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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Original Post - Dec 24, 2008 - 02:38pm PT
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Dear Beloved Mortgage Provider Person,
I hate to inform you I will be leaving my home soon due to foreclosure. I know you can't help me. I've tried hard to work with you and I can appreciate your uncompromising position. I also know this is tough for you so I am informing you that I will be doing some extensive remodeling in order to make it easier for you to sell this puppy.
I've got some great final touches in mind that I'm sure new home buyers will love.
If you have any new ideas about helping me with my mortgage and preventing foreclosure, give me a call !
Sincerely,
Your beloved mortgage customer.
P.S. My home insurance just ran out....
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klk
Trad climber
cali
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Dec 24, 2008 - 02:45pm PT
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Get a demolition permit, scrape up the loose change and rent a 'dozer for a three hours.
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cragnshag
Social climber
san joser
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Dec 24, 2008 - 02:50pm PT
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Don't forget to take the copper pipes, dishwasher and AC unit.
But leave at the house the following items: dirt, dander, pet hair, dooker in the toilet, personal responsibility, and pride.
I think the overall shabby condition of a forclosed property will make it even cheaper for the next family to buy the house.
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Jaybro
Social climber
wuz real!
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Dec 24, 2008 - 03:39pm PT
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I guess Bachar just looks better After that first cup of Coffee, especially with a chainsaw.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 24, 2008 - 04:09pm PT
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Rokjox,
"This technique was used in the rural South for quite a while with some success."
Really?
I was just kidding around but what the heck - if it could save the US housing market and the economy maybe we should implement it on a wide scale!
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 24, 2008 - 04:22pm PT
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I think my house could use a little remodeling job now that I think about it. I'll start this week....
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T2
climber
Cardiff by the sea
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Dec 24, 2008 - 06:46pm PT
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It is funny that you bring this up John. I just saw a report this morning on how this is becomming quite an issue with foreclosers. People are "remodeling" their place so to say before they are evicted. They are taking all kitchen, bathroom, and electrical fixtures, some are even thrashing drywall and structural components. I can understand why people are doing this but the problem is that it creates issues for more than just the lenders. The "remodeling" brings down the value of the property which is good for future buyers (if they are handy at home remodeling) but for the guy that lives next door that is making good on his loan his property value is affected as well. The news report talked with a guy that had a few of these "remodel" foreclosers in his hood an now he is upside down on the value of his property because of it. What sad state of affairs our country is in.
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Roughster
Sport climber
Vacaville, CA
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Dec 24, 2008 - 07:16pm PT
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George Bush's message to U.S. Home Owners:
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rlf
Trad climber
Josh, CA
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Dec 24, 2008 - 08:52pm PT
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"if it could save the US housing market and the economy maybe we should implement it on a wide scale! "
Well, in some respects it has already started. Foreclosed home after foreclosed home have been left a total mess as a final f*#k you to the mortgage companies.
While I don't condone random vandalism, I absolutely understand why this is happening.
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noshoesnoshirt
climber
I don't even know anymore
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Dec 24, 2008 - 09:02pm PT
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What's random about it?
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rlf
Trad climber
Josh, CA
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Dec 24, 2008 - 09:27pm PT
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I was refering to random acts people commit because they think it's funny.
There's nothing funny about what is driving people to do this.
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Norton
Social climber
the Wastelands
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Dec 24, 2008 - 09:54pm PT
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Let's see, you want to buy a home so you ask for a loan and are given one, no one forces you to buy the home, it is all your decision. Then, things go wrong in your life, and for whatever reason you cannot keep up your end of the loan agreement.
So, you decide that since your credit will be ruined because of the foreclosure action, you are going to take out your anger on someone, anyone, so you trash your own home, just so the mortgage company has to pay some of their money to have it restored to sellable condition. Good thinking, like how a six year old acts out a tantrum? Is it the mortgage company's fault that you lost your job or beat your wife so she divorced you?
Why is it funny, or ok, to destroy property, any property?
What did the mortgage company do to you to "deserve" trashing?
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rlf
Trad climber
Josh, CA
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Dec 24, 2008 - 10:01pm PT
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I'm not losing anything since I don't own a house.
There's a hell of lot more to what's going on here than a few deadbeats losing their jobs and not being able to pay their bills.
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rlf
Trad climber
Josh, CA
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Dec 24, 2008 - 10:11pm PT
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That's great!
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 25, 2008 - 08:10pm PT
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Is there any real help for people facing foreclosure?
I've been looking and can't seem to find jack.
Who is responsible for all this? ha ha ha....take a big fat guess.
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WBraun
climber
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Dec 25, 2008 - 08:14pm PT
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Jaybro --"I guess Bachar just looks better After that first cup of Coffee, especially with a chainsaw."
Hahahaha LOL
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 25, 2008 - 08:23pm PT
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Werner,
Just wait until foreclosure to see what I look like!
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dogtown
climber
Cheyenne,Wyoming
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Dec 26, 2008 - 01:38am PT
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I Like how Greenspan turns the Hundred into a Zero!
F*#king Jackass.
Hang in there JB.
Bruce.
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couchmaster
climber
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Dec 26, 2008 - 01:47am PT
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If this is happening for real John, my advice is to:
A) Rent out your spare bedrooms for a short term sharing arrangement to increase your cash on hand.
B) Pocket that money, don't give a dime to the bank UNLESS you can get current and have an agreement that they will cease and desist on their efforts of foreclosure. Giving them half of it will get you nothing and you'll still be out. You'll have @ 9 months of non-payment before they can get you out if you have a mortgage, less if you bought on contract. Perhaps longer if the courts are backlogged. Use the time wisely in looking for new arrangements and building up a supply of spare cash, but don't leave until they've nailed it down legally.
Good luck!
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 26, 2008 - 11:58am PT
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Does any one have an opinion on what "mortgage assistance programs" are for real?
Anything coming soon?
There are a lot of scams out there right now, I get a few calls every day from so-called "save your home from foreclosure" plans and they all want some money up front.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Dec 26, 2008 - 12:32pm PT
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Why not sell your business and meet your contractual obligations? Nobody forced you to buy a home instead of rent.
Guess that is hard to understand for somebody who asks for all cash up front to pay for what he sells.
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salad
climber
Escondido
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Dec 26, 2008 - 02:28pm PT
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John,
I have a friend in the mortgage business, I can ask him if he knows anything legit about these "mortgage assistance programs".
I also know someone on the board at the Bank of Escondido. I can see if they know anything as well.
It will probably take a few days to get a response.
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mottaaa
Trad climber
tucson
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Dec 26, 2008 - 02:40pm PT
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I don't know what your main source of income is, John, but I work in the construction industry, an industry driven by bank loans. Where do the banks get off making millions, or is it billions, of dollars of high risk loans and then when it comes back to bite them in the ass they take no responsibility in making the loans. Instead, they freeze up the loan process. Projects come to a halt or never leave the ground. Then they call me to find out where there money is and I have to tell them I have no work. I've been paying my mortgage for the last 6 years and a previous mortgage for 8 years before that. The banks played a major role in the economy's decline/collapse and they take no responsibility for it. Granted, we, as individuals are responsible for making sound financial decisions about what we can afford, but the fact that these high risk loans were made raises some serious ethical issues about how banks do business. The worst part is, those of us who were able to pay our bills up to this point are made to pay for the banks irresponsible and down right greedy business decisions.
I hope this makes sense, I'm a bit pissed off. I'm an idependent contractor and 2007 was my best year ever and now I'm scraping tooth and nail to keep a roof over my familys' head.
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Matt
Trad climber
primordial soup
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Dec 26, 2008 - 02:48pm PT
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you are right about risky bank loans and the like, but it's a bit more complex than that. many of the major financial institutions, in their various forms, sought out new and sexy ways to make money, and with the deregulation of the financial industry, they were allowed to do so.
morgatges that were re-sold and then bundled together into "securities" (i.e. something that could be bought and sold, or invested in by others), and then what were essentially bets, and then highly leveraged bets, placed upon the performance of those morgtage securities, are mostly what has brought down the financial industry (as i understand it).
ever wonder why you heard so many radio commercials for so many years, wanting to give you a better loan for less money? well the engine that drove both the subprime morgatge industry and the morgatge refinancing industry was a combination of the perpetually low interest rates and the widespread international interest in investments in the US housing market, and their combination made it easy to lend money, and then easy to sell the loan off, absolving the original lender of the risk associated with the loan itself.
so when you hear right wingers crying about regulation, what you should be hearing is people who want large institutions to be able take greater risk complaining that to do so is not allowed, and when you hear people calling for tighter and smarter regulation of the financial industry, what you should be hearing is people saying that the banks shouldn't take so much risk, because it translates into risk for the greater economy, and the rest of us as well.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Dec 26, 2008 - 03:00pm PT
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Does any one have an opinion on what "mortgage assistance programs" are for real?
Talk to your lender. They may have the right to modify and may decide to do so, if they think you will pay.
There are a lot of scams out there right now, I get a few calls every day from so-called "save your home from foreclosure" plans and they all want some money up front.
Is there some reason that you expect money up front to pay your employees and yourself for making a product, but somebody who is merely providing a service should do so for free? Should service providers all have to work for the government and be paid by tax-payers?
Are we supposed to be entitled to services, but not goods, in your mind?
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Gene
climber
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Dec 26, 2008 - 05:05pm PT
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Bachar,
Whoever holds the paper on your house really doesn't want to own it. Most lenders will lose $$$ on the deal. Their costs include legal fees (in house or otherwise), appraisal, marketing, and tons of I-dotting, T-crossing overhead. To say nothing of having to place your house on a way over-supplied market. The lender is better off with you in the house than out - as long as they are convinced you are doing your level best. Talk to the lender. Find ONE person to be your contact. Convince that person that you are making a good faith effort to meet your obligation. Make that person your advocate. Turn on your obvious charm. Remember, that Big Ole Bank is staffed by people who, by the grace of god, could be in your shoes (you know the type of shoes I mean).
A third party acting as your agent for $$$ may not be in your best interest. Most can only do what you can do, but your costs will only be on your phone bill.
Working with them will have better results than working against them IMHO. My unsolicited $0.02.
gm
Edit: What Fattrad said while I was composing.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 26, 2008 - 05:31pm PT
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Thanks everybody for the advice - it is MUCH appreciated.
I know most of this stuff already. The H4H, HUD government programs in place won't help me right now ( I don't qualify - slight technicalities I won't go into).
I would sell my house if I could actually walk away with $ 0 - unfortnately I would actually have to pay money if I sold it.
I have tried in good faith to do all the things fattrad noted above. They don't want to hear any of it. That's why I threw up that sarcastic letter draft at the start of this thread.
I think I'm digging the Vegas style approach Mr. Robinson. It's damn cold up here...
Tradisgood - great advice buddy. Want to go free soloing sometime? I didn't think so...
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Nefarius
Big Wall climber
somewhere without avatars.........
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Dec 26, 2008 - 05:43pm PT
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"Tradisgood - great advice buddy. Want to go free soloing sometime? I didn't think so... "
hahaha
Real bummer to hear about this, JB. Times are tough all over and it sucks. As much as I detest my job, I'm grateful to have one and do my best to grit my teeth, do the best job I can and make them appreciate me while I show that I appreciate my job. It's tough, however, to read and hear about friends who are struggling so much. It must be frustrating as hell to not be able to get any of the help promised you for things like this. That's how it usually works tho, right? Ugh! Hopefully this all works out for you.
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unnamable
climber
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Dec 26, 2008 - 10:14pm PT
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John:
In the securities industry (stocks, bonds), there's strict compliance with a so called "suitability" rule. Suitability means that before recommending an investment, a broker is required to gather financial information from the client (annual income, risk tolerance, age, amount of indebtedness). Only then can a broker provide advice. Moreover, that advice has to mesh with the information gathered. If a broker ignores the information, say for example, recommends shorting naked call options to an unsophisticated grandmother living on a fixed income, the broker can be sued and dollars recovered.
It seems to me that there was no such "suitability" requirement in place in the mortgage industry. Mortgage brokers earned commissions with every loan pushed through and unsuitable loans were offered. If the mortgage industry was subject to the same suitability requirements that the securities business was and is subject to, the business wouldn't have gotten so out of hand.
If you're upside down now, chances are that someone sold you an unsuitable loan. So I hope you ignore the posters here who try to argue that it all boils down to the buyer, as in "buyer beware". There were a lot of snake oil salesman in the heyday of the market. My guess is that you were dealing with a salesperson more interested in pushing the loan through than gathering information and discussing more moderate terms with a larger margin of safety.
Gene, Couchmaster, Fattrad, Salad et al offer some good advice. I hope you can work it out with the bank. So hang in there, be tough, and you'll pull through stronger than ever.
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Ken M
Mountain climber
Los Angeles, Ca
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Dec 27, 2008 - 12:27am PT
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John, I appreciate that your original post was born out of frustration. You certainly don't want to do anything that will potentially expose you to criminal complaint.
However, I would counsel patience.
We are about to embark on a different gov't, which seems to be very interested in helping people in difficulty with their homes. Who knows what help might become available?
I agree with other posters that the unsolicited offers are only a way to separate you from the little money you have, with little hope of result.
Get creative in terms of money generation. I haven't seen posts about the "Bacher Climbing Clinics". I'm positive they would be popular and lucrative. I can help you set up a series at Stoney. You don't even have to climb.
But mainly, don't do anything irrevocable, and continue to contact your lender.
=
Once upon a time in China, there lived an Emperor who owned a majestic white stallion, the finest beast in all his Kingdom. One night, a thief tried to slip in and steal the horse, but was captured by the palace guards and thrown into the dungeon.
The next morning, he was dragged before the Emperor's court. "How dare you," bellowed the Emperor, "lay hand on my royal steed! Jailor, put this thief to death!"
Immediately, the thief bowed deeply. "Your judgement is peerless and wise, O Emperor," he calmly replied, "but my life is of little value. I should offer you a gift before I depart. Your mount is quite a fine one, but if your eminence would spare my life for just a year and a day, I swear to you I can teach that horse to sing hymns!"
The court burst in to laughter at that, but the Emperor was intrigued. After all, you didn't get to his high position by turning down freely offered gifts, no matter how far-fetched they seem. To the surprise of all, the Emperor quickly accepted the offer.
As they were leaving the chambers, the jailor whispered to the thief, "You are a fool!"
"I am a fool?" replied the thief, smiling broadly. "Much can happen in a year and a day. The King may die. The horse may die. I may die... and maybe the horse will learn how to sing."
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TradIsGood
Chalkless climber
the Gunks end of the country
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Dec 27, 2008 - 08:03am PT
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Set up AAC - Acopa Acceptance Corp.
From that you will lease shoes. Establish a lease period that allows the shoes to be resold at the end with a buyout option. Figure in the cost of one resoling and set an interest rate of say 12%. (If the lessee does not buy out, then dealer will sell or lease to climbing gyms - crappy old used shoes expected there.)
Arrange dealer financing so that they have massive inventories - all sizes, multiple colors, styles etc. Maybe have iPod dock option, or altimeter option.
Make crappy shoes that won't last more than 3 years - maybe you are already there.
Once you have enough shoes leased, turn AAC into a bank and ask for TARP funding. You will get 5% money - preferred stock which will jump after 3 years to 9%.
Put all your workers in a union (Obama loves them). Establish a retirement plan that you could not possibly meet.
Go to Congress and ask for money (drive a beater van running on veggie oil - don't fly your jet).
Oh, yeah. About your mortgage, pay it off from proceeds when AAC refinances your house. There are a lot of guys out there like you. You can refi them, too. If they don't pay, foreclose on them.
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ron gomez
Trad climber
fallbrook,ca
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Dec 27, 2008 - 09:19am PT
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"want to go free soloing sometime?" Good one John, I'm just picturing above smart azz chalking up at the base gettin' ready to DIE! Think he'd/she pay up front for "service provided assistance" from you? Hope things work out one way or the other for you bro! Some people fail to see the whole picture, but want to put in their 3 cents worth.
Peace
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 27, 2008 - 11:16am PT
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Thanks again all. I put up this thread not only for me but for guys like Cosmic and others facing the same problem.
I ain't going "Vegas" yet - don't even have enough gas for the chainsaw...ha ha
Soloing lessons? Pay up front? Sounds good to me - don't think that's going to bring home the bacon.
I wonder what we can expect from the new administration as far as mortgage relief goes?
More expansion of the H4H HUD programs out there? Lower interest rates? Grace periods during the "financial recuperation" period ahead?
Think home values will increase anytime soon? One year, two years?
Maybe some mortgage/finance gurus out there will chime in!
Happy New Year everybody - see ya' at the crags, JB
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Karl Baba
Trad climber
Yosemite, Ca
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Dec 27, 2008 - 11:48am PT
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John, if there's just some way you could coax that mammoth volcano to erupt ahead of schedule, the whole problem could be solved with your homeowner insurance.
"In the securities industry (stocks, bonds), there's strict compliance with a so called "suitability" rule. Suitability means that before recommending an investment, a broker is required to gather financial information from the client (annual income, risk tolerance, age, amount of indebtedness). Only then can a broker provide advice. Moreover, that advice has to mesh with the information gathered. If a broker ignores the information, say for example, recommends shorting naked call options to an unsophisticated grandmother living on a fixed income, the broker can be sued and dollars recovered.
It seems to me that there was no such "suitability" requirement in place in the mortgage industry. Mortgage brokers earned commissions with every loan pushed through and unsuitable loans were offered. If the mortgage industry was subject to the same suitability requirements that the securities business was and is subject to, the business wouldn't have gotten so out of hand. "
Yeah, even Bernie Madoff required investors to have piles of money before he allowed them to invest in his ponzi scheme!
There's really little difference. Certainly mortgage brokers were supposed to determine folks could afford loans. I've noticed when brokers sell private placements for startup companies that aren't top drawer, they have a way of getting the buyer to answer the questions right and not check the answers.
Peace
Karl
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 27, 2008 - 12:00pm PT
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If the government keeps giving bailout money to the mortgage providers, won't the mortgage providers now have less incentive to help homeowners keep their mortgages?
They'd rather have some kind of mortgage instead of a foreclosure right? Now if someone forecloses it's no big deal - they get bailed out?
Seems somewhat counterproductive/backwards to me - or am I missing something here?
If you could help people keep their mortgages and not foreclose then the bank (or mortgage provider) wouldn't need a bailout?
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Tomcat
Trad climber
Chatham N.H.
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Dec 27, 2008 - 12:19pm PT
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Ummmm,when the bank repo's your car,or forecloses on your mortgage,they sell the asset for what they can get and you still owe the rest.Sounds like a great idea to increase the spread then.
For any jackass who would willingly destroy a home they can't afford as retribution against whatever,all I can say is....I hope the next day you find a government program in your mailbox to help you with your mortgage.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 27, 2008 - 01:17pm PT
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Any opinions on what Obama has planned? What is most likely?
Good stuff fattrad, financial free soloist...heh heh
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mtwoodsonguide
Big Wall climber
San Diego
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Dec 27, 2008 - 02:05pm PT
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"Think home values will increase anytime soon? One year, two years?"
To recover to what you payed for it? Try 10,12 (15 or 20 once you adjust for inflation)
and the big question is inflation. That is how we are going to get out of this, pay off this debt and make what you idiots payed for your houses what they are worth. Make the dollar weaker, what it can buy less. Wages will hopefully, hopefully, go up proportionally.
Which really sucks if you did the responsible thing and saved your money, you got screwed the worst.
the value of a home must be compared to wages and the cost of renting. Never by crooks, I mean, real estate agents. Used to be different, real estate agents 20 years ago understood it wasn't the same as selling used cars.
Your especially screwed in Mammoth cause everyone who lives in LA will give up there place in Mammoth before their home close close to their job.
We are 1 year (yeah, official, Dec 2007, almost a year of denial) into a deep recession another 3,4,or5 to go. Home prices are dropping slower then the speculators rose them.
This is being compared to "the lost generation" in Japan.
Just be glad your not 10 years older, a lot of baby boomers, who have worked 40 hours a weeks since the 60's are unable to retire, and have to compete with younger men like yourself for a job.
For those of you who thought it was a bit much to pay for a house but didn't want to miss the boat, you must feel like you got caught with a bad card at the end of a card game, rummy or something.
Hey Bachar wasn't Reardon's wife a salesperson, manager, executive? at Countrywide.
oh, the irony.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 27, 2008 - 02:48pm PT
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Uh-oh.....
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xtrmecat
Trad climber
Kalispell, Montanagonia
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Dec 27, 2008 - 02:57pm PT
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Man, oh man, what a load of ----! I lost my job of 17 years, at the start of last quarter. Yes it is a direct result of the economy. I lost my ass on my retirement and am getting penalized by Uncle Sam's collection agency to boot. I on the other hand, already own a chainsaw, and have gas in the pickup I own, but cannot afford to drive. I just need to siphon it out. Does this seem like a reasonable solution to my problems? Come on really. I grossed less every month than almost everyone here's mortgage payments are. Just the way the economy is here. I took what few dollars I could and payed my obligations out as far as it would take me. Then I set out into the world of looking for work, along with the other 10% of the newly unemployed workforce here. I don't whine that it is tough, I just get up at 12:30 at night and work until 7:30 to 8:00 in the afternoon, when someone asks(for real) and collect the unemployment checks for the weeks that I cannot get work. The whole months unemployment is what some of you pay for your cars every month. My wife makes the prevailing wage here that is equivelant to a entry level wage at a fast food resteraunt in California. We do what we can and are damn happy to have made it the last three months and had enough left over to celebrate Christmas with those we love.
That is good enough. I will probably go out of town to work and have to make sacrifices, to make it but nowhere here did I ever want to lay down and feel sorry for the position I ended up in. I am not a victim here, just a normal person caught up in life. I have no vacation or benefits of any kind so I cannot continue climbing in the fashion that I am used to. But I will not quit doing this, or backcountry skiing, or backpacking, or white water rafting, or hunting, or photographing many very unique places I seem to visit. I just will do it on a dirtbag style and scale.
I never once thought of letting a loan lapse in reposession, or damage any collateral. Noone stuck a gun to my head when I made the decision to purchase the toys I cannot afford to use. Why the hell would I want to give up? I never give up on a climb until it is apparent that I may not come back unless I turn around now. Why would the other aspects of my life be different. Maybe some peoples morals and conviction are less than I thought. "Dedication" is only a word used in the magazine and newspaper articles to spice up the hero?
When this is over I am hoping to still be alive. That is all. I will go out being able to look the world in the eye knowing I did my level best. If I end up with just the clothes on my back, again, then I am OK with that. I think the wife secretely wants to end up a little better off than that though.
Anyone want some snowmobiles, Harley touring bike, F-250, yard tools, oudoor book collection, spare snap-on tools and boxes cheap. I once thought these things were needed in my life, and now realize they are just money sitting there that I can never recover, because noone here has the money to buy these things. I will part with them for pennies on the dollar.
Quit yer whining and buck up. It cannot be harder than 5.9D, maybe sustained and manky, but satisfying in the end.
Bob
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John Moosie
climber
Beautiful California
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Dec 27, 2008 - 03:05pm PT
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Bob, I don't see either John or Dwain whining. They are trying to figure a way out of a jam and are asking for help with figuring it out. What would you do if you were injured?
John makes a valid point about mortgaged companies having less motivation to work with you because the government has bailed them out so they won't be hurt by someone defaulting on their loan. This takes away their motivation to be flexible.
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sully
Trad climber
CA
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Dec 27, 2008 - 03:26pm PT
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John and other climbing gods on this site: Please write more books. You could pay those mortgages for sure. I just devoured Steve Roper's Camp 4 and bought Chouinard's Let my People... The point is, so many of us former climbers are stuck in the burbs raising kids and need to live vicariously through your adventures. Hence I lurk on this board. Better yet, write a screenplay about YNP adventures. Look at how well Into The Wild Did. Get Sean Penn to direct. In hard times we need funny, daring stories. You guys are full of them.
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Karl Baba
Trad climber
Yosemite, Ca
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Dec 27, 2008 - 08:37pm PT
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Fatty writes
"Personally, I think housing has about 10% more downside. "
I know less than Fatty but I think my supertopo prediction record is better. 10% down is a joke that's only funnier because we both live in california.
25% to 40% more down and more in some places. The ugliness of the economic hell that's setting is has shown itself fully yet, like someone who has got brain cancer might not feel really sick right away.
I'm an idiot but i suggest that anybody who thinks they won't or can't stick with their home should sell now while people still have hope and some economic incentives and low interest rates are around and rent until there is blood in the streets.
The only way the housing numbers can remotely stay even or get better is through inflation which means they will only seem to be better. Face it, when people can't pay for their homes, or don't want to because they are many, many thousands underwater, they will be forced to sell and prices will dive. Lenders still aren't giving away money and that will mean even cheaper housing.
Add job losses due to contracting economy and you have a perfect storm. Why deny it when there is still time to act?
I'd love to be wrong but tell me what I'm missing?
peace
karl
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Jaybro
Social climber
wuz real!
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Dec 27, 2008 - 09:07pm PT
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This is only going to get worse, what ever Obama and various conditions, change.
John, Dwain, Jim? There, but for the grace of a tight and fortunate family structure, go I. There is a downside to being an unemployed special ed teacher for 6 months =) That has changed recently, and as I get more and more on my feet, one important thing I will do is help other people, as I have been helped.
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Lynne Leichtfuss
Social climber
valley center, ca
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Dec 27, 2008 - 09:47pm PT
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Agree with Sully, Yo got the gifts, knowledge, humor and life stories. Write On.
As far as life. We have our lives. We are Alive. Let's Enjoy ! I may be homeless also but who gives a whatever ! Live life to the fullest, give what yo have to those in need...and what happens does. I am trusting God, if He lets me down I'll let ya know. : ))
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 28, 2008 - 01:37pm PT
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Wanna buy a cool house in the Mammoth area anyone?
Lots of climbing, skiing, hiking nearby...hmmmmm
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August West
Trad climber
Where the wind blows strange
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Dec 29, 2008 - 04:00pm PT
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John
You mentioned you would sell if you could get out with 0% (not oweing money).
If you are lucky enough to be able to get a hold of your lender on the phone, you might see if they will agree to a short sell. You sell the property for less than it is worth and they agree to cancel all of your remaining debt. Saves them from having to evict you, saves them from having to sell it, and saves them from having you trash the place (a very real fear for them).
If you can't reach them on the phone, tell a real estate agent you are interested in a short sell and they might be able to track them down.
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Jaybro
Social climber
wuz real!
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Dec 29, 2008 - 04:17pm PT
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Wanna swap for one in Portola? For you, I'll throw in the wooden, 50' offwidth roof for free. They need sped teachers in Mammoth these days?
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couchmaster
climber
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Dec 29, 2008 - 07:03pm PT
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John: something I did when I got upside down in 1980 (remember 20% interest rates?) I bought a house and then decided to attend college. My house price simultaneously dropped 20% below what I paid for it. Many many people in similar circumstances were walking away from their obligations. However, I chose to rent it out and go live in a cheap flop house downtown.
The renters paid me $25 bucks less a month than the mortgage. I paid $100 a month for my downtown rental. (the home was a little 700 sq foot starter home with no basement- tiny! ) At a negative $125 a month total for both the home (-$25) and flophouse (-$100) , I worked and extra job and stayed current.
Eventually, like 7 years later, the value had approached what it was owed on it. I was able to keep it and my good credit intact. It's gratifying to have a credit score over 800.
So, consider renting it and live in a buddies basement. You have plenty of friends, now's the time to quietly ask for a favor: I'm sure many would be glad to help you out.
-or-
Rent part of your house, the basement or extra room to a friend.
Be creative and do some brainstorming: I once had a buddy drive his VW van over to my house and park it in the back of my driveway for almost a year. We ran a big assed extension cord out there so he had power. He was an excellent renter, never bothered us, he would take showers to the local college and not in our house. He'd mow the yard and do chores. He come in if we invited him like for dinner, which we did often, but he never foisted himself on us. Later he bought a rathole of a house and a bunch of us all worked on getting it so he could live in it. I was glad that he asked me for that favor as it made me feel closer to him. I also know that he still, almost 30 years later, feels he owes me big should I ever need one in return.
So, allow your friends to help, and be flexible.
Good luck.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Dec 30, 2008 - 12:34pm PT
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I have a friend who is just renting her address.
To an engineer who is being paid extra to work on a long-term job in WV.
He lives in WV, but he gets paid extra because he has not changed his home address.
Just forwards the mail once in awhile.
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jenren
Trad climber
Sac, CA
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Dec 30, 2008 - 01:43pm PT
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Amen to that sully!!!
Write it down!! Share!!..If you write it they will pay... : )
Good Luck JB..
Hang in there if you can or if you really want to..
There are some companys offering to help you procure a loan MOD for about 4gs..FYI the fee is negotialble..and they will many times take payments. Usually a group of Attorneys/Realtors offering to be the liason between you and the lender..pretty good sucess rate..just check them out six ways from Sunday and read the fine print..
Take care! : )
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salad
climber
Escondido
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Dec 30, 2008 - 02:56pm PT
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John,
Here is the email from my friend in the mortgage business:
I've heard some good things about a government sponsored organization called HOPE NOW.
Here is their website.
http://www.hopenow.com/
I would love to know how it goes for him if/when he calls. He should. I hear they actually do some things:
Freezing a low fixed rate.
Balance forgiveness (lowering the loan amount).
That kind of thing.
Hope it helps.
Best of luck...
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Batrock
Trad climber
Burbank
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Dec 30, 2008 - 05:50pm PT
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I dont have the patience to read the whole post so I am just speaking to the first few posts by Bachar.
People who trash homes before they leave are scum. It is not the right thing to do, it may feel good but it is wrong.
I also understand the need to want to lay blame on someone else other than yourself but nobody twisted your arm when you signed the paper saying you would make the payments on time.
It's called responsibility and being an adult and taking responsibility for promises you made no matter how absurd. There are millions in your position.
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John Moosie
climber
Beautiful California
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Dec 30, 2008 - 07:19pm PT
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Batrock, John was making a joke.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 30, 2008 - 09:27pm PT
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Salad,
Thanks for the link. I've already been there. I don't qualify for their programs. I've also tried all the things they suggested about contacting my mortgage provider to try to alter my loan agreement. They say they can't do anything.
Hence, my proposed letter. It is a joke letter. I thought it might be a way to get their attention. Obviously I'm not sending it.
I am extremely frustrated by the whole thing as I'm sure tens thousands of people in this country are.
It's just as much my fault as it is theirs in my opinion. They get the bailout money but it's not helping us. The H4H program is pretty much a total failure so far.
The Fed keeps printing more money and accounts to no one. What can you do?
Instead of a chainsaw, maybe I should get a printing machine...hahaha
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salad
climber
Escondido
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Dec 30, 2008 - 09:32pm PT
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Sorry John. I have still got the contact at the Bank of Escondido. I'll be there tomorrow and if he is working, I'll ping him.
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Captain...or Skully
Trad climber
North of the Owyhees
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Dec 30, 2008 - 09:33pm PT
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All it takes is the right paper......I know where the mill is.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Dec 30, 2008 - 09:36pm PT
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Great. I got a genius print man....
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salad
climber
Escondido
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Dec 30, 2008 - 09:42pm PT
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i want in
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Lynne Leichtfuss
Social climber
valley center, ca
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Dec 30, 2008 - 09:57pm PT
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IMHO the guy in the pic on the left exemplifies how I perceive the "selected" not voted on (perhaps that might not even make a difference) few elite that make their own rules, then take the money and run.
When people base their decisions on money in their pocket and not what is the right and moral thing to do, our country will reap the consequences.
I was raised to make decisions that would help the other person. Dan's philo was to help those around you up the ladder. It's not about what you can accumulate in this lifetime, it's what you can do to share with others and help them succeed.
Happy New Year...maybe this year our country will get back to basics and a solid moral fiber. Lynne
Ps, who are "the people that receive assistance" ? I've never met one....Fictional characters ?
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 24, 2009 - 01:03pm PT
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Ya, that does piss me off...whose the MF lender that gave them the money?
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bluering
Trad climber
Santa Clara, Ca.
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Feb 24, 2009 - 02:59pm PT
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Yeah, Dick, she's trying to blame the bank too. She applies for an $800,000 home loan as a bus driver, the bank gives it to her and now she can't make payments so bank forecloses.
The bank didn't force her to take a loan.
In fact, I could argue that banks were strong-armed into giving out loans to people unqualified for them....for the past 15 years this was happening.
Oh yeah, and this jewel too..
http://theliepolitic.com/2009/02/obamas-homeless-woman-is-actually-real-estate-investor/
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dirtbag
climber
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Feb 24, 2009 - 03:06pm PT
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If I was an investor in that bank with the $800,00 loan I'd want some heads to roll, because you know there are other stupid loans made. That borrower was a partner in this stupid dance, but we expect banks to exercise some common sense.
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Nefarius
Big Wall climber
Fresno
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Feb 24, 2009 - 03:07pm PT
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Gotta go with bluering on this one.
It sucks ass when things happen in people's lives (unexpected circumstances such as losing a job, etc) and you can't cover your house note. I feel for those peeps.
However, if you signed up for a loan you couldn't afford, interest only, or any of the other lame ass things millions of Americans did that started the economic fall... Shame the f*#k on you. The bank isn't at fault, at all, here. I have zero sympathy for those folks. It's called being ignorant and irresponsible.
When you buy a house, you have to sign all sorts of paperwork and contracts. You shouldn't sign anything, at all, without fully reading and understanding what it says - let alone the single largest purchase you will ever make. Dumbasses.
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 24, 2009 - 03:29pm PT
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Ya, will blame the homeowner's if it makes you feel better, but ultimately the failure of the banking system will affect you and me more than blaming people who couldn't afford the house in the first place. Lenders were basically giving out loans to people who couldn't afford it. They knew it, now we know it. Because of lameazz lending practices, they drove up the prices of homes to the point of absurdity, now we're left footing bill.
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Nefarius
Big Wall climber
Fresno
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Feb 24, 2009 - 03:42pm PT
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The affects, after the fact, doesn't remove where the responsibility ultimately fell - on the home buyers. Saying otherwise is like supporting that weak ass movie SuperSize Me. No one made that guy fat but himself. If I ate that much food, of any sort, every day, had a milkshake with my meals, etc. I'd be a fat bastard too. And the fact that McDonald's exists, and markets their product doesn't make them responsible for his health.
Again, there's ZERO personal accountability in this country anymore. Drives me f*#king nuts. Everyone finds/places blame on people other than the person who actually made the choice. Weak sauce.
edit: Sorry Rox - but that was a personal choice you made. I read everything when I bought. And, at the very least, you know the general terms of your contract. Interest only, the silly ass variable rate loans, all of that - only a f*#king dumbass would sign that sh#t. You're basically buying a house knowing you're on borrowed time and that you're going to lose it eventually, unless you get all these magical raises, "Oh, it'll be tight, but I can get a new job in the next couple of years, before the payment goes up", etc... Over extending yourself is not the banks fault. period.
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Nefarius
Big Wall climber
Fresno
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Feb 24, 2009 - 03:49pm PT
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And he was doing it due to his own choice. Not to mention he was being a dumbass. If you KNOW you're eating crap for every meal, all day, you KNOW your health will suffer.
That movie was painfully biased, and obviously paid for by funding relating to the twin cows that got the lawsuit going against McDonald's, in the first place. It was a joke.
Will you next also try to convince me that a woman's poor driving is worth $7mil when she spills coffee on her crotch?! hahaha
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dirtbag
climber
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Feb 24, 2009 - 04:05pm PT
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Sorry, but in this case it was 50-50.
Yes, the homeowner made some huge lapses in judgment.
But so did the bank. As the saying goes, a fool and his money are soon parted. Well, the bank was a fool too. We expect institutions like banks to be the sober, savvy ones in the lending deals. And any institution lending $800,000 to someone making a bus driver's salary is a god damned fool that knowingly drove that bus (hah!) over the cliff.
I would say that lender and bank deserve each other and their losses. But the problem is, saps like those two, multiplied by millions, are bringing us all down.
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tolman_paul
Trad climber
Anchorage, AK
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Feb 24, 2009 - 04:59pm PT
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In the case of banks, it's a fool and someone elses money that is parted, the depositors in that bank.
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JLP
Social climber
The internet
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Feb 24, 2009 - 05:11pm PT
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"Ya, that does piss me off...whose the MF lender that gave them the money? "
Hahahhaaa... YOU and ME, buddy, will be paying for that sh#t.
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Nefarius
Big Wall climber
Fresno
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Feb 24, 2009 - 05:19pm PT
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"I've given up Big Mac's, are we on for NIAD?"
I may be getting laid off soon, so this could be the year, Fatty!
I guess I see it all differently. I don't ever take the word of a banker, loan person, car dealer, etc. at face value, without checking on my own. They're sleazy. Plain and simple.
It's funny - when someone gets their arms broken, or worse, by a loan shark, everyone always says the guy that went to get the loan from a loan shark was an idiot. Not the loan shark. It doesn't make what the loan shark did right, but ultimately, it was up to the person needing a loan. The loan shark wouldn't be in business if there were not people stupid enough to take loans from him.
Again, guess I feel differently about it all. Carry on.
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dirtbag
climber
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Feb 24, 2009 - 05:21pm PT
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The thing is Nefarius, the banks, as insitutions, weren't looking after their best interests either. They were stupid for pushing these loans.
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Nefarius
Big Wall climber
Fresno
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Feb 24, 2009 - 05:38pm PT
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I'd agree that the banks owe that responsibility to the shareholders. No doubt. But I don't see a bank as having any responsibility to the buyer.
I think the best time to prevent a foreclosure is when buying a home and when creating your monthly budget.
Whatever happened to common practices such as carefully evaluating how much you can afford in terms of the down payment, monthly payment (including taxes and insurance) and overall interest paid over the life of the loan. You should not buy a home that requires a monthly payment — now or when the payment increases if it’s an adjustable rate loan — that is more than one-third of your monthly income. And you should not pay more in interest over the life of the loan than what the property is reasonably expected to appreciate over the life of the loan.
Every homeowner should create a monthly budget to make sure there is money available to pay the mortgage payment each month. In addition to budgeting for the actual payment, homeowners should build savings into their budget and continue to add to their savings until they have at least enough to pay for six months worth of living expenses. This will ensure that the homeowner will have a cushion on which to fall in the event of a job loss or other incident that causes them to lose their monthly source of income.
Home-ownership is a huge responsibility. It's not something you run down to the bank and just do, on a whim, like so many people did. America went nuts, and now, not only do they not want to own up to it, but they want the government, and the taxpayers to bail them out. Bullshit! Guess you didn't really need that BMW and Mercedes in your driveway, or to be wearing $350 jeans, getting fake boobs and racking up a ton of debt. Suddenly everyone in America is back to the reality that they are NOT wealthy and, thus, cannot live like it...
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Chris Roderick
climber
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Feb 24, 2009 - 05:52pm PT
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Hehe somebody who owns a bank telling you to reduce your "principle", classic..
If you destroy property that's not yours, isn't that criminal damage?
Well at least they serve you three squares in jail I guess
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happiegrrrl
Trad climber
New York, NY
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Feb 24, 2009 - 09:19pm PT
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"Whatever happened to common practices such as carefully evaluating how much you can afford in terms of the down payment, monthly payment (including taxes and insurance) and overall interest paid over the life of the loan. You should not buy a home that requires a monthly payment — now or when the payment increases if it’s an adjustable rate loan — that is more than one-third of your monthly income."
It USED to be that, when you went to the lender, they went over your documents and told YOU how much they'd lend you. They wouldn't MAKE loans to people beyond the formulas they had established, depending on the person's financial records. They TOLD the borrower what they could borrow.
It wasn't so much that people were more responsible "back then," but that the lenders wouldn't accept the risk of lending the money. When the concept of packaging and reselling the mortages evolved, that level of risk to the lender went right out the window. No longer would they be stuck holding the bag, if the borrower defaulted.
Or so they thought; this financial disease has shown to be systematic, and we're barely yet beginning to see the symptoms of it.
I bet you a good number of the lenders who worked with the borrowers in the last 5 years wouldn't have been able to explain the terms of the loans they made any more than the people they made the loans to.
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pip the dog
Mountain climber
planet dogboy
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Feb 24, 2009 - 09:50pm PT
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Bachar,
Two things that might be of use to you:
[1] The mortgage relief portion of the new federal stimulus bill will help some mortgage holders in situations like yours. The as of yet unanswered question is what the specific requirements will be to define specifically who will qualify for that assistance. The specific regulations (and hence the full answer) are going to be released on March 3. Until then all anyone can do is offer best guesses, and I don’t think that is very useful.
So watch the news sources carefully for a coherent definition in plain English as to who specifically qualifies for mortgage relief, and what specific relief each of them qualifies for, in the days following March 3.
~~~
[2] I have friends in positions similar to yours who have found their local county treasurers/tax assessment office a very good source for useful and unbiased info – and it is free. These offices have pros on staff whose job it is to track (and in some cases implement) available mortgage relief. And while they know the banks and what they are doing, they don’t work for banks or other lenders. They should be among the first to translate the federal programs regulations once they are issued on March 3.
My friends have no specific experience with Mono county (they are in other states).
Here is the contact info:
Mono County Treasurer-Tax Collector Brian Muir
P.O. Box 124
Bridgeport, CA 93517
[voice] (760) 932-5494
[fax] (760) 932-5481
[email] bmuir@mono.ca.gov
Hope this proves useful. I’ll send along anything else I learn of that seems actually useful.
All the best, great one.
^,,^ (dogboy, michael, pip… whatever, I answer to all of them)
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bluering
Trad climber
Santa Clara, Ca.
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Feb 24, 2009 - 10:12pm PT
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I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?
Anybody?
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happiegrrrl
Trad climber
New York, NY
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Feb 24, 2009 - 10:38pm PT
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Bluering - I have been thinking about that particular issue. It seems that some are suggesting, as you, that it was banks being "forced" to loan to minorities and low income folks that has caused this credit crisis.
1) I believe the laws referred to were put in place a hell of a lot longer ago than, say, five years. Isn't that true?
2) If it were the minorities/low-income level people who were the cause of this fall out - how come it wasn't occurring on any level of concern until only this last few years? And how come it is people who wouldn't fall into those categories that are reporting the problems now?
3) What yearly salary are we talking about, anyway, when we say "low income?" I'm doubting it's $60 - $80K, and isn't that where the income levels of the majority of defaulters range?(totally pulled that outa my butt - but I believe it may be accurate. Feel free to refute it, anyone, with something they can document!) That's hardly the "low income" loans that were put in place since the 1980's.
4) If the problem lies in those pesky poor people getting handed loans because of US law - why is the housing market collapsing in other countries as well?(re: http://www.guardian.co.uk/business/2008/mar/31/northernrock.banking1);
I admit that I am not knowledgeable on the details of finance and the crisis we are in. I just did a tiny bit of surfing, and found a blog with this bit:
b. A safe mortgage is a maximum of 3 times the buyer’s yearly income, but mortgages have been 5 to 10 times incomes in the last few years, which have eliminated the current prospect of housing market.
The source: http://crekcm.blogspot.com/2008_12_01_archive.html
I note that because it specifically refers to "the last few years," which ...sort of coincides with the time frame of the "buy now or never, your home is guaranteed to increase in value" media/advertising ploy that was touted. Touted BY lending institutions, not by "anything for a story" National Enquirer writers.
I bet you there are a LOT of Supertopo folks suffering in silence because of the hateful abuse they expect to endure if they let others know they're in trouble. I don't know about you, but I would rather not find out so-and-so committed suicide one day, and it comes out they were in financial trouble and kept it to themselves. This is QUITE a possible scenario. So - for f*#k's sake, people.... THINK.
United we stand, and divided we fall.
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Lynne Leichtfuss
Social climber
valley center, ca
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Feb 24, 2009 - 10:38pm PT
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For some it's about trying to wait out this sheee until things get better.
Things Will Either:
*Get Better.
OR
*Stay the Same for a year or two....Hope not !
OR
*America will disappear as a major player on this planet.
WHAT WE CAN DO.....
*Take what we have and link with others to save and help each other best we can.
*Learn a new, better and more healthy life style. Do with less, spend less, grow your food, trade for goods, cut back on everything.
*Kinda like removing a tumor that grows in yo body and starts to take over. That is what all the sheee we have collected and let control our lives is. Lynnie has been pruned big time and it hurt, but now seeing the results.....
Just a Thought. Peace and Joy to You All, Lynne
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bluering
Trad climber
Santa Clara, Ca.
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Feb 24, 2009 - 10:54pm PT
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Happiegirl, Google the 'community reinvestment act' and look under the biased Wiki page. Scroll down to the amendments to the act from 1990 through 2002.
There's your problem.
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stevep
Boulder climber
Salt Lake, UT
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Feb 24, 2009 - 11:42pm PT
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Bluering, the CRA was only a small part of the issue. And please show me some stats that minorities are any more represented in foreclosures than whites.
I don't really have any sympathy for people who got in way over their head, but greedy brokers, flippers, and finance guys all also ignored risks and helped cause the problem. CRA had nothing to do with repackaging bad mortgage debt into overly risky investments. Nor did the CRA have anything to do with a lot of brokers selling condos to investors in places like Palm Beach or Las Vegas.
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Lynne Leichtfuss
Social climber
valley center, ca
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Feb 24, 2009 - 11:55pm PT
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stevep, there are people "out there" that bought homes with regular mortgages. The problem is the economy and loss of jobs. Who could have known this would come down?
Best thing people can do now is help one another survive...hey, that's what jesus said, help yo neighbor. If we all pull together the less loss.
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dirtbag
climber
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Feb 25, 2009 - 12:15am PT
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"I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?
Anybody? "
Hmmm...not sure I'm the best one to answer since I blamed both, but Drug dealers and loan sharks are a poor analogy. Drug dealers get paid on the spot and have an interest in getting their customers hooked on their product. Banks are supposed to be interested in maintaining their business, and not lend (meaning get paid later) money to people who realistically have no chance of paying them, such as the bus driver. But their business models didn't work well in that respect. They got greedy and gave to people who shouldn't have them. Banks are supposed to be the really, really smart ones in these transactions: they sure didn't act like it.
So why are you, bluering, so willing to give banks a pass?
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 25, 2009 - 10:15am PT
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Blue-It's a no brainer that people who borrowed more than they can pay are culpable. But, what leverage do banks have in getting their money back on foreclosed homes? As far as I know, the folks who foreclosed credit ratings take a big hit, but big deal. So you're looking at losing $200K or $300K on your home or walking away with a bad credit rating...Hmmmm...tough decision!
Banks weren't forced into this Blue, their greed to make a quick buck off off naive homeowners led to this housing meltdown. Greed trumps responsibility each and every time!
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darod
Big Wall climber
South Side Billburg
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Feb 25, 2009 - 10:30am PT
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bluering, spin, spin away...
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Feb 25, 2009 - 01:16pm PT
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I guess I'm really just trying to understand why housing prices dropped so drastcally. Other wise I could just sell my house.
Here's some interesting stuff about how lending really works....an excerpt from
Fiat World Mathematical Model
by Mike "Mish" Shedlock
Ponzi Financing
Borrowers have to pay interest on the amount borrowed. However, the interest and the debt cannot possibly be paid back except by an ever expanding Ponzi scheme of lending. That scheme can last only as long as everyone believes the debt can be paid back and the market value of that debt keeps rising.
It's a faith based system in which banks extend loans and hold the credit on the books (or in many cases off the books in various structured instruments). The banks are thought of as being well capitalized as long as the value of credit on the books in relation to their reserves meets some ridiculously low minimum set by the Fed.
This is how the system works, using the term "works" loosely.
Day of Reckoning
The day of reckoning comes when asset prices start falling, defaults soar, and the value of credit on the books starts plunging. That day of reckoning has arrived.
And if leverage is high enough, as it was with Bear Stearns and Lehman, the institutions are wiped out overnight. Citigroup (C), Back of America (BAC), Fannie Mae (FNM), Freddie Mac (FRE) and AIG are essentially in the same position of Lehman except the taxpayers via the Treasury are funding the bailouts.
Read the article:
http://globaleconomicanalysis.blogspot.com/2009/02/fiat-world-mathematical-model.html
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JLP
Social climber
The internet
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Feb 25, 2009 - 01:34pm PT
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"I guess I'm really just trying to understand why housing prices dropped so drastcally."
I think the correct question is why did they rise so fast. Buy low, sell high. Most do the opposite.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 03:43pm PT
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i have been avoiding this site for the simple reason that i am so sick of seeing the right wing drivel stack up around here- just as it has in this thread.
blueguy wants you to blame the minorities?
that's just great.
so rich fat white bankers destroy the economy by way of massive over-leveraged bets on the unlikely continuation of ongoing expansion of an obvious bubble in the wider US housing market, and it's all the fault of unedumucated blacks and browns... ain't this a great country?
(now i will try to make this simple for all the racists, opps- i mean all the "republicans"- ya'll try to keep up).
i'll tell you why minorities were over represented in the subprime market- because there are so many minorities who are gainfully employed and would/will never make enough to be anything but renters, and that represented a new market for banks and mortgage finance companies to exploit. they needed to expand into new and available pools of borrowers because they created so much demand for the securities they were selling, often internationally, which were essentially large groups of loans that had been "bundled" into something that could be bought and sold, or invested in by others.
why would banks do this?
why would morgtage companies sell loan products to people who could not afford them?
1)because they had their republican pals (read: phil gramm http://www.slate.com/id/2194933/ , former TX senator and john mccain's primary financial policy advisor for much of the '08 campaign) slip in some language to an important bill, at the very last minute, and in the last months of clinton's 2nd term, that erased longstanding legal barriers (which had been put in place after the great depression) and allowed the union or merger of separate types of financial institutions, like insurance companies, banks, and mortgage finance companies. "deregulation".
and 2) the above allowed them to offer loans without consequences if those loans failed. that simple fact changed everything in the mortgage business. now everyone got paid based on volume. they made money on the loans no matter what the quality of the loan was, and they made lots of money if they made (and sold) lots of loans. that gave all the various lenders a financial incentive to lower the requirements upon borrowers, and they of course lobbied the republicans (who were in power in both the house and senate for 6 of the 8 yrs of the 2 bush terms) to lower their regulatory standards and more easily offer loans and guarantees that grease the skids in the mortgage industry. that was the reason unscrupulous lenders- even some so-called "predatory" lenders- targeted new markets for their mortgage products. it had to be so because they needed more and more loans to bundle into more and more securities, and then sell to eager investors. and internationally, everyone wanted a piece of the US housing market, simply because it was so successfully growing for so long. WaMu, for example, had been a conservative lender for decades, but in the bush years became widely known for their large volume of risky loans. why? profit incentive, period.
so why is this political?
make no mistake, "they" did this on purpose, and not because they thought it would destroy everything, but because they knew it would allow them to make lots of money. that's all they (republicans) are about- making all the money they can, period.
and by the way, that republican rallying cry of "deregulation" is simply the effort to allow people, companies, or even industries to do whatever they want to seek a greater profit, and eventually that just equates to gambling. gambling that the pollution won't be that bad, gambling that the lead paint in toys won't be a problem, gambling that untested drugs won't have unintended or unknown side effects on the public, gambling that the food we eat will be safe even if there are fewer inspections of food processors, gambling that highly leveraged bets on unsustainable expansions won't go sour, these are all risk/benefit or cost/benefit calculations that "the market" might make a different evaluation on than the people or their elected representatives might.
btw- those (of you?) who are ideologically bound to the republican party for some other reason than making all the money they can are sheep who are just as abused by them as the religious right has been. but truth be told, most republicans openly admit that the GOP drumbeat of ever lower taxes (thus making more money) is their primary attachment to their party. so interested in that promise are most that they don't even care if the "lower taxes" mostly go only to the very wealthiest americans (psychologically they apparently believe they will someday be worth hundreds of millions of dollars).
so why was republican ideology to blame for all of the subprime mess? because they deregulated the banks with a wink and a nod, and they made gold from straw with the statistics on increased home ownership in america. the sub-prime fueled expansion of home ownership during the bush years allowed "them" to argue that flat or even decreasing wages, coupled with the erosion of labor unions, workers rights, and employee benefits in general, were not indicative of an economy that was unfair or unkind to the middle class and disproportionately skewed to the advantage of the wealthy, whose income and net worth continued to expand at rates even faster than during the regan years (which had previously represented the fastest transfer of wealth to the top 1% within any society on earth since the period immediately preceding the french revolution).
seriously, how many times did you hear bush chime in about "home ownership in america is on the rise!" ? remember "the ownership society"? that was all they could offer the working public. in the absence of the housing bubble, there was no economic growth in america in the bush years, so they fueled phantom economic "growth" with home equity credit, and they filtered the new cash off the top in the form of tax cuts for the wealthy.
it's really not that complicated.
bleeeech-
nevermind that.
you are right- it must be all those damn uppity negroes being irresponsible, all trying to buy houses they cannot afford!
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Roughster
Sport climber
Vacaville, CA
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Feb 25, 2009 - 03:51pm PT
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Great post Matt
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dirtbag
climber
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Feb 25, 2009 - 03:53pm PT
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Go Matt, go!!!
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 25, 2009 - 04:27pm PT
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I'd say that's more realistic, Matt. But, I'll have to agree with Fatty, it wasn't just the repubs fault, dems were just as compliant in this housing "Ponzi Scheme". Where do we start holding people accountable...I'd say at the top (i.e. CEO's who gained the most from this mess) and not the bottom...
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apogee
climber
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Feb 25, 2009 - 04:29pm PT
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Matt-
Nevermind fattrad- he doesn't just drink the koolaid, he brews it himself.
Great post. Keep up the good work!
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TradIsGood
Chalkless climber
the Gunks end of the country
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Feb 25, 2009 - 04:29pm PT
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Matt, hate to let you in on this, but one of the biggest pieces of sub-prime is home equity loans (second mortgages). That is where somebody uses the equity that he built up in his house to pay off his credit card or buy things he "needs" to have now.
Maybe you were thinking of Alt-A, also known as liar loans, no income verification loans, etc.
Not sure where you got the idea that racism had anything to do with the problem. Geographically, what areas have been the most punished? Hint, one is Florida. You might live in one of the others.
Do you think minorities are more likely to make bad borrowing decisions than non-minorities?
Do you have any evidence that blacks and browns are "over-represented"? If not, then all your argument is wasted.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 04:30pm PT
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DadIsBad-
I "got the idea" from upthread posts that sought to blame minorities for taking loans they could not afford.
specifically:
"I just love how so many blame the 'lenders' instead of the idiots asking for loans they can't afford. Ever hear of drug dealers and loan sharks (as Nef pointed out), if you're an idiot don't blame someone else.
Why were banks forced to give out questionable loans to 'minority' peoples who couldn't qualify under normal lending procedures?"
As to the rest of your comment-
The presence or lack or racism on anyone's part does not in any way impact my argument, which is that the engine was a deregulation enabled bubble that rose on the opportunity for banks and lenders to make loads by selling bundled loans, an opportunity that was put in place on purpose by a republican senator's late amendment. Please recall how many reports we once heard about investors who didn't even know their investments included sub-prime paper.
FT-
While it may not be that simple, it's also not that complicated.
You also believe we should have invaded Iraq, and that we did so because we were truly afraid of them, as opposed to being interested in exploiting their resources and hosting our armies there for several decades. I suppose you would make the statement: "it's not that simple."
I beg to differ.
more UBS/Phil Gramm info may be on the way to a news stand near you:
http://www.nytimes.com/2009/02/25/business/worldbusiness/25ubs.html
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stevep
Boulder climber
Salt Lake, UT
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Feb 25, 2009 - 04:33pm PT
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While I agree with most of Matt's post, and certainly the GOP has been the bigger party of deregulation, at least some Dems should get blamed as well.
There was banking deregulation that went on during the Clinton administration, led at least in part by Rubin.
Basically a whole lot of rich folks, both GOP and Dem, got wayyy greedy.
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salad
climber
Escondido
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Feb 25, 2009 - 04:37pm PT
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dont forget the part about the racethuglicans blocking any efforts to tighten up on fannie and freddie.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 04:38pm PT
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racethuglicans, lol
Steve-
Not every single instance of "bank deregulation" is/was responsible for the enabling of the current financial crisis.
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JuanDeFuca
Big Wall climber
Stoney Point
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Feb 25, 2009 - 05:06pm PT
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Don't worry come the great eclipse of 2017 this will all be over.
Or if you belive the Mayan 2012 the world ends.
Smoke if you got them.
Juan
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TradIsGood
Chalkless climber
the Gunks end of the country
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Feb 25, 2009 - 05:12pm PT
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Matt, selling bundled loans was started in the 70's. Selling bundled loans never caused a credit crisis until they started bundling bad loans. Even that took some time. It needed the real estate value correction to expose the error and some time to expose that error.
Selling bad loans had some limited history of failure even prior to this. Think "The Money Store", for example.
Anybody who is trying to find a single party to blame in this, is wasting gray cells - most likely because he does not have enough knowledge of the subject to understand the big picture.
The blame ultimately has to fall on the shoulders of every participant. It would not have worked with out all of them - government, lenders, borrowers, investors, wall street, ratings agencies, bond insurers, appraisers. Take just one class of out of the picture and it never happens. Everyone of the participants mentioned made at least one serious mistake.
Now the question is "will we extend the "moral hazard" even farther?" Today we heard from the administration that the banks that fail the "stress test" will have 6 months to raise capital. So clearly it has been yet further extended to the big 18. If they can't do so privately, they will have to do it at 9% from the government. Think about it. How is a bank going to earn money at a rate higher than 9%? Certainly not by jacking the interest rate on mortgages down. Certainly not be extending it to borrowers on credit cards who are already having difficulty paying. So the current government plan is to lend money to a bank that needs money, but which has no hope of re-lending at a profitable rate.
Last week we heard that it was going to be extended to some class of borrowers - it remains to be seen how big that is, and whether it will achieve anything useful. So far, loan modification has proved to be a failure, with borrowers falling behind or defaulting in very rapid order - mostly under 6 months.
Could they do anything different? Yes. Would it work? Probably not. The damage has been done. The recovery is going to take well over a year.
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Mighty Hiker
Social climber
Vancouver, B.C.
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Feb 25, 2009 - 05:19pm PT
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Matt: "that's all they (republicans) are about- making all the money they can, period."
And here I naively thought they just liked scaring people, and then manipulating them.
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the Fet
Knackered climber
A bivy sack in the secret campground
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Feb 25, 2009 - 05:24pm PT
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My house was built by a guy who had 5 acres and built houses one after the other and sold them on 1 acre parcels.
After he died his widow let one of their kids move into the house and they didn't make the payments, so the bank foreclosed.
On his way out he opened up the water heater and let it flood the house. Nice guy, huh, the house his dad built by himself he trashes.
A contractor bought the house from the bank and replaced all the sheet rock and all the plumbing.
We got a great deal on it since the hard work was done, but lots of cosemetic stuff left to do, so it didn't have the appeal it should have.
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Nefarius
Big Wall climber
Fresno
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Feb 25, 2009 - 05:24pm PT
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""I guess I'm really just trying to understand why housing prices dropped so drastcally."
I think the correct question is why did they rise so fast. "
I'd agree with that, and it happened for a number of reasons. I was honestly surprised that *anyone* was shocked or surprised when the crash happened. It was inevitable. Plain, simple logic and arithmetic showed that there was no other way for it to go but down. I've gone round and round with the CEO of the bank I work for for a few years about it. Now he's eating his words.
Look, the houses were seriously over-valued. We'll use Fresno as an example. One of the great things about Fresno was always that you could buy a decent home here for a reasonable price. This enabled blue collar workers the opportunity to actually purchase a home here. The median family income here is around $42K. The median price on a home here, at the peak, shot up from like $80k to $325K. How long did they seriously expect that they could keep selling those houses for that amount here? And this was the case all over the place. The price of housing can't more than triple, with zero rise in earnings. It just won't work.
I managed to get lucky when my relationship fell apart right at the beginning of the thing (rather than now, or even last year)and I was able to sell for a bit more than I paid. I had a 3200sq ft home, in a great neighborhood, all the upgrades, that I paid $225K for. Had I have known that the ignorance would go on and on and on, I'd have kept it and sold that bad mutherf*#ker for around $700k at the peak and bailed. Hinsdsight, eh? Now I'm sitting, waiting. Eventually this will all end and that same house will be back down to $170K-ish, where it was to begin with, and where it belongs.
The housing boom was manufactured and a shitty thing. The worst part is that millions of sheeple bought into. Bummer.
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bluering
Trad climber
Santa Clara, Ca.
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Feb 25, 2009 - 05:40pm PT
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Boy, Matt sure is pissed off, huh?
Matt, here's what I was referring to when I mentioned pressure to give loans out to minorties who couldn't afford them. Of course, 'non-minorties' made stupid decisions too, but this is what I was referring to;
ACORN recognized very early the opportunity presented by the Community Reinvestment Act (CRA) of 1977. As Stanley Kurtz has reported, ACORN proudly touted "affirmative action" lending and pressured banks to make subprime loans. Madeline Talbott, a Chicago ACORN leader, boasted of "dragging banks kicking and screaming" into dubious loans. And, as Sol Stern reported in City Journal, ACORN also found a remunerative niche as an "advisor" to banks seeking regulatory approval. "Thus we have J.P. Morgan & Co., the legatee of the man who once symbolized for many all that was supposedly evil about American capitalism, suddenly donating hundreds of thousands of dollars to ACORN." Is this a great country or what? As conservative community activist Robert Woodson put it, "The same corporations that pay ransom to Jesse Jackson and Al Sharpton pay ransom to ACORN."
and
Now you could make the case that before 2008, well-intentioned people were simply unaware of what their agitation on behalf of non-credit-worthy borrowers could lead to. But now? With the whole financial world and possibly the world economy trembling and cracking like a cement building in an earthquake, Democrats continue to try to fund their friends at ACORN? And, unashamed, they then trot out to the TV cameras to declare "the party is over" for Wall Street (Nancy Pelosi)? The party should be over for the Democrats who brought us to this pass. If Obama wins, it means hiring an arsonist to fight a fire.
from here...
http://www.realclearpolitics.com/articles/2008/09/acorn_obama_and_the_mortgage_m.html
It's laughably naive to say the Republicans did this, but it doesn't surprise me.
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apogee
climber
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Feb 25, 2009 - 05:46pm PT
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TiG: "Anybody who is trying to find a single party to blame in this, is wasting gray cells..."
That's partially true- there is no one individual who is responsible, but there most certainly is a group of people, a 'Party' if you will, that had a tremendous influence on it. It is part and parcel of the GOP's ideology to remove regulation and oversight whereever it can, and let the market regulate itself. This is a core element of the GOP, not the Dem's, and the GOP has been running the show that started this mess, and saw it collapse.
It is funny how, when discussions of responsibility for this morass come up, members of the GOP try desperately to change the channel or try to implicate others in the process. It is what it is, guys- you voted for it, your Party created it, and now we are all living with the outcome.
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dirtbag
climber
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Feb 25, 2009 - 05:47pm PT
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I blame ACORN for everything.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 05:50pm PT
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just so i am clear, the *AUTHORITY* you want to cite is a no more than a conservative comentator?
and one who wrote extensively on obama/ayres and obama/wright during the 2008 elections?
http://en.wikipedia.org/wiki/Stanley_Kurtz
hahaha
ha ha ha
HA HA HA
HA HA HA HA HA HA HA...
so you have a conservative blaming, get this, ACORN, for the sub-prime debacle, and you just accept that?
(ok wait, did they invent voter fraud, or did they destroy the economy?)
come on blueguy, at least try.
what did hannity have to say? or oriely?
edit-
it's just unfathomable to me that you would consider that to be an actual argument in favor of the idea that borrowers were to blame and ACORN was the catalyst. what about george soros? sean penn? can jimmy carter get in there for some blame? what about all those fags getting married? surely that destroyed the moral fiber that supported housing prices, no?
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bluering
Trad climber
Santa Clara, Ca.
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Feb 25, 2009 - 05:56pm PT
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Stanley Kurtz didn't write that....
Also, I'm not blaming ACORN entirely, they were PART of the problem in the lending fiasco.
dirt,
I blame ACORN for everything. don't forget Jimmy Carter.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 06:05pm PT
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edit-
hey no foolin, is he really "an economy professor"?
[/]edit
yer sharp as a tack blueguy!
kurtz didn't write that-
the author only relied on kurtz to make his bullshit case against ACORN
from YOUR post above:
"As Stanley Kurtz has reported, ACORN proudly touted "affirmative action" lending and pressured banks to make subprime loans.
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bluering
Trad climber
Santa Clara, Ca.
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Feb 25, 2009 - 06:16pm PT
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Matt, he's only mentioned once in the whole article to make one point.
Must mean that he's a liar and the whole thing is made up. Definately covering for those money-grubbing Repubs.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 06:17pm PT
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uhhhhh- it was just the part that you quoted...
as for this:
http://www.lewrockwell.com/dilorenzo/dilorenzo125.html
HAHAHA!!!!!!!!!!!
blueguy you are THE BEST!
that dude actually blames carter and "hard core leftists"!
that's awesome man, just awesome!
this has got to be the best troll of all time!
you fooled me man, i really believed that you believed all that silly sh#t you spew, you are something else...
btw-
that author that you linked to, here's his book (as advertised on that very page you linked to):
http://www.huffingtonpost.com/william-k-black/the-two-documents-everyon_b_169813.html
apparently abraham lincoln was a demon of sorts, and his relentless drive to centralize federal power and create revenue via income tax was the true cause of the civil war! who knew...
hey, do you have wesley snipes' tax guy's # for me bro?
thanks!
(you are just embarrassing yourself dood- i am embarrassed for you now, seriously. so what else came up when you googled "ACORN subprime" ?)
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dirtbag
climber
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Feb 25, 2009 - 06:22pm PT
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Yeah, I looked up that economist too. He's pretty fringe, arguing that Abe Lincoln was a SOB and the North should've let the south go.
Interesting that a guy who is pro-secessionist writes an article blasting ACORN.
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 06:27pm PT
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in all honesty, this is why i stopped hanging around here.
what a waste of time.
who are all these right wing idealogues that couldn't tell an opinion from a reasoned conclusion or from a statement of fact if their very life depended upon it?
it's just not my job to go back to 8th grade and teach people to think critically.
(and btw- you cannot teach that skill out of one side of your mouth and then, for example, deny that the theory of evolution has withstood decades of scientific scrutiny quite well out of the other, or that the book of mormon was delivered on golden plates to joseph smith in upstate new york via an angel, who then subsequently took the plates back, leaving joseph to spread "the true word of god". so no, you cannot say that all american children are taught to think critically)
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bluering
Trad climber
Santa Clara, Ca.
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Feb 25, 2009 - 06:29pm PT
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Matt, so are you stating that the claims put forth are false?
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Matt
Trad climber
primordial soup
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Feb 25, 2009 - 06:50pm PT
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i'm saying they are highly suspect, given the source.
similarly, i could not have attested that barack obama was in fact a US citizen, and had been born in the US as required by law for anyone to become POTUS, but given where those claims were made, i was able to discount them and be comfortable with it.
you, sir, have not offered any claims that are worth refuting, investigating, or even commenting upon. you have parrotted what are blatantly apparent to be ideologically driven "talking point" type responses to the observable fact that our economy melted down on the heels of 8 years under george bush, the first 6 of those with the control of both houses of congress.
that so-called "conservatives" want to push the blame for that meltdown away from the policies that they championed for decades and finally implemented under bush II should not surprise anyone. can we not agree that we should AT LEAST insist that they attempt to make a fact based, statistically supported argument, rather than one of finger-pointing at move-on, Acorn, michael more, public education, high taxes, gun control, and gay marriage?
(and please, shouting about ACORN at the top of your lungs is meant for audiences inside the vault! i.e., when you hear that rhetoric, what it should be telling you is that these guys are not substantively supporting their argument in any way, and what they are relying on is certain key words that will resonate with the "base" of the republican party, defined as those who will believe anything their slow-talkin, hate-mongerin, quietly (but not that quietly) racist media icons say)
i'm over this
you guys are seriously just not that smart- not that i am either, but this back and forth with your unfiltered political commentary as the foundation of serious argument is just pointless. go read a real book!
here's one:
http://www.amazon.com/Perfectly-Legal-Campaign-Benefit-Everybody/dp/1591840198
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bluering
Trad climber
Santa Clara, Ca.
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Feb 25, 2009 - 06:55pm PT
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I don't see how you can dispute that lending institutions were pressured to give out loans to people with poor credit ratings and low down payments. They were accused of 'redlining' and discriminating against certain groups and, as a result, were pressured to give out crappy loans.
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John Moosie
climber
Beautiful California
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Feb 25, 2009 - 07:00pm PT
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"I don't see how you can dispute that lending institutions were pressured to give out loans to people with poor credit ratings and low down payments"
It wouldn't have been possible to pressure them if the laws hadn't been changed to also give whitey that same opportunity. You can't pressure someone based on race bias if the other races aren't already getting it.
The real problem was the loosening of rules. Rules that were created to protect us from the mess we are in now. Without the looser rules, there would have been no way for Acorn to pressure anyone.
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dirtbag
climber
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Feb 25, 2009 - 07:01pm PT
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"(and please, shouting about ACORN at the top of your lungs is meant for audiences inside the vault! i.e., when you hear that rhetoric, what it should be telling you is that these guys are not substantively supporting their argument in any way, and what they are relying on is certain key words that will resonate with the "base" of the republican party, defined as those who will believe anything their slow-talkin, hate-mongerin, quietly (but not that quietly) racist media icons say) "
Yep, dog-whistle politics: Southern strategy/states rights /welfare queens/black presidents drawn as chimps. They're all racist code-wording designed to get a conservative segment riled up. It's worked for years.
And pro-secession anti-ACORN economists have ears that are well-tuned to that kind of stuff.
Ah, if only Strom Thurmond had won in '48, we wouldn't have the kind of messes we have today.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Feb 25, 2009 - 07:04pm PT
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If you really want to show that you understand the mortgage market, here is a thread where you could contribute by constructing your own perfect world solution:
http://www.supertopo.com/climbing/thread.html?topic_id=794946
I don't expect it will get many contributions, since criticism is easier and more fun than actually solving a problem.
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dirtbag
climber
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Feb 25, 2009 - 07:07pm PT
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Sure. 60 years ago. The Dems were the racist party, and largely conservative for much of its history. But racism, a funamentally socially conservative impulse, has a different home now. You don't find many conservative Dems anymore.
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pip the dog
Mountain climber
planet dogboy
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Feb 26, 2009 - 02:56am PT
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[I’d still like to see this thread focus on stuff that might actually be of use to our mighty brother Bachar. Really.]
~~~
That said, to answer an earlier question “how did this happen”
[Massive Post Warning – think PgDn Key]
I spent a couple years as an independent contractor writing stock and bond selection models for a number of the huge investment firms now in the headlines. My work was trivial and used at the far margins of the game. The pay was (relative to my talent) spectacular, so I did it - then quick headed off for many months in the bronze age at altitude. Eventually i came crawling back with my last jar of peanut butter for my next cash fix.
This is my piddly background – but through it I did end up as an accidental fly on the wall to witness the beginning of the current meltdown. (Me, I never once did anything remotely real estate or mortgage related – so no need to come after me with a chainsaw... pahlease)
~~~
So here, in 1400 words or less, is what I witnessed first hand:
Through most of US history, one got a mortgage through their local bank or S&L. As they were using their own money (their depositors’ cash) and were local, they looked quite hard to see if an applicant was in a good position to actually pay off the mortgage. The mortgage brokers all worked for the banks/S&L’s – so if they got it wrong more than a couple times, they were quick unemployed.
In the very late ‘90’s and into the early 00’s, the biggest institutional brokers (who were forever looking for the next cash cow) came up with idea of bundling hundreds of retail (home) mortgages into a single mighty ‘unit’ of $10mil or $100mil (or more) each -- that they could then sell to their largest investors (like massive pension funds all over the world).
So they set their best quaints (mostly recently academic statisticians, physicists, and math geeks) to coming up with the math for such a ‘unit’ of such size and built from so many mortgages (and soon just pieces of mortgages) that they were “statistically” almost risk free. I have two friends, both high end water cooled brain phycisits that they lured out of academia and the labs with salaries 5 or 8 or more times what they were used to.
So this pool of massive IQ’s (with little actual experience in any reality, let alone home mortgages) come up with some imponderable formulas that suggest that a big enough unit made up of enough teeny mortgage pieces where, effectively, risk free. Such that even if a statistically improbable bunch of them went belly up, the mighty unit would sail on and make big profits.
This was the moment the current disaster was born.
~~~
At this point the huge institutional brokerages needed wads and wads of mortgages to fill these ‘units’ and started buying them hand over fist from banks and other mortgage outfits. They were insatiable, as they knew they would make mega wads selling the units to their largest clients.
And they offered the banks, S&L’s, and other mortgage lenders a very sweet bit of cash to sell them the mortgages on their books. So, human nature being what it is, they all sold tons of them to the big institutional brokerages. And these huge brokerages used their fancy software to assemble mighty ‘units’ and found them easy to sell to most everyone around the globe.
For they were based on US home mortgages – which within the lifespan of most buying them was considered all but bombproof. That and the huge institutional brokerages assured them that their might geeks had done the math and it was bombproof. And just having the name of a mighty institutional brokerage behind it all meant a lot to most.
~~~
The lenders who once actually held the local mortgages (and regularly drove by the local properties to ‘kick the tires’) sold off most of their mortgage portfolios and made a sweet profit on every one.
~~~
OK, now enter the “independent mortgage brokers” I know a few of these people too, but don’t consider them friends. Unlike the traditional mortgage broker BITD – those who worked for the lenders who had their own money at stake – this new breed was accountable to no one.
Even those ‘newbies’ who were dummies would make a half a point (0.5%) on any mortgage they wrote. The more informed among them made notably more. Think about this – that is $1,000 for the hour it takes to do a “search and replace” on some boilerplate contract for a $200K mortgage -- then get someone, anyone, to sign it. Some who signed understood all the details and ramifications. Others did not -- though not all in this latter group were stupid or greedy weasels. The contract for an ARM is a very complex document, seemingly designed to confuse.
And who among us didn't dream of owning our own home -- even many years before we could really afford it?
These 'independent mortgage broker' twerps (very few of whom were licensed -- and I witnessed a bunch of them personally) were doing this a couple of times a day, every day, and for a couple of years in a row. In all, crazy big money. Some of them actually razz'd me and said ‘why be a such moron doing what you do -- do this and get crazy rich!” For whatever reason, I deferred…
~~~
Now think of this in terms of all of the above (I prattled on so for a reason). The Independent Mortgage Brokers (many ex-car salesmen, or the like) are signing on anyone with a pulse into a mortgage. Issues like whether it was appropriate to their income or even remotely do-able be damned. For with each signature then got many thousands. And they could, and did, do it many times a day, every day, and for a couple years.
You’d think that the actual bank/lender named on the mortgage might stop and read some of these mortgage apps and say “What? Are you insane?” But they didn’t. For unlike the old days, when it was actually their money at risk, in these days they quick sold the mortgage to one of those massive institutional brokerages – and for a sweet profit. And once sold off -- not their problem.
Back at the most mighty institutional brokerages, they didn’t care to read the app and kick the tires either. For they quick chopped up the incoming flood of mortgages and jigsawed them in pieces into one of their mighty – and mighty profitable – massive ‘units’. Then they quick sold those units to some massive pension fund or the like -- for what was for them too a mighty sweet profit.
___
And those at the end of this food chain, the massive hedge funds, pensions, foreign banks -- just bought this stuff up like candy. For, after all, famous massive institutional brokerage firm XXX assured them that they had done the math and found the result ‘bombproof’. And with this, their clients throughout the planet figured “Hell, these are US home mortgages, of course they are solid (none were old enough to remember like, 1932). And besides (and mostly), the mighty and famous global institutional brokerage XXX assured us it is bombproof! And at 250+ basis points over a US treasury bond of the same duration? hell, a no-brainer!
~~~
And so it went. For at leat 8 years. And all of the players on the food chain made huge money. And those who bought the units assumed they’d do as well. Hell, even the big banks and brokerages fell into their own trap.
And then somebody said (not the first, but finally someone loud enough -- “The king has no clothes!”) and within a week it all cratered, and continues to this day to collapse towards the core of the earth.
~~~
So who specifically among this tag-team of greedy turds is responsible for this mess? As Darwin tells us that it is the greedy and selfish who survive, I myself would say all of them. Though I do admit that I have a special dislike of the front line – those independent mortgage brokers. For they alone were in a place to know the realities of the specific souls they were damning to something truly ugly. Ah, but there is more than enough blame to go around.
Our species wear pants, or pant-suits, and smile and shake hands. And yet too many among us would rip your kidneys out if you fell down and couldn’t defend yourself – just to sell them in the organ market in Bangladesh.
~~~
If nothing else, I hope this ‘fly on the wall, up close and personal vision’ of what went down, perhaps leads those who might want to blame it all on people not as pale as most of us gringos to pause a moment and reconsider their conclusions. For this cabal could care less what color you were – as long as you could hold a pen and sign your name.
~~~
As for the best way out of it, who among us really knows. It is Terra Incognito. I hope for my own small selfish sake if not yours that those at the helm guess right. I do believe that the prior administration’s belief that unregulated capitalism will cure all is at best, poop. I’ve met and stood close to enough of the “masters of the universe” that I have absolutely no faith in the most of them. Years of being worshipped and having a limo forever at hand, and being slobbered over by most everyone they meet, well, its rots out even what might have once been an actually powerful and focused mind.
I think that a bit of regulation is essential. Not at the “Premier Kissoff’s” extreme. But entirely unregulated capitalism leads to what? My guess (and I suspect Darwin’s) is: complete anarchy.
But that is a political statement, and this dog refuses to do politics in a public place – as the results are forever as tedious as they are pointless.
~~~
I’d still like to see this thread focus more on stuff that might actually be of immediate use to our mighty brother Bachar.
fwiw...
^,,^
"The dullest end of the pencil is the top of your head." - Franz Kafka
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jbar
Social climber
land of the lost
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Feb 26, 2009 - 03:55am PT
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Excellent way to sum things up Pip!
I myself was wondering what was going on when my FHA loan was bought by GMAC about 8 years ago. When I started looking for my mortgage lender I went wit FHA even though I was a vet because they were super easy to get qualified through and I had only had my civilian job for 6mos plus they were actually offering me money. I couldn't figure out how FNM could possibly afford to give every one of their lenders $3000 to cover closing costs but now I guess it's pretty evident. Also evidence that giving lenders money is not going to solve this problem. IMHO lenders weren't so much pressured into anything but rather assured they would not be accountable. As already stated they knew they would not be holding the loans for long but I also feel they knew they were protected. FNM is charted by Congress after all.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Feb 26, 2009 - 11:49am PT
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I've been hearing more of the so called "produce-the-note" tactic to prevent foreclosure. Apparently if the mortgage servicer can't find the "real note" on the mortgage, the homeowner is off the hook? owns the house?
Does anybody know anything about how it works?
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Chris Roderick
climber
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Feb 26, 2009 - 12:09pm PT
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One of the articles posted in here said the "produce the note" strategy usually only works as a stalling technique and that a lot of judges may eventually accept an electronic copy, etc, etc..
Nice post Pip!
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 26, 2009 - 12:57pm PT
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Wow, so it's not the "minorities" fault afterall for the financial collapse of the US, but actually it's all those academia nerds..mathematicians, physicists, and MBA'ers! I knew it! LOL!
Pip, that was an incredible summation of what "really" went down. That's probably one of the most, if not the most insightful pieces of information I've read here on ST in my modest 3yrs. of viewership. Thanks for taking the time to post up!
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bluering
Trad climber
Santa Clara, Ca.
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Feb 26, 2009 - 01:21pm PT
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Pip, that was well put.
It amazes me, however, that so many refuse to put blame on people accepting these mortgages who clearly couldn't afford them.
I'm know real-estate or banking genius but I knew damn well I couldn't afford a Bay Area home 2 or 3 years ago. It requires some very simple math.
House cost - down payment x interest rate = monthly payment.
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Nefarius
Big Wall climber
Fresno
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Feb 26, 2009 - 02:13pm PT
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I agree with a post up-thread - Can we get this back to the info the bachar was looking for? Seriously. I'm guilty too, no doubt. But let's get it back on track for the man. I think bachar saving his home, as well as anyone else who can benefit from the info here, is a bit more important than any of our opinions and drivel.
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Double D
climber
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Feb 26, 2009 - 02:28pm PT
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John, as far as the "produce-the-note" tactic...
Most all of the industry went paperless a couple of years ago and in your mortgage paper work you most likely agreed to accept electronic scans or faxes to be legal and binding. In CA you will definitely find this mirrored in your CA Purchase agreement from about 2004 on (this is just from memory...I have it on file from older RE clients).
The only thing that I'm really seeing consistent results on is using RESPA violations that are found by combing your paper work and finding the violations. Then a lawyer files a suit that stalls any foreclosure action until the suit is settled. During that time the law firm re-negotiates the mortgage. Most legit companies do charge up front fees to look into this but will offer a full refund contingency if they don't think you have the applicable RESPA violations to go forward.
Good luck my friend!
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ontheedgeandscaredtodeath
Trad climber
San Francisco, Ca
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Feb 26, 2009 - 02:41pm PT
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Bachar, the original note must be produced. People are having luck with this because mortgages were being sold all over the place. It's more of a delay tactic- I'd assume the note will eventually be found.
See California Civil Code Sections 2924 through Section 2924k for info on the foreclosure process.
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pip the dog
Mountain climber
planet dogboy
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Feb 26, 2009 - 09:28pm PT
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fattrad,
> You missed one key and crucial ingredient in the mix...
> the rating agencies. Yes, those guys just put a AAA rubber
> stamp on everything
You’re quite right. For who pays the rating agencies? The client -- in this case the big institutional brokerages who put huge pressure on the rating agencies to sustain their oh so profitable ‘units’.
And there were of course others involved in this feeding frenzy. fwiw, I tried to stick with just the main vein of the food chain so as to keep my post under 30,000 words.
~~~
AIG is another notable pig at the feeding trough. For nearly a hundred years they had a solid and profitable firm focused on bread and butter insurance – auto and homeowner stuff. But when some of the mighty big name institutional brokerages begin to get a bit of the ‘heebies’ as to how low risk these units actually were, they went to AIG and said:
“Dudes, you could make a fortune insuring our mighty ‘units’ – for we’ve done all the nonlinear math and have demonstrated that they are in fact bombproof... But, then, some of our less informed clients might perhaps be reassured by some insurance behind the 'units'. So what do you think? You can make zillions insuring our 'units' – and unlike cars or houses, our ‘units’ will of course never crash or burn."
So the MBA’s at AIG of course jump all over this chance to join the feeding frenzy and make all manner of 'risk-free' free money. Soon AIG goes way outside its century old business plan and writes policies on over at least a trillion dollars worth of ‘units’ (likely more, it's just that we the general public are not allowed to know). And soon the cash comes pouring into AIG. Touchdown! And of of course, AIG saw no reason to set aside much capital to back up these ‘bombproof’ units.
There is a reason why Paulson and Bernanke dumped some of the first, and largest, wads of the TARP cash into AIG – and still more since. They realized that AIG’s ‘insurance’ on the failing units was the last small twig many of the ‘mighty’ institutional brokerages had to cling to when they finally realized they were way up poop creek without so much as a canoe.
And that if word of how under funded AIG was to cover even a fraction of this massive debt got out into the general press, it would be chaos.
It kinda pisses this taxpayer off that that this dynamic duo (Paulson and Bernanke) sold the idea of the TARP to the congress based on one specific game plan -- but once they had the first $350 billion in hand they suddenly changed their minds and did something very very different with the cash. But that enters the realm of politics, and I don’t want to go there, certainly not here.
Perhaps the biggest pisser in this whole circus, to me, is that no one but a select few know exactly what the actual numbers are at all the firms involved. How much toxic debt does Citi, or BofA – or any of their many peers hold? And just how toxic is any given 'unit'? Some, i suspect, are worth 70 cents on the dollar. Others are worth less then a dime on the dollar. But without actual facts and numbers, how can we left holding the bag begin to guess?
I think that once we the taxpayers (via the feds) dump many tens of billions of our money into a firm, we should get to see all of the details that the fed regulators have already seen.
To date, just a few select C-class suits, and a handful of fed regulators, actually know. But as for the rest of us, those who are being asked to pony up still more imponderable wads of cash (on our grandchildren's credit), we don’t get to know. For there is still a reg on the books that allows those holding the toxic debt for which there is no market (and there is definately _no_ current market for this crap) -- to mark it as full dollar for dollar value in their SEC filings. That has got to change. To quote one of my heroes Dr. Strangelove “So, Vye don’t you tell de vorld, eh?”
I’d especially love to know exactly how many trillions worth of collapsing ‘units’ AIG has ‘insured’. I suspect the number is mind-blowing.
Enough already… Your point is a valid one.
^,,^
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groaz
Big Wall climber
italy
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Feb 27, 2009 - 04:29am PT
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How many american climber are in this bad situation?
The italian committee Help Jim Bridwell is very sorry about the mortgage of John Bachar (note the same J. B.), expecially because thesen't the first worst house-problem of Bachar...
Good luck!
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Dick_Lugar
Trad climber
Indiana (the other Mideast)
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Feb 27, 2009 - 07:04am PT
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"I wrote the same thing weeks ago, how about tossing me a bone?"
Here's your bone Fatty, don't choke on it! J/K...I musta missed your post Fatty. I'll go back through the archives and look it up. You have to admit though, Pip does have a way with words that catches the reader's eye, for example:
"AIG is another notable pig at the feeding trough..". Now that's just good writing!
Edit: "It amazes me, however, that so many refuse to put blame on people accepting these mortgages who clearly couldn't afford them."
Blue, what don't you get? Not buying a house with no money down is like a fat kid not eating a piece of cake at his birthday party! No big mystery there..
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Chris Roderick
climber
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Feb 27, 2009 - 10:31am PT
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The bonuses the executives at the AIG CDS unit paid themselves on fictitious profits that eventually turned into massive losses that the taxpayer is now covering, yup "pigs at the trough" is about right.
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Matt
Trad climber
primordial soup
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Feb 27, 2009 - 03:58pm PT
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hey pip- good post!
just one thing to add:
re: In the very late ‘90’s and into the early 00’s, the biggest institutional brokers (who were forever looking for the next cash cow) came up with idea of bundling hundreds of retail (home) mortgages into a single mighty ‘unit’ of $10mil or $100mil (or more) each -- that they could then sell to their largest investors (like massive pension funds all over the world).
the one tidbit you left out is that the removal of regulatory obstacles to these transactions, by something added last minute to a bill clinton signed at the end of his presidency, opened the door,
i used to have a link to a really good article (maybe i can find it soon enough to add it in here) but i am not sure where it is-
here is a blog post w/ sufficient information, although i concede that the source is not necessarily an authority- still worth a read IMO.
http://www.dailykos.com/storyonly/2008/9/21/9322/74248
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Gene
climber
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Feb 27, 2009 - 04:15pm PT
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And because not enough fees and profits were being generated by buying and selling mortgages, slicing and dicing, mixing, repackaging, insuring and trading them, the bright guys decided that they could create a whole new market by developing products in which those who didn’t own any of these mortgage securities could play. Highly leveraged financial contracts could be bought and sold that would be triggered by the financial performance of the gazillion parts of the bundled mortgages. Folks several levels removed from the home owner, the mortgage lender, and who had absolutely no skin in the home ownership game could trade these products – the value of which was derived from something they had no financial interest in. Gotta love it.
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bachar
Gym climber
Mammoth Lakes, CA
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Topic Author's Reply - Feb 27, 2009 - 06:58pm PT
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Declare bankruptcy and get a court ordered "cramdown" of the principal?
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ontheedgeandscaredtodeath
Trad climber
San Francisco, Ca
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Feb 27, 2009 - 07:39pm PT
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Cramdowns are routine in commercial matters and plenty of lending goes on.
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monolith
Trad climber
Berkeley
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Feb 27, 2009 - 07:44pm PT
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I thought cramdowns could only be done on second homes.
See this.
The Dems do have a bill pending to allow cramdowns on primary residence, but it's not law yet.
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ontheedgeandscaredtodeath
Trad climber
San Francisco, Ca
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Feb 27, 2009 - 08:02pm PT
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Fatty, I should have said commercial bankruptcies.
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