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Why do those who had no business taking out loans (but were encouraged and enabled by the government via special GSE programs, etc.) and then inevitably defaulting on them (no big surprise, there), not get any blame?
Why doesn't the government get the blame for requiring and/or instituting such dangerously risky lending programs in the first place?
Sigh....
Housing built this country. Property taxes built and maintained local storm and waste water sewers, roads, schools, parks, libraries, First Responders, Police and Firefighters. Areas with a high percentage of owner occupied housing generally offer a higher quality of life than would have been possible, otherwise.
Housing in one form or another employs the masses.
Without government intervention, we might all still be required to cough up a 50% down payment to buy a home and have to refi at current interest rates every 5 years. Without government, perhaps eviction would occur within 2 months of the last payment, no different than what happens with auto loans.
Corporate marketing has caused generations to seek bigger and better. People are no longer content to have 2 or more kids sharing a bedroom, let alone one bath for a family of 4. People want more.
The masses rip out functional kitchens and baths because they are dated. Coveting and obsolescence employs the masses.
Government has been involved in housing for almost 80 years now.
Mac and Mae's charter and standards for conforming loans were rather conservative compared to mortgage originators at large. This is why Mac and Mae lost market share as the housing bubble inflated.
No one, not one single person, was ever forced to buy a home, ever. Some who did, did so, with the belief they deserved a piece of the pie. They had less skin in the game than a typical renter who has to make a security deposit. I have met many, too many, who lost their homes because either they chose to not honor their obligations or could not do so. I have yet to hear one of them accept any responsibility for their outcome. The rants are primarily about greedy banks, oblivious to their own contribution to the mess. In so many cases, their mortgage was the least of their problems. Their obsession with immediate gratification funded by unsecured credit card debt did them in.
From 1980 or so onward, however, that system gradually broke down, partly because of bank deregulation, but mainly because of the rise of “shadow banking”: institutions and practices — like financing long-term investments with overnight borrowing — that recreated the risks of old-fashioned banking but weren’t covered either by guarantees or by regulation. The result, by 2007, was a financial system as vulnerable to severe crisis as the system of 1930. And the crisis came.
You nailed it, my dear.
May I add for emphasis here, that when we talk about panic, a run on a bank, we are not talking about ma/pa withdrawing their funds before the bank shuts their doors and they lose their life savings. Global institutional deposits are uninsured and short term. A run on a bank can occur in seconds. That's what happened in 2008. Nothing more or less.
Your statement says "nearly half". "Nearly half" means they didn't have the majority of the market.
The GSEs have nearly half, while all the multitude of the private issuers split the rest. Really now, use some common sense. The GSEs were the single largest mortgage purchasing and securitizing entity. They did in fact have significant influence over the mortgage market.
Quote:
I don't deny that the GSEs were also players in the market and as such were supplying money for mortgages. However the GSEs had 0% of the CDO marketplace where the worst abuses occurred.
Then why is it costing taxpayers $317 billion (or more) to bail out just Fannie and Freddie?
Housing built this country. Property taxes built and maintained local storm and waste water sewers, roads, schools, parks, libraries, First Responders, Police and Firefighters. Areas with a high percentage of owner occupied housing generally offer a higher quality of life than would have been possible, otherwise.
Housing in one form or another employs the masses.
Without government intervention, we might all still be required to cough up a 50% down payment to buy a home and have to refi at current interest rates every 5 years. Without government, perhaps eviction would occur within 2 months of the last payment, no different than what happens with auto loans.
Corporate marketing has caused generations to seek bigger and better. People are no longer content to have 2 or more kids sharing a bedroom, let alone one bath for a family of 4. People want more.
The masses rip out functional kitchens and baths because they are dated. Coveting and obsolescence employs the masses.
Government has been involved in housing for almost 80 years now.
Lengthy diatribe, but you still can't get around the fact that lending to those who never should have qualified for a loan in the first place resulted in avalanching massive loan defaulting, which nearly brought down our entire economy.
Is there some underlying assumption on your part that all potential mortgage applicants from low-moderate income are sub prime?
Does not the market value of the property intended for purchase matter?
Which loan is riskier, all other things being equal?
Black applicant makes $20K a year and intends to buy a home for $35K.
White applicant makes $100,000 a year and intends to buy a home for $1MM?
Which loan do you think Citi was more likely to approve?
Chicago was, at one time, ground zero for redlining.
Is there some underlying assumption on your part that all potential mortgage applicants from low-moderate income are sub prime?
No, the assumption is that they will be more likely to default on their loans. That is, in fact, true.
Quote:
Does not the market value of the property intended for purchase matter?
Yes, but so does income source, property tax, insurance rates, and credit history.
Quote:
Which loan is riskier, all other things being equal?
Black applicant makes $20K a year and intends to buy a home for $35K.
White applicant makes $100,000 a year and intends to buy a home for $1MM?
Both carry inherent risk. Actuaries exist for a reason.
Again, what must be looked at is the predictive value of the applicant's income and credit history.
Quote:
Chicago was, at one time, ground zero for redlining.
So why does the settlement include more than just racial considerations? Why even broach the subject of other qualifications in which the borrowers were lacking, like income and credit history?
It wasn't just about supposed "redlining," even though racists tried to frame it as such.
Lengthy diatribe, but you still can't get around the fact that lending to those who never should have qualified for a loan in the first place resulted in avalanching massive loan defaulting, which nearly brought down our entire economy.
ACtually packaging up the loans and selling them off multiple times to engorge on the profits because the taxpayers were the ones holding the bag is what really caused the debacle. Among other things of course. They were of course bailed out like they knew they would be the entire time and are starting the charade all over again. Hey why not they got away with it once.
IMO everbody should stop paying taxes, their home notes, credit cards etc. and just let the house of cards crumble. At least they will go down with us this time.
Is there some underlying assumption on your part that all potential mortgage applicants from low-moderate income are sub prime?
Does not the market value of the property intended for purchase matter?
Which loan is riskier, all other things being equal?
Black applicant makes $20K a year and intends to buy a home for $35K.
White applicant makes $100,000 a year and intends to buy a home for $1MM?
Which loan do you think Citi was more likely to approve?
Chicago was, at one time, ground zero for redlining.
Great thread, a ton of info.
Although you said all things being equal, lack of down payment is the risk. You didn't mention that.
20 percent down on a 200k house, even if the value drops to roughly my payoff of 160k I'm still in it. I owe 195k on that 160k house I'm letting it go. Easy call for me anyway.
Why bother with a 35k loan when there is alot more money to be made with the 1 million dollar loan?
Housing built this country. Property taxes built and maintained local storm and waste water sewers, roads, schools, parks, libraries, First Responders, Police and Firefighters. Areas with a high percentage of owner occupied housing generally offer a higher quality of life than would have been possible, otherwise.
Housing in one form or another employs the masses.
Without government intervention, we might all still be required to cough up a 50% down payment to buy a home and have to refi at current interest rates every 5 years. Without government, perhaps eviction would occur within 2 months of the last payment, no different than what happens with auto loans.
Corporate marketing has caused generations to seek bigger and better. People are no longer content to have 2 or more kids sharing a bedroom, let alone one bath for a family of 4. People want more.
The masses rip out functional kitchens and baths because they are dated. Coveting and obsolescence employs the masses.
Government has been involved in housing for almost 80 years now.
Mac and Mae's charter and standards for conforming loans were rather conservative compared to mortgage originators at large. This is why Mac and Mae lost market share as the housing bubble inflated.
No one, not one single person, was ever forced to buy a home, ever. Some who did, did so, with the belief they deserved a piece of the pie. They had less skin in the game than a typical renter who has to make a security deposit. I have met many, too many, who lost their homes because either they chose to not honor their obligations or could not do so. I have yet to hear one of them accept any responsibility for their outcome. The rants are primarily about greedy banks, oblivious to their own contribution to the mess. In so many cases, their mortgage was the least of their problems. Their obsession with immediate gratification funded by unsecured credit card debt did them in.
Blame is the American way.
Funny...
I just read a report yesterday, that in 2013, we're going to go into another phase of the economic downturn. And, that's also being predicted by the same guy that accurately predicted 2008. But, this time you don't have a housing bubble and bad loans to blame it on. And, it's not something that Obama can blame on Bush. They're predicting that we'll be in the same boat as Greece. Reason? We're that far into China's pocket, and the printing more and more money. And, even they don't have all of it. Oh, yeah... They threw inflation in there too. And, yes, that is a big factor.
As long as there are people that listen to, and believe all the bruhaha about bad loans, we'll never get it fixed. You have to throw away all the easy answers and go back in history to the source. Then, you have to start to undo things that were done. No, it's not the easy answer, but it's the correct answer.
Housing is a "VICTIM" just like the loans and everything else. But, if the economy had been healthy for the average American, business would not have needed the bailouts. Those that did need the bailouts didn't see one dime. As long as that keeps up, we'll never get out of this.
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