently forget where this all started.
Median sales price for new homes sold in the US in 2006: $246,500
Average sales price for new homes sold in the US in 2006: $305,900
My question is, what about the lenders and the investors who made the money available? Do they bear any responsibility for lowering their underwriting standards to the point where, if you could fog a mirror, you qualify? Many of these loans were not sold to FNMA/FHLMC/GNMA - many of these loans were sold to private secondary markets.
Ginnie Mae has no particualr role in the current situation. It bundles only loans guaranteed by USG agencies and the resulting ABS's are fully default-risk free. Nobody will be writing down any ABS's issued by Ginnie Mae. Fannie Mae and Freddie Mac have covered mortgages up to $417K as conforming. Beyond that, you're into jumbo-land. There is no implied backing for jumbo's...hence, the higher interest rates There is and always has been for conforming... hence, the lower interest rates. If there is any actual evidence for a widespread relaxation of underwriting standards, please point to it.
Quote:
Originally Posted by Greatday
It was this type of market - the subprime market - not the conforming market, that fueled the upswing -
The upswing in what?
Quote:
Originally Posted by Greatday
What about looking to the lenders for some responsibility. Why always look to the government?
How about looking for some irrespsonsibility, since that's the charge. The reason we look to the government is the same reason we look to the goverment for anything. See the word 'tariffs' in the Constitution? Why is that there???
Read a book. To oversimplify, what people are writing down in this case is the value of mortgage- and other asset-backed securities (ABS's). These securities evidence a payment stream to be generated from the proceeds of the bundled mortgages (or other assets) that underlie them. When borrowers begin defaulting on those mortgages, there are no (or sharply reduced) proceeds from which the payment stream can be generated. The value of the ABS therefore either declines or vanishes. There is no offset. The value simply disappears. The money originally invested by the ABS holder went to an intermediary bundler as his recovery for the cost of purchasing and then packaging the original mortgages from lenders. The money paid by the intermediary to the lenders in order to acquire the mortgages to begin with is what created the liquidity from which the lenders themselves were able to make new loans.
Um.. reread the thread in its entirety. Let me point out in bold on YOUR own posting that you actually agree with me.
You do realize that this money didn't just disappear, right?
No, that would be wrong. Writedowns are money that disappears. It was there a minute ago...my balance sheet looked fine. Now it looks like crap...
Writedowns are money that disappeared from YOUR wallet, the money however is in someone elses wallet as you paid them for whatever it is your writing down..(in this instance, property)
In order for the consumer to buy that asset (property) to begin with, they had to pay for that asset. Where did that money go? That money went into builders and other sellers pockets, (and of course the bank they owed).
While YOUR balance sheet now it looks like crap, you made the choice to help move someone elses balance sheet from looking crappy, to now looking fine because now they are no longer carrying a liability.
Well, neither of us has seen any such thing since the 1980's. And while those people might not own those same mortgages anymore, there is no a priori reason why they should not own the same homes.
Then, clearly, you are quite unfamiliar with the Sub-Prime market for, if you were, you would know that there were, and are, loans being done for the purchase of a home that have interest rates far exceeding 9%.
Then, let me add to the mix, the "pay day loan" centers who, in some cases, do real estate loans - with interest rates exceeding 100%
Median sales price for new homes sold in the US in 2000: $169,000.
It was last at $84,500 in 1985.
Average sales price for new homes sold in the US in 2000: $207,000.
It was last at $103,500 in 1986.
Median sales price for new homes sold in the US in 2006: $246,500
Average sales price for new homes sold in the US in 2006: $305,900
Where did you say this all started again???
So median sales prices went from
1985 $84,500
2000 $169,000
2006 $246,500
Average sales prices went from
1986 $103,500
2000 $207,000
2006 $305,900
Lets do the math shall we.
1985-2000 prices went up 100% (or doubled), meaning that every 7 years, prices went up 50%
2000-2006 prices went up 50%
Meaning that consistantly, since 1985, prices of properties have been going up an average of OVER 10% per year.
If people think (and I'm not accusing you of this) that ONLY Bush is to blame for the prices of homes going up 10% + when our economy has only grown by 2-3%, they are sadly mistaken. Bush has not been president since 1986, and the prices of properties since then have been growing at a consistant rate, through all 3-4 administrations since then, by both political parties.
The problem is that politicians believe that we can continue to boost our economy by encouraging debt, by increasing the values of properties at a much greater rate then inflation.
You can not expect property values to grow consistantly at 10% + per year, and at the same time, believe that property ownership is inteded for the poor. (dont misquote me, I do believe that property ownership is for the poor also), the argument is that prices of homes have been rising to fast for to long, eventually something has to give.
Then, clearly, you are quite unfamiliar with the Sub-Prime market for, if you were, you would know that there were, and are, loans being done for the purchase of a home that have interest rates far exceeding 9%.
Then, let me add to the mix, the "pay day loan" centers who, in some cases, do real estate loans - with interest rates exceeding 100%
I've seen people do them up to 24%.. I bang my head against the wall, but the "I OWN A HOME" push is so great that people make stupid decisions sometimes..
Yep - caps that allow the interest (and corresponding payment it is based on) to go from 6 to 16% in one crack -
Yep - that is protection all right
Lets forget that most of the time, the variety of caps into place become no longer caps in the event a payment is missed. Most of these consumers have missed payments, which allowed the banks to skyrocket the interest rates.
I've seen people do them up to 24%.. I bang my head against the wall, but the "I OWN A HOME" push is so great that people make stupid decisions sometimes..
We referred one to the AG's office - the APR was 56%. Purchase money loan
Last edited by Greatday; 12-14-2007 at 10:26 AM..
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