Subprime Fraud - Day of Reckoning

[chinaco]

Did anyone see the "House of Cards" segment on 60 minutes.

60 Minutes - Video, Reports, Profiles, Interviews - CBSNews.com


I have been reading about this in the news. It looks like more investigations will be popping up.

When you consider that the CEOs of Merrill Lynch and Citibank made fortunes... it is pretty sickening.

Matter of fact everyone in the chain got a slice of the money from borrower to the investment bankers that sold it.

Who get's the bill? Investors (individuals, governments, pension funds, etc), tax payers who have to bail it out.

Many of the people who bought the houses at high interest rates are just walking away not that they have high interest rates and a house that is worth about half of it's purchase value. What makes this particularly disgusting is that quite a few actually walked away from closing with money taken out of the deal. Buy a 500k house and borrowed 540k. Live in the house for 3 years and walk away.


It is time for long, long prison sentence and disgorging of any money made. Investors are depending on business executives to act with integrity. Every major CEO and the exec that is in charge of the division or department that loaned and/or packaged and sold the debt should go to prison. Once again... it is a money grab.

Since it is an election year, I expect many high profile convictions. They should go from the Bank, to the rating agencies, to the investment houses that perpetrated the fraud. Hopefully these convictions are 25 - 30 years. I hope some state attorney general moves to freeze their assets quickly. Once again, the federal government (Justice Department) sems to be sitting on its hands.

 

[Maurice]

So far the banks have gotten the bill. For every deadbeat who walks away from his mortgage there's a CDO or MBS writedown on the other side of the transaction.

 

[Maurice]

I'll add plenty of investors are taking the hit too, its just usually not public.

 

[liveitup]

That was a great segment of 60 minutes that demonstrates the underlying cause of the housing collapse.

This is my opinion......The banks were in it to profit.They gave the consumer a chance to own the American dream and they blew it.

I listen to all of the bleeding heart liberals point fingers and blame everyone else,but the one that I feel is truly responsible for this crisis is the consumer.

Yes there was widespread fraud.People overstated incomes to qualify for loans,sometimes at the advise of their broker.An honest person would have refused it,knowing that it was a lie and also fraud.

The days when a person stood behind their signature are over.It's your responsibility to read and understand the terms of the loan,prior to signing.If you don't understand it,you ask an attorney,or someone who is qualified to answer the question.Some people just didn't care.Now we are all paying the price.........

 

[al_bundy]

the only laws that were broken were by the buyers that lied on their mortgage applications

everyone else had dollar signs in their eyes and is now surprised they didn't make any money

idiot pension funds as well as county governments that invested in these things do this on a regular basis. last time in 1990 a bunch of counties in california almost went bankrupt. instead of reducing spending, they took big risks to bring in more revenue and invested in crazy investments most people would not.

 

[UncleHoney]

Years ago it was a joke between my dad and I that bankers would put prospective borrowers in a darkened room and turn brights lights on them and hold an inquisition as to their ability to repay a loan, just like a police investigation in an old James Cagney movie. We even joked about the use of thumbscrews to impress the borrower that the money must be repaid.

Maybe we are need to return the old ways of doing business.

 

[al_bundy]

i remember in the old days they would check your credit like 2 days before closing to make sure you didn't run up a bunch of debt

even back in 2003 when i bought my place Countrywide was taking a lot of shortcuts that would have been unthinkable even a few years before that. things like checking only one credit report and in many cases they would check the one you ask them to check

 

[Buku]

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

 

[liveitup]

I read the article and it's enough to make me sick.

How can you compare the Katrina disaster to the sub prime crisis?Katrina was a natural disaster and the housing crash is a result of people making irresponsible and risky financial decisions.

Nobody held a gun to their heads and forced them to sign a mortgage they cannot afford.

 

[Retire Soon]

The key phrase in this CBS Documentary is that, "Everyone was gaming the system." The fault can be shared equally with the lenders, CEOs, credit rating agencies and the borrowers. As they pointed out in the interview, The money was free. One person put it this way, "You almost had to apply not to get the loan." Many of the people who bought the homes in Stockton, CA had bad credit and many actually received money at the close of escrow. They had absolutely nothing to lose. This is why many are simply walking away from their upside down mortgages. The loans were then cut into pieces and sold as high yield bonds to pension funds and banks around the world. These were securities that were rated AAA by credit rating companies such as Standard & Poor. Now we're all going to pay for it as Merrill Lynch pointed out in its recent weekly report (on another thread) that prices have dropped 7% so far, and will drop another 30% through 2009. Everyone did indeed, "Game the system."

 

[JPatrick]

Well we've heard from the west, the north, the deep south--here's a look at the Florida gulf coast:
In Southwest Florida, an eerie sense of emptiness - The Boston Globe

 

[Buku]

I have seen some reports of local communties suing lenders.

What are the consequences of suing lenders who do business in your town. im sure driving lenders out of an area will improve the housing mess.

 

[eridanus]

the only laws that were broken were by the buyers that lied on their mortgage applications

And by mortgage brokers who increased a buyer's income without telling the buyer. They just wanted the mortgage to go through so they could collect their cut.

 

[Buku]

And by mortgage brokers who increased a buyer's income without telling the buyer. They just wanted the mortgage to go through so they could collect their cut.

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.

 

[eridanus]

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.

So how did all of these people who couldn't afford these loans do it? Why did banks willingly give loans to these people? How about some responsibility here?

 

[FinanceDude]

So how did all of these people who couldn't afford these loans do it? Why did banks willingly give loans to these people? How about some responsibility here?

Because it's mush easier to blame the lender or someone else than admit responsibility.

It's too late now, but I was for NO bailout, and have the market fix itself..........

2 million folks got homes they shouldn't have, and that will take awhile to fix on all levels.........

 

[Buku]

So how did all of these people who couldn't afford these loans do it? Why did banks willingly give loans to these people? How about some responsibility here?

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.

 

[audreyh1]

So was it a pretty accurate and detailed portrayal?

I mean - it's really a wild story. The financial shenanigans are just unbelievable. I wonder if the average joe really has a clue as to what all was going on.....

Audrey

 

[eridanus]

Because it's mush easier to blame the lender or someone else than admit responsibility.

I meant corporate responsibility.

Retire Soon's post was dead on -- a lot of people and companies had a hand in the pot. For deadbeats to get houses means that lenders had to lend to deadbeats, WAMU et al had to lean on appraisers, and the S&P had to rate questionable loans as "almost-like-a-treasury." It was a great time until the next morning.

 

[Moemg]

Well we've heard from the west, the north, the deep south--here's a look at the Florida gulf coast:
In Southwest Florida, an eerie sense of emptiness - The Boston Globe

If you are interested HGTV 's National Open House on tuesday at 9:30 pm will feature southwest Florida . I saw the listing for one of the houses .What a deal !

 

[eridanus]

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).

 

[FinanceDude]

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.........

 

[Texas Proud]

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

 

[TickTock]

More on municipalities fining lenders:

http://realestate.msn.com/buying/Article_busweek.aspx?cp-documentid=6015750&GT1=10833

 

[FinanceDude]

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..........