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Old 01-28-2008, 12:08 PM   #21
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I agree, there was a lack of due dilligence. That said, my point was not to diminish the role of banks but rather to address my dissatisfaction with consumers crying foul over decisions there were fully party to.
Agreed, then. As FD wrote, there are plenty of buyers who shouldn't be. A lot of them are using the bank screwups as an excuse for why they shouldn't have to re-pay their over-extended loan(s).
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Old 01-28-2008, 12:17 PM   #22
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What does the saying go: "Beauty fades, but stupid is forever"........

It's like when people are busted for drunk driving, and they blame the cops for pulling them over, and then claim they "didn't know" they had too much to drink.........
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Old 01-28-2008, 12:27 PM   #23
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I thought it was a balanced show myself... not alway that way with 60 minutes..

I loved the couple who was telling that they COULD afford the home payments but just do not send them in because their house is worth so much less than they owe.... and the reporter said something like, but you agreed to these payments and the lady came up with some hair brained excuse why they should not be held to their contract... Like "Well, if the price kept increasing they we would pay"....

So, you take the upside and the bank takes the downside
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Old 01-28-2008, 12:53 PM   #24
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More on municipalities fining lenders:

http://realestate.msn.com/buying/Article_busweek.aspx?cp-documentid=6015750&GT1=10833
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Old 01-28-2008, 12:53 PM   #25
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I thought it was a balanced show myself... not alway that way with 60 minutes..

I loved the couple who was telling that they COULD afford the home payments but just do not send them in because their house is worth so much less than they owe.... and the reporter said something like, but you agreed to these payments and the lady came up with some hair brained excuse why they should not be held to their contract... Like "Well, if the price kept increasing they we would pay"....

So, you take the upside and the bank takes the downside
Something tells me those folks aren't FIRE'd..........
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Old 01-28-2008, 12:54 PM   #26
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So, you take the upside and the bank takes the downside
Nature of the beast if you are a lender/bondholder. That's why lenders are usually pessimists.
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Old 01-28-2008, 01:00 PM   #27
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Nature of the beast if you are a lender/bondholder. That's why lenders are usually pessimists.
Hey, at least Merrill and Citi can AFFORD a multi-billion dollar write-off, and STAY in business..........
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Old 01-28-2008, 01:16 PM   #28
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What does the saying go: "Beauty fades, but stupid is forever"........

It's like when people are busted for drunk driving, and they blame the cops for pulling them over, and then claim they "didn't know" they had too much to drink.........
... then they complain that alcohol is too strong or it takes so long to feel the effect... they don't think alcohol can impair their ability to drive ....
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Old 01-28-2008, 01:44 PM   #29
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There is a reason why so many of these people who bought homes using subprime loans had bad credit in the first place.
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Old 01-28-2008, 01:51 PM   #30
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of course those folks should be held accountable. Do you really believe that lenders artificially inflating the borrowers income without their knowledge drove us to these conditions?

Small, small fraction of the total.
now all you have to do is prove it in a court of law

broker will just say the buyers put that in
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Old 01-28-2008, 01:52 PM   #31
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So, you take the upside and the bank takes the downside
... and history has shown the buyers can have thier cake and eat it too. Loads of buyers had prior bankrupcies, defaults, collections issues. But IT WAS DIFFERENT THIS TIME.

And it'll be DIFFERENT next time when this crop of defaulted buyers obtain financing in the next RE craze. Really no down side to jingle mail for the owners ... they'll be quickly forgiven (even if the feds decide not to "save" them).
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Old 01-28-2008, 02:17 PM   #32
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I am concerned about the lack of accountability among subprime consumers. I know I am a junior member of this board but I am pretty frustrated at the home owner getting a free pass because of those "mean old banks".

For instance see this article

US blacks see 'financial apartheid' in subprime crisis


Are you kidding me? the article discusses the black community but it really should cover the entire sector.

I know there are some institutions that willingly broke rules, and I hope they are held accountable via their bottom line.

At the end of the day how about a little personal responsibility,.... if you got a loan and couldnt afford it, and/or all along the way ATMd via home equity Benzos and HD TVs, and are now facing "economic ruin" Im having a little trouble finding sympathy for you. I think rather its time for you to STFU and accept some of the blame.

Last note: It wasnt so long ago that these same banks were getting pressure from these same activists to provide more low income loan opportunities.

edit: Fixed my crappy spelling. Spell check WRU
All very excellent and valid points Buku.... but the one thing you forget is the liberal mindset... and yes... there is one. At their very core, liberal minded people believe that most are just not smart enough to take care of themselves (sometimes themselves included). They also believe that since they are not intelligent enough to take care of themselves, that the govt MUST take care of them in all ways. That is why the media is forever harping on how it is not the fault of the lenders, it is the fault of the banks, because after all.... these people could not be expected to know any better. Of course, when the govt is fully taking "care" of you, then you are absolved of every bad decision you made, or will make in the future. It makes people FEEL good about themselves, but in reality, solves nothing. When there are no personal negative consequences to a persons actions, well then of course they will just do it again. This is why a bailout is such a futile effort. Would the stock market have tanked even worse than it has if the Fed had not stepped in.... probably, but in the long run the foundation of what would come after would be stonger. The thing that keep a society in check more than anything else, is when your citizenry has something to loose. I do not steal, because if I were caught I would loose my freedom. I do not cheat others, because I can get sued, and in turn loose my money and possessions. But if I buy a house that I cannot afford, the govt is supposed to absolve me of that responsibility? This is nonsense....
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Old 01-28-2008, 02:44 PM   #33
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. At their very core, liberal minded people believe that most are just not smart enough to take care of themselves (sometimes themselves included).
This liberal agrees that others are smart enough to take care of themselves. You included corporations in your general condemnation, right?
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Old 01-28-2008, 02:47 PM   #34
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And it'll be DIFFERENT next time when this crop of defaulted buyers obtain financing in the next RE craze. Really no down side to jingle mail for the owners ... they'll be quickly forgiven (even if the feds decide not to "save" them).
I believe the phrase is...A fool and his money are soon parted.
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Old 01-28-2008, 03:13 PM   #35
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To me, the crux of the matter is here:
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"They were getting loans in excess of 100 percent of the value of the property," Abbott says. "That type of thing. So, most of 'em were actually putting a little bit of money in their pocket at close of escrow."

"So, they were getting paid to buy a house?" Kroft asks.

"They were getting paid to buy a house. Yes. Yeah," Abbott says.

And strangely enough, it didn't seem to bother the lenders either, who were collecting huge fees just for landing the loans.

"Whatever they wanted to state for their income. The bank accepted that at face value and made the loan based on that income," Abbott says.

Abbott says borrowers got the money, without a down payment.

Jim Grant calls it an invitation to fraud. "You apply to a bank, or a mortgage broker for a loan. And you would fill out a form. And you would say, 'I have an income of, oh, $400,000 a year.' They say, 'You do? Fine. Just sign right there.' And they would nod, and because they were being paid, not by the veracity of the information, but by the consummation of the deal. The lending office would say, 'Ah. You have verified this?' 'Why, yes, we have.' And the lending officer would say, 'Great. So do I,'" Grant says.

"And he got a cut, too?" Kroft asks.

"Yes, oh, yes. Everyone gets a cut," Grant says.

Almost all of the people involved in the transactions made huge amounts of money, then passed the risk onto someone else. Instead of keeping the dicey loans in their own portfolios, the big banks and giant mortgage companies that originally underwrote them, resold the mortgages to big New York investment houses.

Firms like Bear Stearns and Merrill Lynch sliced the loans into little pieces and packaged them up with other investments, then sold them to their best customers around the world as high-yield mortgage-backed securities, turning sows' ears into silk purses, all with the blessing of rating agencies like Standard & Poor’s.

"At every step in the way, somebody has his or her hand out, getting paid. And everyone, for the time, is happy. The broker got paid. He or she was happy. The lending officer, ditto. The rating agencies got paid for passing judgment on these securities. They, too, were pleased, and their stockholders were happy. And on and on. And it would never end, except that it did," Grant says.
The middle men had an incentive to push these loans, to "encourage" the borrowers to commit fraud and themselves look the other way. The people selling this stuff got their fees at the time and didn't care about the long term - for either the lender or the borrower.

Seems to me that when you create an environment that encourages such rash and even fraudulent behavior on the part of the borrowers, you're going to get a bunch of people to take advantage.

I think these are exactly the kind of customers the mortgage brokers wanted. Other borrowers could get better terms and wouldn't touch this stuff.

Look at who got all those fees - a long chain of fees.

Audrey
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Old 01-28-2008, 03:33 PM   #36
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I had heard from someone that knew someone who sold mortgages.. he got paid 50 bp of the loan amount... on every loan made... so to him he did not care if they could pay or not, he got his 50 bps...

Heard he quit and went somewhere else when they dropped it to 40... a 20% cut in your income.
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Old 01-28-2008, 03:58 PM   #37
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For what it's worth, I can share my personal experience as a potential customer for these mortgage brokers. I've shared elsewhere that I am divorced and in fact that divorce was only a few years ago, somewhere in the midst of the housing bubble feeding frenzy run up in the housing market. As a newly divorced person with formerly excellent credit, now potentially subprime, in need of a new mortgage I was apparently in one of the target demographics of these mortgage pushers.

I was pursued relentlessly both by phone (1-2 calls per week) and by mass mailings (up to 3 separate pitches per DAY) for all manner of low payment loans. Interest rates of 1% and lower (for the first month), exotic "fixed payment" loans which actually negatively amortized for years then ballooned, ARMs of all sorts with short term teaser rates and hidden adjustments. If I hadn't been the kind of curmudgeon I am about knowing all the details of any deal, it would seem I was turning down free money. I even got dozens of solicitations to buy multiple properties with 125% loans (they pay me extra cash at closing).

I can easily see why many were taken in by these promotions. They were everywhere and the buzz was huge. And this is without any of the bait-and-switch or finagles with the terms that are also alleged to have occurred.

I do think people should be responsible for understanding the commitments they make. But the fact that it was a circus didn't seem to trigger alarms for many.
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Old 01-28-2008, 06:00 PM   #38
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I meant corporate responsibility.
I agree lenders should do their part to verify people's income information and make a reasonable judgment about borrower's ability to pay the loan back.

If lenders could not sell the loan, they might be more careful. They would (should) be concerned about the negative impact on their investors.

If the borrower deceived the banker, the banker closed one eye and did not verify the information and hurt their investors or sold it off to other investors.

Some individuals may have defrauded the bank. Some banks/lenders defrauded investors or at the very least were grossly negligent. Therefore, the banks/lenders and investment houses are liable and will probably be sued.

In some cases banks may be fined. There will also be a number of people caught up in trying to cover up during investigations.
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Old 01-28-2008, 06:26 PM   #39
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Like 'growing older',I think my profile must look dicey too....I am STILL getting bombarded including a weekly fax which I am unable to block.
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Old 01-28-2008, 07:22 PM   #40
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If lenders could not sell the loan, they might be more careful. They would (should) be concerned about the negative impact on their investors.
This seems like a good place for a shout-out to my credit union.

I called them last week to ask a few questions about refinancing and in the process asked how their home loan portfolio was doing.

Was told they've had a total of 2! (two!) foreclosures, and that was because the borrowers lost their jobs.

There's a reason I've been with these folks for 30+ years.
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