Look at the full cost of out-of-control mortgage lending (attorney, companies, dollars)

[saganista]

Originally Posted by pghquest

It did show up in the mandatory disclosure statements, the consumers ignored it...

Consumers? Are consumers to serve as the regulators of financial markets now? How many have ever read a disclosure statement? Assuming that any were filed to begin with. Deregulate! Deregulate! Deregulate! Cut bureaucratic red tape! Cut bureaucratic red tape! Cut bureaucratic red tape! This is what you end up with from a recipe like that. What you are witnessing up close and personal is free market failure.

Originally Posted by pghquest

When the banks collect 9% interest on a loan, that they borrowed from the government at 2%.. why would they not freely hand out loans?

When was any interest rate last at 9%? Where do you see that 2% USG lending window?

Originally Posted by pghquest

Who cares if I'm doing 1000 loans and have to forclose on 100 of them.. I've juste collected a 7% point spread from 900 other loans to cushion the blow. (as your listing shows, none of them are hurting over this).

Tens of billions of dollars in writedowns will hurt anybody. Even Citibank. Lenders meanwhile hate foreclosures. You can lose the profit from dozens of loans on a single foreclosure.

Originally Posted by pghquest

In addition, since the GOVERNMENT controls the rates that the banks borrow money at, the "blame the free market" thought process is just ludicrous.

The market determines interest rates. The Fed tries to influence the market. That's one function of a central bank. Meanwhile, when one is increasingly surrounded by free market failure, it's continuing to see those two words as some sort of mystic talisman that borders on the hysterical.

Originally Posted by pghquest

If the interest rates we're not low to begin with, these banks would not have freely just passed out money to anyone regardless of qualifications.

I thought the rates were 9%. That's not low. But lenders don't really care what rates are. Their business is to lend regardless of rates. Whether 14% as under Reagan or 5% as recently, their job is to move money. It's the government's job to see that they move enough to keep an economy from starving for credit or from tripping over it. Who was minding the store, here? After being forced to take nearly all pressure off of interest rates in last-ditch attempt to jump start an economy precariously perched on the edge of a liquidity trap, it wasn't like as much as a 2-percent increase in rates wasn't widely anticipated by mid-2003. That's four years ago now. Hello? Republicans? Anybody home?

[saganista]

Originally Posted by Aqualung

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...

[pghquest]

Originally Posted by saganista

Consumers? Are consumers to serve as the regulators of financial markets now? How many have ever read a disclosure statement? Assuming that any were filed to begin with. Deregulate! Deregulate! Deregulate! Cut bureaucratic red tape! Cut bureaucratic red tape! Cut bureaucratic red tape! This is what you end up with from a recipe like that. What you are witnessing up close and personal is free market failure.

Um.. its MY job to read the disclosure statements on documents that I am signing. If I dont.. the BANK is to blame?

Originally Posted by saganista

When was any interest rate last at 9%? Where do you see that 2% USG lending window?

9%, you've never seen anyone pay 9% for a mortgage? I've seen people finance homes at 18%, yes, they dont own them anymore.. I wonder why.

As for the 2%, the federal reserve rate has gone as low as 1% in the past.

http://www.federalreserve.gov/fomc/fundsrate.htm

Originally Posted by saganista

Tens of billions of dollars in writedowns will hurt anybody. Even Citibank. Lenders meanwhile hate foreclosures. You can lose the profit from dozens of loans on a single foreclosure.

Of course they hate foreclosures, they lose money on each one. I'd hate to foreclose also. Doesnt mean they dont do a mathmatical equiation because obviously they did.. x good loans * x bad loans = profit margin.

Originally Posted by saganista

The market determines interest rates. The Fed tries to influence the market. That's one function of a central bank. Meanwhile, when one is increasingly surrounded by free market failure, it's continuing to see those two words as some sort of mystic talisman that borders on the hysterical.

The fed does not influence the market, they directly control it. The Federal Reserve Board quarterly reviews the rate that they will charge to loan money to bank overnight.

Originally Posted by saganista

I thought the rates were 9%. That's not low. But lenders don't really care what rates are. Their business is to lend regardless of rates. Whether 14% as under Reagan or 5% as recently, their job is to move money. It's the government's job to see that they move enough to keep an economy from starving for credit or from tripping over it. Who was minding the store, here? After being forced to take nearly all pressure off of interest rates in last-ditch attempt to jump start an economy precariously perched on the edge of a liquidity trap, it wasn't like as much as a 2-percent increase in rates wasn't widely anticipated by mid-2003. That's four years ago now. Hello? Republicans? Anybody home?

Your confusing issues. There is a huge difference at the rate that banks borrow money at, and the rate they loan money at. There should be.. Banks should be profitable.

I'm not quite sure what your issue is, are you stating that the consumers who lied on their application about their income hold no blame? Or are you stating that the consumers who read that their interest rates will go up in a year, never understood that their interest rates would go up in a year?

We all know that given a chance, the banks will increase interest rates the minute they can, A consumer would be foolish to bet their life on buying a home under the guise that the banks will not raise interest rates out the the kindness of their hearts.

A home mortgage lasts 30 years on the average and if your betting that interest rates wont go up for 30 years, you'll lose everytime. 30 years is a VERY long time to be gambling on ones home.

[pghquest]

Originally Posted by saganista

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)

[RedNC]

So now this mortgage mess is all Bushes fault?
Somehow he pulled Geenspan aside and forced him to lower the interest rates to 0%?
Bush somehow got everyone together and forced them to pay whatever price someone listed a house at?
Bush had a meeting with all the lenders and told them to offer teaser interest rates to unsuspecting buyers?

All this right under the Democrats noses?
You Dems-o-cons still claim Bush is dumb and yet continue to blame him for things that would take a pretty sharp individual to pull off. You think that some how Bush put together a plan to create a real estate bubble and then have it crash without even one Democrat knowing? Were they asleep or something, or were they in on the plan?

Seems to me that housing prices started to climb around 1997 about the time home interest rates came down below 7% and came down below 6% by 1999. LIBOR and other interest only loans were all the rage in 1999. Housing prices had more than doubled by 2000. That Bush is some sharp guy that he doubled housing prices even before he was elected. Impressive.
But, I guess when things finally fall apart you conveniently forget where this all started.

[ParkTwain]

Originally Posted by VAFury

See silly man.... This is what you apparrently misunderstand when it comes to "conservatism". The government doesn't "have to" bail out anyone so far as I'm concerned.

Do you understand that, yes, the government DOES have to get involved or else a major part of that local economy literally goes down the tube? It happens, and the governments know it can happen in their county/town/state, so yes they HAVE TO get involved for the greater economic good, else they/their party/etc will be pinned with the negative outcome. The multiplier effect also pertains to an economic or credit contraction, you know. Check it out.

In the aftermath of the Great Depression in America, it is a tacit political bargain with the People that the Government is charged with ACTIVELY managing the economy. Who's going to rewrite that history?

[pghquest]

I wonder if things like interest rates couldnt be adjusted on a smaller scale state by state. Its totally possibly that the Fed, by lowering the interest rate could be helping one part of the country, and then hurting another at same time.

Not sure how it would work, but its something that I often wonder about.

[Aqualung]

Originally Posted by pghquest

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)

Correct. Much of this money went to developers and contractors (who employed millions). Much of this also went to other debt holders (like credit card companies, who certainly had mortgage divisions as well). And the rest was used for things like vacations and new vehicles.

That money has already been dispersed into the economy. What happened was not much different than mortgage companies writing checks to other industries. I have no sympathy for mortgage companies that took part in this frenzy. They deserve to lose billions because they made poor business decisions. Next time, they won't make the same mistakes if they want to continue to be a profitable companies.

The collateral damage is a poor credit rating for those who made foolish decisions. It's not like these people won't be able to find somewhere to live. In most cases, they'll be forced to rent rather than own. I'm not happy that these people are taking a step back, financially, but that's part of life.

[Greatday]

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

It was this type of market - the subprime market - not the conforming market, that fueled the upswing -

What about looking to the lenders for some responsibility

Why always look to the government?

[GregW]

VA Fury - thanks for noticing. I am a fiscal conservative, an isolationist, a social liberal and a Constitutionalist.

I am a social liberal that really believes in “Liberty and justice for ALL”. I believe that this Liberty and Justice is better enhanced and protected under a socialist economic system as typified by the Scandinavian countries than by a corporate kleptocracy as typified by ours.