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Anyway, during that time I found the whole housing market very odd. Who was buying and affording 600-700k 2 bedroom under 1k Sqft. homes? I had always assumed 20% down, traditional 30 year, etc. Then I find out that people making what I was making were buying interest only, using federal/state programs, etc...
They often took out a second mortgage to get around the downpayment and the PMI. This became an issue during the loan modification or debt forgiveness for homeowners underwater on their homes.
They often took out a second mortgage to get around the downpayment and the PMI. This became an issue during the loan modification or debt forgiveness for homeowners underwater on their homes.
The big short is entertaining but what is not shown in the story is as important as what is shown. I would not take the story line as a full explanation of the crash and recession.
Regardless, no matter what, the people who borrowed more than they could afford ARE a BIG part to blame...
Very true. But the story doesn't stop there.
Unfortunately, leading up to the crises, many who borrowed were financially clueless - it wasn't that they knowingly borrowed more than they could afford with the intention of defaulting.
Rather, they had no idea whatsoever what they could afford.
It is good entertainment. But it is not "Truth" with a capital T. It is not based on a peer-reviewed article published in a scholarly article.
It is what it is.
You're absolutely correct that it's not based on a peer-reviewed article published in a scholarly article (but I think you mean 'published in a scholarly journal', or some such thing). But that isn't a refutation of the book, upon which the movie was based.
The entire point of the film was to make the causes of the financial meltdown understandable by non-academics.
Quote:
Originally Posted by SportyandMisty
Very true. But the story doesn't stop there.
Unfortunately, leading up to the crises, many who borrowed were financially clueless - it wasn't that they knowingly borrowed more than they could afford with the intention of defaulting.
Rather, they had no idea whatsoever what they could afford.
Unfortunately, leading up to the crises, many who borrowed were financially clueless - it wasn't that they knowingly borrowed more than they could afford with the intention of defaulting.
Rather, they had no idea whatsoever what they could afford.
I agree with this. I was personally approved for a large loan that I knew (when I saw the payments) I couldn't afford. Likewise, I saw what happened in the mid-70s, when people had APRs that jumped to 22% sometimes on their home loans. When I bought my house at the height of the insanity, I specifically told the lender I wanted a fixed rate loan. Found the land, found the house, went to sign the loan papers and surprise, surprise, just as smooth as silk, the lender was going over everything and slid in the 4% ARM. Fortunately, I was paying attentions and backed him up with, "No, it's going to be a fixed rate or nothing." It took a day or two and a 2% jump in the rate, but I got my fixed loan.
Thing is, I wonder how people who don't speak much English can even understand what is going on. And where do you go for information? Library books are usually a couple years behind the current market. Going to lenders and bankers is like asking the fox for info on how to guard the chicken coop. There used to be all sorts of free symposiums on how to buy a house and what to look out for, but I haven't seen any of those advertized in ages.
What I'm trying to say is that when you have specific questions about something, it's difficult sometimes to find anyone who knows the correct answers. And it's doubly hard when you don't know enough to ask the right questions.
And just to add to that, banks do push very hard for sales. The banks started all this in the mid 80s and I was working then with a woman who was part-time. That's 20 hours a week, folks. She worked in the vault, where the customers you saw were the same customers every day, and they were people who were usually making deposits on behalf of someone else. My coworker's requirement was to sell $80,000 worth of services every month (VISA card, new checking accounts, CDs, etc). Requirement meaning continuation of employment. Then, everyone from the manager on down knew that was a bunch of hooey and no one cared about the requirements. Today, my coworker would be fired.
Add the risk of being fired if you don't sell stuff to people along with the big bonuses you get if you do sell stuff to people, and you have the perfect storm of people doing what they did in 2008 and continued doing until they were caught at Wells Fargo the other day. And are doing now and will continue to do until this craziness and greed at the top finally stops.
When government gets involved in the name of helping the poor they always end up making more poor.
In this case easy money to people with low credit scores, no or low downpayment, who couldn't afford a mortgage. More people buying, demand increased driving housing prices up, now even people who could once afford to buy can no longer afford it.
I was offered one of those fancy loans. The banker said I would be approved for x amount then said if you want a bigger house that I could get a mortgage paying interest only for the first 5 years. The amount and terms set off red flags and I didn't buy.
??? ??? I kinda doubt people stay poor in order to get mortgage loans.
??? ??? I kinda doubt people stay poor in order to get mortgage loans.
I would spend 70% of my income
On a mortgage if it meant I could
Have a Bay Area home. I would
Just live at home
And rent it out.
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