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Everyone (particularly the media) keeps talking about the "credit crisis" we are in...
Why are they calling it that?
From my perspective, the credit market is just reverting back to traditional standards in underwriting (i.e., making sure the borrower can really afford the loan). We recently purchased a home and submitted the loan app 2 days after the "meltdown" started in Sept - and we were approved. (Yes, we had to submit a LOT of paperwork and our finances were gone over w/ a fine-tooth comb).
Why is this a crisis when people who should never have been in the market are being refused?
Why do people complain about rates and how they're "getting high"?? 6.15% for a 30-yr fixed is high?? What about the late seventies when rates were in the teens??
A new article today mentioned that 70% of our GDP is consumer spending. Holy smokes.... I doubt historically that consumption has been that much of a driver.. I think people spending less is a good thing.. Too many people relying on credit for things they don't really need.. Grrrrrrr......
A stagnant economy is bad, but ours has been running a fever for a while and I think we need to leech the bad blood out... People need to get back to basics and what's really important in life - a little struggle can be a good thing.
Doesn't anyone feel any sense of personal responsibility?
It is a crisis because money is not flowing betwen financial institutions.That means that companies can not borrow to buy new equipment or materials.Homes seem to be dropping in value as the housing crisis spreads. It also means that many are stayng put and not spending money. Not all people are losing their homes because of a bad loan or documention. Many more will be lose them in the coming year because of unemployment that is expected to get alot worse.Who knows what the values of homes will drop to. Less demand will mean materials will drop further reducing the values.We are already seeing reduction in homes selling for 30% less than the peak in many areas and still falling.
Ditto what texdav. Lenders are losing their shirts....their mortgage portfolios depleted and servicing income gone (who's fault is another discussion on it's own). A very small percentage were insured, combo loans or no pmi loans the fad. When the housing supply exceeds 12 months, that drives the price of homes down because the market is flooded. It's still about supply and demand. As the loans go bad, investors (Fannie, Freddie, FHA) are cracking down to try to stop the bleeding. Far too many now meet the definition of homeless. And few can get a loan, and many won't for a very long time. The result - banks very close to insolvency. Add to it, MAJOR CORPORATIONS (AIG, GM, FORD, CHRYSLER) on the edge of going under.
The American people and Wall Street have lost faith in our banking system, and that is the only reason I can understand $700B for the bailout....even if I disagree.
Well, there is lending between banks and there is lending to individuals. I think the media confounds the two. I agree that people should not be leasing 70k bmw suv's on a 40k income and should not be buying any home more than 3 times their income (with at least a 20% down payment). The inability to do either is not a crisis in my book. If banks are not lending to each other or to business due to uncertainty in the economy, then this could be a crisis. It depends.
Well, there is lending between banks and there is lending to individuals. I think the media confounds the two. I agree that people should not be leasing 70k bmw suv's on a 40k income and should not be buying any home more than 3 times their income (with at least a 20% down payment). The inability to do either is not a crisis in my book. If banks are not lending to each other or to business due to uncertainty in the economy, then this could be a crisis. It depends.
Banks and major mortgage investors were insolvent, ready for bankruptcy. AIG, Wachovia, Countrywide, Merrill Lynch, Washington Mutual, and National City were either in the toilet (ready for Fed takeover) or rated junk (and that is off the top of my head). Now, with GM going down, that mortgage entity, which is huge, will be part of the problem. That's just part of the Wall Street portion. Well over 200 institutions have closed their doors or withdrawn from mortgage lending in 2007 & 2008 or sought protection in acquisition.
The homeowners are "Main Street" and getting hit from two different directions, maybe three. Can't afford, owe more than value, can't get refi'd are the immediate thoughts.
So, yes, there are two distinct segments in need of repair. That's why so many were upset with the 700B bailout, it only helped Wall Street, not Main Street. I guess it depends upon which news you have tuned in. MSNBC and Bloomberg have been very clear and you can't get away from them using the phrases "main street" and "Wall Street" as a distinction reference in this mess.
Banks and major mortgage investors were insolvent, ready for bankruptcy. AIG, Wachovia, Countrywide, Merrill Lynch, Washington Mutual, and National City were either in the toilet (ready for Fed takeover) or rated junk (and that is off the top of my head). Now, with GM going down, that mortgage entity, which is huge, will be part of the problem. That's just part of the Wall Street portion. Well over 200 institutions have closed their doors or withdrawn from mortgage lending in 2007 & 2008 or sought protection in acquisition.
The homeowners are "Main Street" and getting hit from two different directions, maybe three. Can't afford, owe more than value, can't get refi'd are the immediate thoughts.
So, yes, there are two distinct segments in need of repair. That's why so many were upset with the 700B bailout, it only helped Wall Street, not Main Street. I guess it depends upon which news you have tuned in. MSNBC and Bloomberg have been very clear and you can't get away from them using the phrases "main street" and "Wall Street" as a distinction reference in this mess.
More posts like this please.
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