Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Usually to invest in the stock market you have to have money. You buy 1000 shares of "x" stock. You have to have that money. If "x" stock loses money, you lose money. But for the most part it's your own money you are losing.
The people who defaulted will blame the banks. The banks will blame the investors who purchased the securities. The investors will blame the banks who lowered their lending standards.
I blame the financial services industry for lobbying the government to loosen regulatory safeguards that would've protected against this sort of thing. I absolutely agree that people should not be allowed to buy stock with money they don't have. But the financial sector realized that if margin requirements were lowered, more people would invest in stocks.
Quote:
Originally Posted by pjsson
What about the renters who were responsible enough to not over pay but would like to buy a home for it's true value??? Is it fair to them to keep prices inflated?
Its kind of too late for that now since the conditions are in place already, so letting people fail is the only fair alternative.
It's definitely not fair to renters to keep prices inflated. As a renter myself, I want to able to buy a home someday. But I'm afraid to buy anything right now because I'm worried it could depreciate right after I buy it. What's clear is that home prices have to come back down. We're going through a very painful correction right now. Keeping home prices at artificially high levels isn't the answer. But a sudden and widespread price drop instead of a gradual one creates a whole new set of problems. Instead of having a handful of foreclosures, imagine if we had 75% of homeowners losing their homes. Well, obviously these people aren't going to be out spending on new clothes, TV, cars, etc. So consumer spending will just drop off. Employers will see this and cut back on output and be forced to lay off even more people. And as more people lose their jobs, you'll have even more people unable to keep their homes. It's a downward spiral, one which we might be already in. I'm not a homeowner, but I am employed and I'd like to stay that way. I also don't want my rent to go up. But I know it will as more and more people who've lost their homes and have damaged credit ratings flood the renters market.
As for your second point, I disagree. It's never too late to fix what brought us to this point. It may not address the current crisis, but hopefully it'll keep it from happening again. That's what we did in The Great Depression increasing margin requirements, separating commercial and investment banking, etc. It worked fine until 2000 when we did away with things like Glass-Steagull.
It is because the United States Government beginning with the Clinton Administration, in their inimitable wisdom, thought that everyone should have the American Dream and thus told the banks they needed to find a way to make monies available to Americans who couldn't qualify for conventional loans. Voila! Subprime mortgages were created and sold like hotcakes. The real estate bubble grew. If that wasn't bad enough, Wall St. dreamed up financial instruments based on this scam that were sold all over the word called mortgage backed securities and conslidated debt obligations. Then when those who had no business buying homes in the first place but were able to with a subprime mortgage couldn't pay their mortgage, the whole thing came tumbling down.
If they had done something similar with car loans we would have people walking away from their car loans.
Now to add insult to injury, the Obama administration, after first robbing the taxpayers to bail out banks who were losing money as a result of getting involved of this scam, are WORSENING the situation by in another way giving the prospective homeowner (who otherwise wouldn't qualify for a conventional mortgage) and $8000 tax credit for buying a home.
What do you think is going to happen when the homebuyer starts having to pay their mortgage payment. A tax credit for one year isn't going to assist them with anything except getting them into a financial trap and nightmare that never should have been offered to them in the first place.
Add this to a rising unemployment rates and you have impending disaster which would have happened and been all overwith by now if anyone other than the Democrat or Republican candidate had been elected President. They all had more of a clue than the mainstream candidates did as far as what was good for the country and the taxpayers than the clowns we have in office now.
So thanks to mainstream polititians the banks get bailed out and as if that wasn't enough, (not to mention ADDITIONALLY that they get money from the Federal Reserve for 0 % interest only to turn around and charge us HUGE interest rates) they STILL go after the "poor homeowmer" that the Obama administration promised to protect. Who needs THAT kind of "protection".
Of course we need to live within our means and NOTborrow money for things that will depreciate like Cars and Homes. However, how stupid can we be to BELIEVE in these rediculous government programs that only benefit BANKS and HUGE CORPORATIONS?????
If we want "Change we can Believe in" we need elected officials who are TRUSTWORTHY and NOT con-artists who once in office will just continue to take advantage of the American taxpayer. That means NO MORE REPUBLICANS OR DEMOCRATS -- especially those who haveheled elected office for more than a year. We need to avoid putting career politicians in higher office. They only run for office for what they get out of it.
The problem is we need to realize that Government has been the CAUSE of all of our Country's ills and will never be the solution.
Look at any government program, and look how much higher the commodity is or service is once the government got involved. College educations are 20 times what they were in the late 70's but then there wasn't an abundance of government backed student loans. In the 1940's and 50's it took only a month's blue collar worker's salary to pay a year's college tuition. Certainly the quality of education hasn't improved by 20 times what it was in the 1970s. Rather it is that the GOVERNMENT is guaranteeing the schools will be paid and saddling the students with the redulous tuition plus interest!
The answer is to STOP GOVERMENT PROGRAMS. Drastically scale down taxes. SHRINK the size of government and put more money back in the hands of taxpayers and small businesses. STOP subsidies to mega corporations. Elected Officials need to STOP being influenced and paid off by mega corporation lobbyists. Simply let the free market work on its own. Also BRING OUR TROOPS HOME. End pre-emptive attacks (starting wars) in other countries that pose no real threat to us. If we did all this we'd truly have a rich country and something to be proud of!
I was with you until the the end of the last paragraph. Not just big Corp are controlling our government but also big unions.
Also, you need to remember that the world is pretty small now, and we have a culture (Radical Islam) that is at war with us even if we think that we are not at war with them.
So, we need to be strong on all fronts.
It's not that people bought the home above their means - at the time of purchase. The fact of most markets is that the value of the home has decreased since the purchase. As LynnKK points out - every new car purchased drops in value, however people seldom take the angle that. "Since the car is worth less the day I drove it home ... why should I pay as agreed?? ... I'll just wall away"
The fact is that people have taken an obligation.
It should be no surprise that the bank comes looking for the deficienies in a short sale. BTW - The bank will do the same in a foreclosure if the property is sold for less than was owed. This is nothing new. The only advantage to the owner might be that a short sale is less harsh on his credit than a foreclosure - it's all bad, just a matter of degree.
I think we all understand that many people have been caught in a bad place. It's part the market, it's part the vast number of second mortgages (all those cars, etc bought with a simple 2md loan) and of course the once beloved, zero down payment.
What we can hope is that people have learned a very difficult lesson. Have a down payment, make extra payments --- BUILD EQUITY! The simple old trick of making a $50 - $100 per month, principal only payment within the first 5 years of a 30 year mortgage can save a homeowner thousands of dollars and build equity quickly. Even with the drop in value of many homes, many homeowners I've talked with would have been in a much better place had they done so. It's sad.
BTW - Yes. The "short sale school" makes it known that the banks will attempt to collect the full amount owed. Any professional would know that. (It almost just stands to reason.)
10% down is a good idea in a perfect world. But when I look at my personal production for the past two years, 98% of my total volume is 5% down or less. I'm willing to bet similar numbers would be seen industry-wide by my counterparts at other companies. But for the sake of the argument, let's say my numbers are off and that nationwide only 20-25% of the purchase transactions have a down payment of 10% or more. Then we would have, what, 75% fewer transactions? How many more of us would be unemployed with that number? Not only bankers and realtors......it would be settlement attorneys, movers, inspectors, appraisers, pest control, and on down to even less revenue for the state and county. We already have 4 states that can't even pay citizens their state income tax refund. Add to this, what do you think would happen to real estate values? We are already looking at a decline in values with additional foreclosures set to occur over the next two years - I'm hearing up to 20% more in some areas. We can't afford for real estate to slow any more.......
The mortgage insurance companies are facing multi-billion lawsuits for denying MI claims. The big box banks are filing suits, but they have set themselves up with their stated loans. Very few stated loans that failed were "on the money" when reporting income. What few seem to understand, the federally covered loans (VA and FHA) that are going bad, are not due to buyers over-reaching their qualifications, but they are due to a faltering economy. These loans failed primarily due to lay-offs and lack of reserves........something that could have happened with anyone.
HAFA (Home Affordable Foreclosure Alternatives) which ramps up in April will require the short sale lender to indemnify the homeowner from any future claim of the mortgage obligation if they wish to participate for incentives paid by the government (us). This indemnification is the only sure-fire release that I have heard about since all hell broke loose. This indemnification is also required for a homeowner to move forward with a purchase immediately after a shortsale. (Other requirements also apply, but there is life after a shortsale).
Besides the feeling of chasing our tail to close the loopholes as they are spotted (buy and bails), it feels like we have swung so far in the other direction, choking our industry.
By the way.......anyone try to report real estate/mortgage lending fraud lately? It's not that easy - there's a reason people give up trying to do the right thing.
How come we don't have people walking away in droves from their car loans? After all, these cars aren't worth what was paid for them the minute they are driven off the lot. This "isn't worth what I paid for it" thought process is a contrived excuse to walk away from debt and then because you walked away from what you agreed to pay, no on is supposed to come after you? Come on....grow up. Live within your means people.
If the banks refuse to negotiate for loan modification or shortsale even after the federal govt provided them with billions of dollars to help people get out of their homes then "walking away" it their only option. If you lose your job and need to MOVE to another aread of the country, you cannot put the house on wheels and take it with you.
The interest rate on your mortgage is based on your "previous" credit history. That is a risk the banks take.
The problem is that few people see the big picture and only focus on what's happening in their world. The loan officer agrees to lend someone too much money. But it's OK because they get to pocket a nice commission. The real estate agent tells their client to buy as much house as they can. But it's OK because even if that client ends up in over their head, it won't be the agent's problem. The homeowner hears about someone being foreclosed on. But it's OK because it's not his house that's being taken.
The truth is that we're all connected. What you do indirectly affects me and everyone else. If I'm a homeowner and you're my neighbor and you get foreclosed on, that brings down the value of my house. Maybe you're an idiot who borrowed too much money and now you can't make your payments. Maybe you lost your job and you're too lazy to look for another one. Even if all that were true, how does my saying that going to make things any better? Is it going to stop the bank from foreclosing on your home? No. Is it going to keep the value of my home from dropping? No. I think these people who blame the victims just want to feel like they're smarter. Great, so when your neighbor loses his house and the value of your house plummets, you can at least take comfort in knowing that you're smarter.
My husband and I purchased a house that was NOT out of our means to afford. Two years later his company transfered him out of state. We put the house on the market and got absolutley nothing. We continued to pay the mortgage payment for over a year because his company gave him per diem ($100/day) while working in NM. 1 1/2 years later they transfered him again to Oregon. The company does not pay per diem in the state of Oregon because that is their home base. Doesn't make sense to me but at least he has a job.
I called BofA and informed them of the situation and asked to refi the house. They declined because the appraisal came in too low? I told them that made no sense. I already owe you the money and I'm saying I will pay, but you wont refi to lower the payments because the appraisal is too low? Then we went through all the suppsed Govt. programs, DENIED ALL! The reason....my husband makes too much money and we are current on the mortgage, wtf! whatever. I then ask if we can go ahead and start the approval process for Shortsale, the guy says, sorry no can do cuz you are current on your payments. These banks will not do anything to help homeowners who are trying to do the right thing. They just don't care. We tried everything to get the bank to help themselves so they wouldn't have another house on the books and they did nothing.
We put the house up for Shortsale, we were almost to the home streach, had a buyer and all, we were waiting for the mortgage insurance company to sign off, that was it. We worked for like 6 to 7 months sending paperwork again and again and again because the banks system kept saying they didn't have it. Well, the bank foreclosed on the property after all the headaches of trying to get them to approve the shortsale. I couldn't beleive it, we were almost done and they foreclose? Then I come to find out that the different departments have no idea what the other is doing. So the legal dept that foreclosed had no idea the shortsale dept was almost done approving the shortsale.
Not everyone who gets forclosed on is a deadbeat. There are circumstances that happen. We never would have bought a house if we knew the company would transfer us. They told us this was permanent, then lo and behold we are transfered. We tried to keep paying, but after the per diem was taken away we couldn't afford it. And yes, we had the house rented, but the rent didn't cover the mortgage.
How come we don't have people walking away in droves from their car loans? After all, these cars aren't worth what was paid for them the minute they are driven off the lot. This "isn't worth what I paid for it" thought process is a contrived excuse to walk away from debt and then because you walked away from what you agreed to pay, no on is supposed to come after you? Come on....grow up. Live within your means people.
Apples and oranges, upside down on a car loan.......maybe 5 to 6K, upside down on a house loan maybe 100 to 200K.
How come we don't have people walking away in droves from their car loans? After all, these cars aren't worth what was paid for them the minute they are driven off the lot. This "isn't worth what I paid for it" thought process is a contrived excuse to walk away from debt and then because you walked away from what you agreed to pay, no on is supposed to come after you? Come on....grow up. Live within your means people.
Oh, they do....which is why "unsecured" car loans can be 15%, 18%....and even much much higher.
Then there is the whole reposession thing which happens fairly quickly instead of after 12 months of non-payment.
FWIW there is NOTHING wrong with intentionally defaulting on a loan. This is just part of the business deal and the bank receives a profit for the associated risk. The defaulting person takes a beating on their credit and possibly in other ways.
We put the house up for Shortsale, we were almost to the home streach, had a buyer and all, we were waiting for the mortgage insurance company to sign off, that was it. We worked for like 6 to 7 months sending paperwork again and again and again because the banks system kept saying they didn't have it. Well, the bank foreclosed on the property after all the headaches of trying to get them to approve the shortsale. I couldn't beleive it, we were almost done and they foreclose? Then I come to find out that the different departments have no idea what the other is doing. So the legal dept that foreclosed had no idea the shortsale dept was almost done approving the shortsale.
Stories like this are becoming more and more common. And oddly enough, BofA is a name that appears in a lot of them. You'll hear about people who've already paid off their mortgages being foreclosed on or the bank getting the address wrong and beginning foreclosure proceedings on the wrong customer. I had one friend who sold her house just as the house was set to go into foreclosure. Long after the buyer closed on her house and moved in, the bank was still saying that they had begun the foreclosure process. It's funny how people say the government is too bloated to be efficient. Sounds like it's the banks who don't have a clue what each department is doing. Or perhaps they really do know, but just hope they can get away with squeezing people for more money.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
