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Are we heading for another potential Financial Crisis?
Old 02-12-2018, 11:12 AM   #1
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Are we heading for another potential Financial Crisis?

In the space of about 30 minute I saw 4 advertisements for 100% Mortgages and Home Loans. Using statements like "Your House is your Bank". Some directly targeting Veterans. Not to mention the persistent "Reverse Mortgage" solicitations. Aren't these 100% loans what got us into trouble in the first place? I thought there were rules in place to prevent this from happening again.
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Old 02-12-2018, 11:20 AM   #2
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In the space of about 30 minute I saw 4 advertisements for 100% Mortgages and Home Loans. Using statements like "Your House is your Bank". Some directly targeting Veterans. Not to mention the persistent "Reverse Mortgage" solicitations. Aren't these 100% loans what got us into trouble in the first place? I thought there were rules in place to prevent this from happening again.
There's plenty of money out there to loan at high interest rates. What got us into trouble before was giving mortgages to dogs and dead people without checking first. Today, you actually have to prove ability to pay.
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Old 02-12-2018, 11:40 AM   #3
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In the space of about 30 minute I saw 4 advertisements for 100% Mortgages and Home Loans. Using statements like "Your House is your Bank". Some directly targeting Veterans. Not to mention the persistent "Reverse Mortgage" solicitations. Aren't these 100% loans what got us into trouble in the first place? I thought there were rules in place to prevent this from happening again.
Those have been running for years, at least more than 2 years since i retired. Perhaps you are just more tuned into them looking for something bad?
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Old 02-12-2018, 11:42 AM   #4
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Today, you actually have to prove ability to pay.
Yep. I've noticed a few threads/posts from retired members discussing difficulty in proving income to qualify for a mortgage. That's in sharp contrast to the days where you only had to be able to fog a mirror to get a loan.
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Old 02-12-2018, 11:50 AM   #5
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I remember, after the sub-prime housing bubble burst in 2007-8 reading articles that sagely, in hindsight, of course, pontificated that some folks would just be better off renting than buying, especially if the only way that buying could make any sense of affordability was through the assumption of yearly value appreciation. The articles would then go on to explain how the entire housing bubble was built on that assumption, which turned out to be a false assumption...and the conclusion was that there may be some value in making sure a potential home buyer had the wherewithal to actually come up with 20% down, (or 10%, or at least SOMETHING) because stuff happens.

Made sense to me.

Then about 3 years later, I'm listening to PBS on the way home from work, and a government official is talking about the need to have low or zero down payment mortgage options, so every American can experience the American Dream of Home Ownership. I nearly wrecked the car I slapped my forehead so hard.
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Old 02-12-2018, 11:53 AM   #6
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& actually the "housing crisis" was as much about the investment industry gambling on things like credit default swaps and synthetic collateralized debt obligations (CDOs.) IOW, greed. And greed is wired into the human condition by Darwin, so never say never.

Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.
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Old 02-12-2018, 12:01 PM   #7
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& actually the "housing crisis" was as much about the investment industry gambling on things like credit default swaps and synthetic collateralized debt obligations (CDOs.) IOW, greed. And greed is wired into the human condition by Darwin, so never say never.

Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.
I'll be taking a couple of long flights soon, I'll keep my eyes peeled for it,

thanks
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Old 02-12-2018, 12:03 PM   #8
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maybe interest in using helocs to invest died down after last week

that is a good sign of a bubble though, about 18 years ago a FA (I got out of the market in early 2000) at our bank was trying to get us back in the market and said people were taking helocs out to invest - i told him that was crazy and not very ethical on his part
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Are we heading for another potential Financial Crisis?
Old 02-12-2018, 12:18 PM   #9
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Are we heading for another potential Financial Crisis?

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Originally Posted by OldShooter View Post
& actually the "housing crisis" was as much about the investment industry gambling on things like credit default swaps and synthetic collateralized debt obligations (CDOs.) IOW, greed. And greed is wired into the human condition by Darwin, so never say never.

Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.


+1.
After reading the book, I wasn't going to bother with the movie, but now I'm going to look for it on NFX or Prime. The movie "Margin Call" comes to mind wrt how poorly understood these financially engineered products are vs the risk when they go off the rails ( like those leveraged inverse volatility products that crashed Feb 2nd).
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Old 02-12-2018, 12:20 PM   #10
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I thought one could not get a 100% mortgage anymore which is why I brought it up. I thought one had to have some sort of a down payment. Like in Canada you now need to have 20% I think. I know the US would not get that radical, but 5-10% is reasonable IMHO.

Would it not be inviting trouble giving a 100% mortgage? Especially in a rising interest environment and on a balloon type mortgage?
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Old 02-12-2018, 12:28 PM   #11
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We have a contract on the sale of our last rental house. It calls for 100% LTV and seller providing $xK in closing costs. The RE agent says she spoke to the lender and this will fly. Oh well. Here we go again.
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Old 02-12-2018, 12:30 PM   #12
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Are we heading for another potential Financial Crisis?
Always; it's just a matter of when. What goes up, comes back down, and what goes down, rises again eventually. Mortgages are just one piece of the puzzle.

Most of us have been expecting some sort of financial crisis for several years by now, so I guess we are ready if one should develop. And if it doesn't, well, terrific! Party on...
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Old 02-12-2018, 12:33 PM   #13
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Sold my Mom's house in 2016 and the people who bought it got 106% financing.

I thought it was a story until I saw the closing papers.

Apparently it was a USDA loan of some sort. (yep...USDA!!!)
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Old 02-12-2018, 01:05 PM   #14
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& actually the "housing crisis" was as much about the investment industry gambling on things like credit default swaps and synthetic collateralized debt obligations (CDOs.) IOW, greed. And greed is wired into the human condition by Darwin, so never say never.

Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.
Exactly correct. Plus the rating firms (initials S&P) were in the tank to the investment houses. S&P could have curtailed or stopped the nonsense and parsing of the debts being sold

Big Short was good. It took me a while to watch it as we were impacted pretty heavily by the housing bust. Probably 2 dozen developers lost everything. A fair amount of them committed suicide. Besides the fraudster developers in collusion with shady mortgage brokers
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Old 02-12-2018, 01:55 PM   #15
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sold an older relative's last rental home just prior to the last housing crisis.

the (obviously sub=prime) buyer did not know their interest rate prior to walking into the closing.
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Old 02-12-2018, 02:02 PM   #16
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Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.
I just watched the movie last week, and thoroughly enjoyed it. Nothing I didn't already know, but entertaining and pretty close to the truth.
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Old 02-12-2018, 05:47 PM   #17
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+1.
After reading the book, I wasn't going to bother with the movie, but now I'm going to look for it on NFX or Prime. The movie "Margin Call" comes to mind wrt how poorly understood these financially engineered products are vs the risk when they go off the rails ( like those leveraged inverse volatility products that crashed Feb 2nd).
I didn't read the book but watched the movie and got a lot out of it. It was a fun reliving of the times.
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Old 02-12-2018, 05:53 PM   #18
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For those that have read the book and seen the movie, is it worth reading the book after seeing the movie? Liked the movie, but if there is more "there there", the book might be worth while.
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Old 02-12-2018, 06:29 PM   #19
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For those that have read the book and seen the movie, is it worth reading the book after seeing the movie? Liked the movie, but if there is more "there there", the book might be worth while.
For me, the book was far better than the movie. But others may differ on that!
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Old 02-12-2018, 06:57 PM   #20
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Yep. I've noticed a few threads/posts from retired members discussing difficulty in proving income to qualify for a mortgage. That's in sharp contrast to the days where you only had to be able to fog a mirror to get a loan.
Was talking with Select Quote rep about term life insurance as part of our planning due to having a blended family and he asked if I was employed, I said no, retired, he said when, I said at 53. He paused, I said it was voluntary. He said oh, good, the companies get a little skittish with early retirees as they fear it was related to a health issue.
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