Obama: fines and bailouts

Good morning. Barack Obama wants to fine unscrupulous lenders to pay for a housing bailout. The Financial Times: "Unscrupulous lenders who deceptively sold subprime mortgages to millions of Americans should be fined and the proceeds used to help bail out borrowers facing a wave of foreclosures, according to Barack Obama."

Our first take on this is that it is likely impossible and probably not a serious proposal, and is a piece of posturing.  We'd like to be proved wrong on that, but how does Congress get money out of New Century Financial and scores of other subprime lenders that are out of business? Get in line in bankruptcy court? Who determines which subprime loans are "deceptive"? And, as commenter Tim K. points out, how do you separate the truly deceived borrowers from the speculators and flippers who were gambling on real estate with someone else's money?

From the FT: "Mr. Obama blamed lobbyists working on behalf of lenders for obstructing tougher regulation of the subprime industry, adding: 'Our government failed to provide the regulatory scrutiny that could have prevented this crisis.'"

More of our take: This is certainly true; it's also true that Sen. Obama and the Democratic Party were part of that government failure. Blaming lobbyists is a campaign theme of his -- a shrewd one, we think -- intended to paint Sen. Clinton in an unflattering light.

We'd like to give you a link to the entire Obama proposal -- an op-ed in today's Financial Times -- but it is behind an expensive pay wall, and L.A. Land is cheap. (What's up with that, writing about the American housing crisis in a British newspaper?) Here's the part that proposes a bailout:

"One way to protect innocent homeowners –- at least until this crisis passes –- is to establish a fund to help people refinance or sell to avoid foreclosure. We can partially pay for this fund by imposing penalties on lenders that acted irresponsibly or committed fraud."

Your thoughts? Comments? Insights?
Hat Tip: Tex

Comments

[Tim K.]

This doesn't solve the problem of *who* is entitled to bailout rewards. You can't tell the difference between Joe the clueless homebuyer who didn't understand his loan documents and was lied to by his broker about what kind of loan he got, to Sally the clever flipper who just got burned trying to take on more house than she could afford.

Both Sally and Joe look *identical* in all objective measures that you can capture.

You can *bet* that more of the money will go to the Sally's than the Joes.

[Steve]

There is enough blame to go around. The lenders should not have been preying on borrowers who could not understand the terms of the loans. The lenders were often fronted by unscrupulous salesmen, who would do just about anything to bring in the loan. The borrowers, on the other hand, should be castigated for accepting the loans, for not getting help in understanding the loans before they signed. Moreover, most of them are responsible for getting themselves into situations where they need a subprime loan in the first place - relying on a rising housing market and taking on more and more debt is not a good financial strategy. Penalizing the lenders will not work, unless you also get the borrowers to should some of the responsibility, too.

[jemarqu]

At this point I don't know what is worse..

The government thinking that US citizens are too stupid to read a contract or citizens believe that the government should bail them out for making poor decisions.

These people in foreclosure were not tricked out of their homes. They were greedy and bought something they couldn't afford. Others were trying to make a quick buck in real estate and their timing was off. If something is too good to be true then the odds are its not true.

[Todd in WeHo]

For starters, here's the link to Obama's oped: http://www.ft.com/cms/s/0/6e23639e-557f-11dc-b971-0000779fd2ac.html

After reading this, I'm at a loss where to start with my tirade. How about Obama saying "The real victims in this crisis are the millions of borrowers who followed the rules, whose only crime was taking out mortgages that lenders told them they could afford." My response? Boo hoo! Enough about making it sound like everyone caught up in this mess is a poor single mother who's just trying to keep food on the table while working three part time jobs. Nobody held homeowners and speculators at gunpoint to sign any paperwork. Doesn't anybody still believe if something sounds too good to be true, it probably is? My stance is you bought it, now deal with it.

[sunsetbeachguy]

I am pretty firmly in the no bailout for anyone ever camp.

However, if Obama can get blood from a bunch of bankrupt turnips (how about personal income/bonus clawbacks from the mtg brokers) or get settlements from the Investment Banks (Bear Stearns, ala Enron's Investment Banker settlements) and use it as just a trust account with NO taxpayer funds, no problem by me.

That will actually accelerate the decimation of the housing bubble back to safe & sane prices supported by incomes because mortgage interests rates would rocket to the moon to pay for the fines/taxes.

Now the criteria for who gets help.

No, stated income loans with overstated incomes would be eligible. The test will be to simply compare the mortgage application with the prior years tax forms. If the forms don't agree no settlements for tax cheats and jail them for tax evasion.

No, largesse greater than $10-20K per homeower. This amount has to be successful in avoiding foreclosure or in re-establishing a renting household. This will "rescue" less than 5% of homeowers in CA since they are already underwater by greater than this amount.

The tangible net benefit to society must be measured.

Obama better get cracking with his dunning letters to mortgage brokers, lenders and investment banks. Since the forecasted 2.2M foreclosures at $20K a piece is $44 billion.

As soon as I see a trust account with $44B in it funded by the broker's, lenders, investment banks and billionaires advocating a bailout, I will drop my opposition to a bailout.

[Rob]

Senator, you mean in 3-5 years from now when a trickle of these shared "fees" are collected and everyone has moved on with their lives, you are going to rewards these wayward folks with making bad decisions? Senator, Senator.... Senator, can we please stay on topic.

Headline today, gone tomorrow.

-Rob

[Jax]

Obama is an "empty suit". He is highly educated but has no common sense and will say just about anything that he thinks is politically popular in order to get elected. (or was I talking about Hillary?) Oh well, it doesn't matter.....they're two peas in a pod.
His idea is too ridiculous to even debate.

[Rainman]

Any bailout proposal is posturing. As Pete mentioned, there's really no way to get the money from these now-cratered companies, and how do you prove who was taken advantage of and who wasn't? Obama and others would be better off promising to appoint regulators who actually regulate and not those who pretend that all of this couldn't have been predicted. The signs were there for anyone to see, like the saying about the time to sell stocks before the Great Depression was when your shoeshine boy was giving you stock tips. When companies are begging people to borrow money with no money down, that's never a good sign.

[Todd in WeHo]

Here's another idea for anyone dealing with the reset of an Adjustable Rate Mortgage: instead of making this month's house payment, use the money to buy MEGA Millions lotto tickets. Your odds of winning are just 1 in 175,711,536.

While we're on this topic, I also think mortgage lenders should be required to say something similar to what the California Lottery says:

“As the jackpots rise, the Acme Mortgage Company would like to remind players that home-owning (aka gambling) should be fun. If you think that you or someone you care about might have a home-owning problem, call the California Problem Home Owner Help Line at 1-800-GAMBLER.”

[MyLessThanPrimeBeef]

My vote goes to the candidate who said, THREE YEARS AGO, 'Our government regulators, at this moment, yes, right now, are failing to provide regulatory scrutiny for this mushrooming bubble!'

Is there such a candidate?

DId anyone looking to lead the nation now, said then as anyone with any common sense would and many actually did here and elsewhere, 'These suicide loans, these NINJA loans, these 120% LTV loans are nothing but trouble.'

Anyone who said it then, he or she's got my vote. Maybe I will vote for Cal or Peter...

[rob case]

It just goes to show how far out of touch the politicians are with the reality of the situtation.

Once again, too little way too late...

[Giacomo]

This is just more evidence that Mr. Obama will put forward almost any hare-brained scheme in an effort to pander to a few voters. He is attempting to built a coalition of voters who think of themselves as victims in an imagined rich-vs-poor class struggle (in which the "rich" are always defined as "the people who have more money than you.")

[V]

Too bad. Lenders were greedy and so were prospective homeowners. No bailout for them.

[Dan Moran]

Another Democrat Viles has found to smear with the mortgage crisis. Color me shocked.

Republicans controlled every branch of the government while this insane runup was going on.

[srla]

It's amazing how all these politicians are tripping over themselves to "rescue" people who took out careless loans and to attempt to prop up a horrifically bloated housing market.

Where were all these fools when the prices were escalating at clearly unsustainable rates? Back then, the effect of all this on consumers was being covered up by the use of "owner's equivalent rent" in place of actual housing costs in calculating the Consumer Price Index. And when housing makes up the largest part of the CPI, yet this cost was being underreported by a factor or 100-200%, it should have been clear to even the simple minded that something was amiss. But where were Schumer and Dodd and their cadre back then?

It seems almost everyone in government is responding years too late to the housing situation, and they are making the worst possible choices when they do end up acting. The only viable option now is to let the market self-correct and offer debt and/or bankruptcy counseling to the people who made seriously bad and ill-informed choices.

[shanty dweller]

let the law of the jungle rule without interference. The duplicitous brokers can go out of business, the greedy lenders and investors can take a bath, and the flippers and unworthy buyers can go back to being renters.

[Joseph]

More bailout rumblings:

http://www.thestreet.com/s/housing-bailout-chatter-gets-louder/newsanalysis/banking/10377008.html?puc=_tscs

Anyone know if this represents anything significant? Or just wishful thinking on the part of Bill Gross types?

[Joe, Santa Monica]

Is this a common lending practice? or indication of something else?

My brother was offered a first mortgage contigent on him taking out a second as well even though he had more than enough cash on hand such that he did not need the second. I think the second was a home equity loan. Seems odd to me that any lender would require that he borrow more money unless something funny was going on between the mortgage broker and the lenders.

Any thoughts?

[Dave P]

You already made the best point Pete, in that many of the lenders are already out of business with more to follow. Even the big fish are under such pressure that some loopy politico inspired judgement against them could push them under water. How can Countrywide write off all that bad debt AND absorb a $10,000 per borrower penalty?

And I don't really believe anyone was truly defrauded here. In my experience, most people knew one of two things: That they (or, fewer cases than the media would have you believe, someone else) lied on their application about their true income, or two, they knew or willfully avoided knowing that there is no way they could really afford a $500,000 mortgage with $30,000 per year in income and a 610 credit score.

Everyone wants to claim being a victim when thier shady doings go bad. But if the Real Estate RollerCoaster went up for two more years and they turned a tidy $150,000 profit with 0% down and bad credit, they would be whupping it up like their were Hero Geniuses.

The whole bailout talk thing is ill thought. If you can't afford your $4000 monthly payment on your $500,000 mortgage, what is $10,000 going to do? You're probably $12,000 in arrears before you can even apply for the bailout money, and unless the bailout comes with a big fat raise...

[jemarqu]

MyLessThanPrimeBeef wrote: "My vote goes to the candidate who said, THREE YEARS AGO, 'Our government regulators, at this moment, yes, right now, are failing to provide regulatory scrutiny for this mushrooming bubble!'

Is there such a candidate?"

Sounds like you would be voting for Ron Paul.

[Kathy]

Good luck squeezing the funds out of Angelo Mozillo and those New Century execs who made hundreds of millions off these scams. I think one or two small fry will be made an example of, but the big guys will get off scot-free. But if they did manage to wring a few bucks out, here's my suggestion for a means test for qualifying beneficiaries of the fund: any senior/retired person on a fixed income, below a certain level, gets first in line for any bailout.

[MyLessThanPrimeBeef]

Ron Paul said that three years ago?

[AnnS]

At this point I don't know what is worse..
The government thinking that US citizens are too stupid to read a contract or citizens believe that the government should bail them out for making poor decisions.
Posted by: jemarqu

Priceless!

And don’t forget to add that the lament of ‘oh the poor borrowers just relied upon the lender who told them they could afford the mortgage payment” – that payment that would get to the point of taking 50-70% of gross income.

What did they do? Flunk arithmetic 101 and e completely unable to figure out how much they spend on utilities, transportation, food and other things and how much was left for a mortgage, taxes and insurance?

I’ve never met anyone over the age of 18 who was that stupid who hadn’t been adjudicated incompetent and had a guardian appointed.

[are they crazy]

If pseudo victims really feel they were defrauded, why aren't they attempting to initiate criminal actions - going to the DA, contacting FBI, representative, etc.? Same thing for realtors, bankers or anyone else claiming fraud? The fact that some broker who makes their money by commission told them they could afford it, doesn't make them victims.

[DB]

Let's see if this gets posted. So far no luck! There does NOT have to be a bail out. Just have the State loan the money for housing at 5% interest. This would give the State revenue coming in (possibly lowering taxes) and help in keeping mortgage rates at a consistant rate. There are many reasons to have the State give loans for housing!

[jemarqu]

MyLessThanPrimeBeef wrote: "Ron Paul said that three years ago?"

Not quite in those words. He did say "But capitalism is not to blame for the housing bubble, the Federal Reserve is."

[investorguy]

Fed Chief Bernanke, according to the Washington Post, is already urging lenders to come up with creative new lending programs for low income borrowers.

I told you so.

And before AnnS gets her dainty underthings in a knot, I do NOT think this is a good idea. It perpetuates the problem, although not as much in markets outside of LA, New York and San Francisco. Besides, I'd much rather do seller financing and make the money myself.

And as a side note, designed to get the doom and gloomers in a snit, while prices dropped over the last year in LA and other markets, Seatlle and other markets posted gains, NBC reports.

[jemarqu]

Investorguy, The Feds got us into this mess, you trust them to make it all better by "urging lenders"?

[cjp]

This is insanity. No one is going to "lose their homes." Built housing stock decays very very slowly. It does not go up in smoke upon foreclosure. The population demanding housing does not change overnight because of some foreclosures. What will happen is that the banks and big corporations will either take the hit or take ownership and RENT to all the people who should have stayed renters in the first place, thereby saving them millions in finance charges. The houses are built. No one will lose anything. Some people might have to move.

A bailout is not just unfair-- it will hurt everybody.

[Name (required)]

Barack Obama is unelectable and will lose. So will Hillary.

[investorguy]

jemarqu: No, I don't. READ my post again... I wrote: "I do NOT think this is a good idea."

But I posted a couple of weeks ago that lenders would be back in the subprime business very shortly. And several people challenged that as impossible. It's not.

[RE in SB]

Thank you for helping me decide WHO NOT TO VOTE FOR IN THE NEXT ELECTION!

[G. E. Vierheller]

The number of documents to sign, initial, or both when buying a house is overwhelming and mind-numbing. Long gone are the days when a simple transaction completes the transference of ownership. Having gone through this absurd ordeal I am unsurprised that greedy lenders, real estate agents, mortgage companies, escrow companies and their ilk, hungry for more quick, short-term profits, purposely confuse and abuse customers, knowing full well those with poor credit who dared dream of owning a home were easy marks. Fine the loan hustlers? Absolutely. Bail the lenders, et. al., out? Never. Their greed got them into this mess, let them suffer.

Re-align Fannie Mae and Freddie Mac to help the hope-to-be homeowners, and to regulate the avaricious, cold-blooded money grubbers.

[investorguy]

G.E.: You're right on the money (so to speak). Fannie and Freddie are the logical sources for working this out.

[C]

People need to take personal responsibility. I agree with jemarqu that most "people in foreclosure were not tricked out of their homes." I want to own a house too, but am still renting because I know I cannot afford a huge mortgage. Why should the irresponsible subprime mortgage holders and/or lenders be bailed out of a mess they created themselves? We should not be rewarding irresponsibility in this manner.

[J]

Another stupid idea. No bailout whatsoever!!!!

[Dr. JwB]

investorguy: Seattle looks like a smaller, later version of LA to me, and to Seattle's Bubble Watchers.

http://seattlebubble.com/blog/category/behind-the-cycle/

[Allen]

I'm a lifelong Democrat, but I'm totally opposed to any proposals by Obama or Clinton or anyone else to bailout homeowners caught in this mess. The fact is that most borrowers knew what they were getting into, or they certainly should have known. The purchase of a home is the biggest financial decision that most people ever make and if someone signs off without knowing what they're getting into then it's their own fault. Why should others have to pay for their ignorance or their losing gamble on the real estate market? As soon as we implement a bailout, the first people in line for federal assistance will be the very same speculators and irresponsible borrowers that caused this disaster, looking for the rest of the taxpayers to save them for misjudging the market. And what about the greedy mortgage brokers that wrongly originated these time bombs, collecting their commissions and then moving on? Why do they manage to escape responsibility here? A federal bailout is a ridiculous solution that some politicians are pushing during an election period to win the support of more voters.

[c-t-m]

I make $100,000 a year. I want to buy a Bently Coupe car that costs $325,000. I figure the payments will come to about $85,000 a year over four years. If I sign the loan documents and then claim I am living out of my car, will Obama's government give me money to keep it? If so, he bought my vote.

[c-t-m]

Every packet of loan documents is signed under penalty of perjury. The loan approval process is legally rquired to vet the records for accuracy. The loan officer AND the lender swear under penalty of perjury the information is accurate.

Every holder of bad loans needs to sue the companys AND every single real estate agent AND every loan officer for every fradulent document signed. "Liar Loans" or overstated, the individals goin gafter a percentage - agents collect 3-7% of a sale, loan officers get 1% - gamed the system and pushed things to collapse.

Despite the "victim" culture of American politics these days, those who took out loans are responsible as well, so the only way is to go after EVERYONE. Those who took loans they cannot afford or one speculation funded by fradulent filings are deservedly losing their homes, money and shirts. But those individuals in the system who signed off were co-conspirators and they should be tracked down and the loss recouped.

[CaliforniaDreaming]

CTM said--

"Every packet of loan documents is signed under penalty of perjury. The loan approval process is legally rquired to vet the records for accuracy. The loan officer AND the lender swear under penalty of perjury the information is accurate."

This is really the point here for all of these people crying "fraud" in their mortgage proceedings. Are the loan applications truly fradulent? And this cuts both ways, if the borrower signed a loan application with a false income stated on it, then they have just committed fraud- not the lender.

I really suspect that the number of truly fraudulent loans on the part of the lender is small. I thiink most financial institutions would be too smart not to CYA and write the documents so that they would be defensible from their side. Now, whether the borrowers actually read and understood the documents is another story.

I'm just glad to see some reality injected into this finally.People who make $70k (or less) have bought $700K houses because their mortgage broker said that it would work. Obviously, this isn't true or sustainable and the market needs to be allowed to make its corrections.

[Troy]

I agree with Obama someqwhat to a point. You may not be able to tell who all the lenders are that took advantage of overly enthusiastic homeowners but you can surely tell who some of them are and fine them. When lenders know that some want to be homeowners have poor credit but still get them into a home that they know is damn unaffordable then perhaps those lenders need to be looked at to impose penalities against them. And also since there is a penalty of perjury when signing loan docuements by both parties that is another avenue to use to impose penalties against lenders, this may take awhile but it can be done. Also if the Feds are going to help out banking instutuions or other companies when they face a financial crisis why can't the fedds help home owners. Take some of that money given to coporate farmers and help people to keep their homes.

[Anthrodiva]

Why not copy these posts and email them to Obama? I did this when Hillary made her similar ill-advised comments and I imagine others did too, 'cause at the next debate she was saying that the solution to the mess is 'complicated' and she did not reiterate her call for a bailout. They can learn, too, especially when people who are their sought demographic give them reason for pause.

[Shanty]

Is Obama crazy? No sympathy for the borrowers or lenders from me. No bailout. Who in the world thinks they have a right to live in a 4,000 sqft. home with a $60,000 income? If you needed a big home should have bought somewhere in or out of the country where the price matched your income. My husband and I live in a 800 sq ft. formerly rat-filled house that's 80 years old with a baby and 3 dogs, because we were extremely conservative in our choices. No master bedroom, no granite counter tops, no walk-in closet, no valuted ceilings, no stainless steel appliances, and certainly no central air, but a nice yard at least for the dogs. Now, we have the money to move way up but we have to wait till this mess that was caused by greed stabilizes.

[E.Soto]

DB, who do you think pays the interest on the municipal bonds that the state would have to issue to provide home loans at 5%? Taxpayers do. In other words: a bailout in disguise. Even if the state does that, you mean to tell me that anyone should be able to get a mortgage at 5%? Shows your knowledge of the finance world, return for lenders/investors is based on risk. Your probably looking for a way out of an outrageous mortgage you signed up for..........

[Shirin]

I disagree with the bailout. Before we bail out homeowners who signed off on houses they couldn't afford in the expectation of making a big profit, we should rewrite the bankruptcy code to protect student borrowers who are (1) far more inexperienced in money matters and are (2) unable to cure their ridiculously inflated college loans via going through bankruptcy. Right now student loans are making permanent wageslaves of our young. These are the folks who are also going to be stuck with the bill for social security. They deserve help far more than the housing gamblers.

[Kelly]

Why is it everyone has a plan to bail out people who made bad choices and got into houses they can't afford; but, two years later, no one has a plan to bail out the people of New Orleans who lost their homes to government mismanagement of the flood wall system? We can find billions to help greedy Americans but next to nothing for the innocent.

[Carmel]

Bailing out people who were foolish enough to take on more debt than they can handle is absolutely ridiculous. House prices are insanely high and need to come back down to a level supported by economic fundamentals. Otherwise you will shut out a whole generation of potential home buyers.

People signed on for these ridiculous Option Arms because they were giddy with the thought of their homes appreciating 20% or more per year. The government has NO business bailing out greed and stupidity. This is akin to bailing out Las Vegas gamblers.

Prices need to drop from their absurd levels. They were only inflated up to these levels by this "Exotic Lending".

[woof]

no bail outs .... and how about dropping the tax subsidy (interest deductions) bail outs are bail outs in what ever form, let us level the economic playing field

[MyLessThanPrimeBeef]

Mortgage interest deductions encourage responsible homeownership (in theory, at least). These are rules, whether you like them or not, everyone knows in advance. And if you don't like them, you can try to change it, so that in the next game, we play by the new rules. Bailouts are different in that rules are changed in the middle of the game... retroactively, no less. Everyone knew there would be penalties for reckless borrowing, but now, they are being told the accrued penalties will be waived.

[Bob sarlan]

It's always somebody else's fault, never there's. I am tired of bailing out stupid people and greedy lenders who lowered there standards to help the minority into homes they never could afford, now it's society problem NO NO NO its the fault of stupid greedy people. They did not know what they were signing? excuse me open your mouth and ask. I was told the only dumb question was the one you did'nt ask. They made there bed let them lay in it. i feel no obligation to help them nor shoud our government.

[woof]

everyone was playing by the
"rules" until we ran out of liquidity.......

good luck

[DB]

For the ones who say people were "greedy" and other little comments. Why don't you go sit in your chair and watch sports and yell at the TV at what you "would have done" if you had been there. But then again, you don't really get out of the chair, do you???

[MyLessThanPrimeBeef]

I don't think anyone is sayin the indebteness limit for home mortgage deduction limit should be raised above $1.1 million dollars just because people say they didn't know it and borrowed $2 million dollar instead.

Tough luck!

[GAB]

The market will make adjustments, just sit back and let it work. The banks made big bucks on the interest only loans, now they're paying it back with the losses. Borrowers got a big house to live in with no money down and a bargain payment for 2 years, now they have to move to a rental they can afford. Developers, loan brokers and real estate agents made money hand over fist, but are now scrambling to survive.

Any baiilout will just teach people that they can make ridiculous decisions and not have to pay the consequences. Yes, individual greed fueled this crash, but greed also fuels the entire economy. Stupidity and ignorance are the guilty parties here. We all have the responsibility to warn our family and friends to stay away from this type of scheme.

[DB]

E.Soto, A stable interest rate would stabilize the housing market. There is no reason to have more than a 5% interest rate. And yes, I have a house. It's out in BFE, but I prefer it to living in town. I feel sorry for you though. You snipe at people who have taken the plunge and bought a house and in the mean time you sit in your apartment and sulk.

[GAB]

Bailout for student loans? These people are college educated and they can't figure out how to pay off their loans?

Bailout for Katrina victims who live next to a river that's 30 feet higher than their home?

Bailout for fire victims that don't fully insure the replacement cost of their homes?

Bailout for investors in risky schemes that promise !00% return on their investment?

I say NO. Hard times make great lessons for life.

The politicians are just pandering to get a sound bite on TV and attract a few voters.

[Happy]

Sooooo, let me get this straight. The government WILL come to my rescue and force those greedy fools that gave me a loan to pay me! I get to keep my pricey home, that I didn't even put a downpayment on, AND laugh all the way to bank to cash my bail-out money. SWEET! and here I was starting to worry and wonder if I had actually made a bad move when I bought my over-priced home with an ARM loan. No more worries for me, back to being happy. Now If I can just get them to also give me some equity money, those credit cards are not going to pay themselves!

[jane, who lives within her means]

yes, while some of us were living within our means, others were living the upper class lifestyle they couldn't afford. i even saw an op ed piece during the party-days, which praised the mortgage industry for raising up the american standard of living!

so now, those of us who live within our means will be bailing out the greedy homeowners (don't worry, it will be us, not the lenders who bail them out) who honestly thought they'd get paid 23%/yr (on the westside) just for living in their over-priced home/piggy banks? no one is that stupid. it was greed, pure greed.

[Tex]

Here's a link to the full text of Obama's editorial in the financial times.

http://www.barackobama.com/2007/08/29/fine_unscrupulous_mortgage_len.php

[smokey]

Investorguy........dude you are the Rush Limbaugh of real estate......no matter how badly the republicans screw up things Limbaugh will ALWAYS
take up for them.....and you.....you.......you find these imaginary silver linings in the real estate debacle.

Greed was the root of the problem that caused the housing bubble. The greedy banksters and the greedy flippers. Sure many innocent people got (will get) hurt, did (do) the greedies gave a damn? NO they (you) don't. Just sell those last couple of granite countertop remods for a loss and move on. The housing bubble has arrived, accept it.....

[investorguy]

JwB... At 6-8 percent, it's actually sustainable. It's when you get in the double digits that you run into trouble. Also,Seattle's economy is diversified enough, and salaries high enough vs.prices that it's not the same meltdown recipe that SoCal, SF and NY are, IMHO.

Smokey: You need a reading comprehension class, dude. Greedy flippers weren't the main part of the issue, despite being a factor. It was normal folks who reached for the dream with a bad loan, anticipating a continued runup in prices to cover what they couldn't. Good people, bad decisions. Most people are never taught by their parents or anyone else how to be responsible readers of their own balance sheets, and to make smart financial projections. I create personal and business balance sheet,s cash flow projections, P&L and financial plans every month-- do you?And as for your insipid, lame and ad hoc Rush Limbaugh comparison, I haven't voted Republican since Reagan's first term (and that was the only time). Nice attempt at assuming, though.

[srla]

Investorguy, yes, the Pac Northwest was late to the party, and their market has continued to rise of late, albeit less precipitously than California's did at its peak. The Seattle and Portland markets have shown signs of weakening over the past month though, so stagnation and subsequent deflation in their housing market seems likely over the next few months.

A reasonably large portion of the Seattle and Portland price run-ups seem to have been attributable to investors from California, especially small-scale speculators looking to flip a property or two in a market where you could buy in for quite a bit less than down here. As the California market has cooled, the flow of such small-time flippers has ebbed. This, combined with the lending crisis, is letting some air out of these presently still heated markets.

And by the way, people who expect a pricing decline are hardly all gloom and dooms. In fact, there is always ample opportunity to make money in a weak market, assuming you were astute enough not to lose your shirt at the market peak.

[Ed]

If those of you who are chiding those of us that took out these loans knew the truth - you would shutter your trap.

The Federal Reserve has increased interest rates 16 times (over 100%) since I got my loan.

Yes, I could use monitary and fiscal policy to wipe any of you out financially, but that is not the function of the Federal Reserve.

The great depression was another example of the Federal Reserve operating out of control, and they are operating out of control this time.

Increase your cost of the most expensive item in your budget by 100% - and you will scream like a pig.

[smokey]

Investorguy says:

"t was normal folks who reached for the dream with a bad loan"

And who was there to make the loan? The greedy banksters!

And speaking of comprehension, I wasn't insinuating you were republician, just that you ignore the obvious.

It was profitable for a few years but the party's over and you ain't seen nothing yet. Enjoy!

[campechano]

ummmm...there is something called RENT! If you cannot afford or do not want to commit to a mortgage you do NOT buy a house, you rent one. Thi market was fed by irrationality. People thought home prices would only go up. I had a difficult time at bbq's and dinner parties talking to folks who spoke about the housing market as gospel. Finally the truth is out. And we're surprised? Just like the the run in prices was fed by psychology (psychosis?) so will the downturn. Please fasten your seatbelts folks 'cause we're going for a ride...straight downhill.

[Anthrodiva]

Ed, the whole point of an ARM is that it adjusts. The reason we are frustrated is that we look around at our poorly educated populace and for the last couple of years could have told you that when your loan goes from 4% to 8% the payment will double, in other words, go up by 100%. Unfortunately, nobody asked us.

[Pam]

NO BAILOUT. The horses are out of the barn and it's too late to point the finger at who is/was culpible in sub-prime lending which isn't the only thing that has lead to unprecedented foreclosures (greed and ignorance). I do believe there are innocent victims that did not receive professional advice (from their Realtor, Lender or Government) as to what they would be able to afford once their mortgage payment increased beyond their income levels. I also believe that the majority of the foreclosures are flippers that haven't lost one cent but the media rarely discusses that.

[MyLessThanPrimeBeef]

Investorguy probably thought Orange County was a good buy when San Diego started its descent before anywhere else. And Los Angeles was a good buy because we were still going up when OC first began to tank. So now Seattle is a good buy while we are going down.

[Mark Lipman]

When massive fraud is played on the nation, it is just tough luck for those who get fooled. I don't hear any whining and moaning though when the government bails out the stock market (like it did when the Asian Market crashed, or just two weeks ago when the DOW dropped 1200 points).

The fact is that all the bail outs are well and good when it is going to the "poor" rich, who own the politicians, but when there is talk of helping out the average person who is just scraping by everyone goes up in arms. What hypocracy!

Like healthcare, housing should already be universal. It is the goverment's responsibility to take care of the people first and foremost. That is why we have government. That is why we pay taxes - to cover the needs of the people - NOT to funnel our hard earned money into the pockets of the rich and definitely NOT to build bombs to destroy other innocent people's lives around the world.

As one poster said "borrowers should be castigated for accepting the loans," well, I think anyone voted for Bush should be castrated, because that is what got this country into the mess it's in in the first place.

[investorguy]

srla: thanks for the update on the Pacific NW. I looked at it a while back, but decided to focus on markets with a lower average purchase cost.

[MyLessThanPrimeBeef]

What about my century-old tulips?

Is our government going to do something about that?

I am way underwater on that one.

I promise to contribute to the economy, maybe get cable-TV or something, if the government will just bail me out.

[paul]

At the rate our governement moves, the mortgage crisis will have passed
by the time any programs are put into effect. Obama, Bush are just trying to
press the right buttons for voters.

[Richard]

These crappy houses buiilt for thousands of dollars and sold for hundreds of thousands are really only worth a fraction of what they are sold for.
I can take a hammer and saws-all and cut one down in a day.
What garbage passing off for mansions we have. Illegal labor building them whipping out long standing blue colar Joes. Makes me so sick I want to puke. Did anyone really believe that their shitty little two bedroom house of sheetrock(read gypsum one of the softest minerals on the planet) was really worth paying all that money? I saw it coming how could no one else. Those houses are not worth it and if you say, "well that is what the market will fetch one more time" I may knock you down.

[fred]

‘I plan to help homeowners, the government’s got a role to play. Bush said, ‘But it’s not the government’s job to bail out speculators or those who made the decision to buy a home they couldn’t afford.’

Hey Dubya: the people who bought a house they could afford don’t need any help, by definition. So who exactly is supposed to get this help of yours?

[Sheryl]

How many of these people who can't afford the loans they signed even read English?

There have been 3 properties on my block purchased in the last 2 years--I live in a very old, stable, South Bay neighborhood of 1950's and 60's houses mixed with 1970's apartments--all of them purchased by non-English speakers. 2 of them already have for sale signs back out in front of them; 1 of those looks abandoned already.

The third has very recently converted the garage--a special 4 car hobby garage that used to hold the 1930's and 40's cars owned by the man who bought the house new more than 40 years ago--converted that space into two "apartments" in the last 3-4 months. Other neighbors claim this was done without permits or inspection, but I have no visibility to that. What I am certain of is that there are now 2families--both with children--living in the house, one upstairs and one in the basement; one gentleman living in a beat up 25 ft. motorhome parked between the main residence and the two "apartments" with his electricity plugged into an outlet on the outside of the former garage and his water into a spigot off the main house (he drives off on Saturday mornings somewhere to empty his gray water tank); and at least 4 people living in each of the "apartments." And there's not a single one of them that speaks English well enough to converse with casually on the street with other neighbors. I know--I've tried several times.

I have serious doubts that the mortgage holders of that house could have even READ the complicated loan documents, much less understood them.
And that same language barrier has contributed to the housing bubble all over Southern California. The only reason that this 3rd guy is keeping his head above water is because he's found people desperate enough to live in substandard housing, and pay market rates for it.

There was also a story in the Times a year or so ago detailing how major banks were encouraging illegal aliens to establish bank accounts, take out loans, etc. And if BOA was encouraging it, then you KNOW that all these other unscrupulous sub-prime peddlers were in on it as well. Personally, I would be really, really curious to see numbers on how many of these Southern California residents whose home loans are a disaster are even legal.

Does that mean that any of them should get any kind of a bailout?

HELL, NO.

Anybody who's stupid enough to sign something they can't read, much less understand, deserves to get their....head....handed to them on a plate. I mean, I knew all THREE of these properties were for sale, and I didn't even go walk thru them--because I knew I couldn't AFFORD them!!!