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Old 10-14-2010, 11:37 PM   #1
goof2
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Originally Posted by EpyonXero View Post
@ Wall St. telling people to fulfill their obligations.
"Wall St." didn't start having problems fulfilling their obligations until wholesale lots of their borrowers stopped fulfilling their own. The stability of those financial institutions do depend on people paying back what they have borrowed.
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Old 10-15-2010, 02:47 AM   #2
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The problem with these banks is that they are very relucant to help people who fell on hard times as for the reason why there are so many foreclosures. People's rate adjusted, lost their job or had a reduction in pay and cannot meet the current mortgage payment. So then they dick you around for a year and nothing comes of it. Then you fail to pay and they take the house. BUT...now the house isn't worth nearly as much as you owe on it and instead of working with these people with government funding, they just let them go because guess what? Investors are taking most of the hit, not the banks.
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Old 10-15-2010, 10:53 AM   #3
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Normal people should not be offered complex mortgages.
Normal people should not be offered a mortgage unless they have a reasonable down payment and meet stringent criteria.

However, we are a capitalistic society. If institutions figure out way to make a buck by taking a little risk and offering certain products to consumers we should be supportive.
People have had it easy for so long that they have forgotten the meaning of the word risk.
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Old 10-15-2010, 11:40 AM   #4
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Normal people should not be offered complex mortgages.
Normal people should not be offered a mortgage unless they have a reasonable down payment and meet stringent criteria.

However, we are a capitalistic society. If institutions figure out way to make a buck by taking a little risk and offering certain products to consumers we should be supportive.
People have had it easy for so long that they have forgotten the meaning of the word risk.
I agree about the public's view of risk. If someone wants a "safe" investment they can go down to their local bank and pick up an FDIC insured Certificate of Deposit. It will pay about .3% interest over a year or about 3 bucks for a thousand dollar investment. People want investments with a larger return with no more risk and don't understand it just isn't available.

At the same time "Wall St.'s" evaluation of risk also got way out of whack. They used flawed assumptions about the real estate market which lead them to the conclusion that there was no way to lose in mortgage lending. They found out the hard way that wasn't the case.

I do disagree with not offering complex mortgages to consumers. I believe it is incumbent on borrowers to understand the obligation they are agreeing to. If a borrower is incapable of doing so they should either get help or not sign the document. That also includes the depressing number of people who don't understand a 30 year fixed mortgage. The mortgage market shouldn't be restricted to catering to the lowest common denominator.

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Who can blame the banks for taking advantage of the system our government set up and encouraged? I can't. The banks did what was smart business to do at the time, with Uncle Sugar coaxing them along the way.
This goes to what I was saying about "Wall St.'s" evaluation of risk. If they had stuck to risky mortgages only when they were federally insured (FHA loans) that would be one thing. Instead they offered high risk loans to everyone. The only reason "Wall St.' thought it was smart business at the time was based off some seriously messed up assumptions. If I invest in an FDIC insured CD and the bank goes under it doesn't matter because my money is insured by the government. Alternatively, if I invest in a stock thinking it can't lose, but it tanks anyway, I'm the one to blame. I hold "Wall St." to the same standard.
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Old 10-15-2010, 12:17 PM   #5
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Originally Posted by goof2 View Post
I agree about the public's view of risk. If someone wants a "safe" investment they can go down to their local bank and pick up an FDIC insured Certificate of Deposit. It will pay about .3% interest over a year or about 3 bucks for a thousand dollar investment. People want investments with a larger return with no more risk and don't understand it just isn't available.

At the same time "Wall St.'s" evaluation of risk also got way out of whack. They used flawed assumptions about the real estate market which lead them to the conclusion that there was no way to lose in mortgage lending. They found out the hard way that wasn't the case.

I do disagree with not offering complex mortgages to consumers. I believe it is incumbent on borrowers to understand the obligation they are agreeing to. If a borrower is incapable of doing so they should either get help or not sign the document. That also includes the depressing number of people who don't understand a 30 year fixed mortgage. The mortgage market shouldn't be restricted to catering to the lowest common denominator.



This goes to what I was saying about "Wall St.'s" evaluation of risk. If they had stuck to risky mortgages only when they were federally insured (FHA loans) that would be one thing. Instead they offered high risk loans to everyone. The only reason "Wall St.' thought it was smart business at the time was based off some seriously messed up assumptions. If I invest in an FDIC insured CD and the bank goes under it doesn't matter because my money is insured by the government. Alternatively, if I invest in a stock thinking it can't lose, but it tanks anyway, I'm the one to blame. I hold "Wall St." to the same standard.
Its a little more complex.
Years ago (1960's)...in order to make an extra buck so that they could raise capital to offer more loans Freddi Mac started selling mortgage backed securities.
Nothing wrong with it.

Year later some folks decide to maybe up their game a bit, make a lot more money with the risk that goes along with it by taking some products normally offered to low risk high wealth clients and offering them to lower income folks.
Nothing Wrong with it as long as you manage the risk.

Meanwhile some asshole decides "We're holding all these mortgages and thats a risk. Lets sell them off to those dudes putting together mortgage backed securities. We'll get some dough and we'll get this risk off our lap."
Nothing wrong with selling off some of your risk.

Soon...assholes didn't give a fuck about what kind of mortgage the put together and who they offer it too because "Hey...we're just gonna sell the fucker off anyway...no risk to us"

While this is happening jerk offs are buying and selling bundles of these off. Bundles of Mortgages packaged up as happy little money makers.
Ratings agency's having spent years dealing with all the freddy mac bundles figure...fuck it this shit is historically good so we just mark it as triple AAA funbagtastic.

Other assholes have the idea to insure these little bundles and sell insurance on em. Sell insurance on these bundles to anyone...even those with no stake in it.

I could go on for an hour and ten pages so I'll stop there. Lets just say its a complex issue.

My original post that most people shouldn't be offered complex mortgages still stands in the way that teens shouldn't be given "big people" credit cards.
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Old 10-15-2010, 01:27 PM   #6
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Originally Posted by pauldun170 View Post
Its a little more complex.
Years ago (1960's)...in order to make an extra buck so that they could raise capital to offer more loans Freddi Mac started selling mortgage backed securities.
Nothing wrong with it.

Year later some folks decide to maybe up their game a bit, make a lot more money with the risk that goes along with it by taking some products normally offered to low risk high wealth clients and offering them to lower income folks.
Nothing Wrong with it as long as you manage the risk.

Meanwhile some asshole decides "We're holding all these mortgages and thats a risk. Lets sell them off to those dudes putting together mortgage backed securities. We'll get some dough and we'll get this risk off our lap."
Nothing wrong with selling off some of your risk.

Soon...assholes didn't give a fuck about what kind of mortgage the put together and who they offer it too because "Hey...we're just gonna sell the fucker off anyway...no risk to us"

While this is happening jerk offs are buying and selling bundles of these off. Bundles of Mortgages packaged up as happy little money makers.
Ratings agency's having spent years dealing with all the freddy mac bundles figure...fuck it this shit is historically good so we just mark it as triple AAA funbagtastic.

Other assholes have the idea to insure these little bundles and sell insurance on em. Sell insurance on these bundles to anyone...even those with no stake in it.

I could go on for an hour and ten pages so I'll stop there. Lets just say its a complex issue.
I understand the complexity and that is why I put "Wall St." in quotes. There are so many different types of organizations involved it goes far beyond the location or traditional definition of Wall St. I don't consider the FHA or Fannie/Freddie a part of Wall St. but they are both involved in this problem up to, and beyond, their eyeballs.

I also bundled the transactions you describe because they are based off the same flawed evaluation of risk. The ratings agencies, AIG, and those who bought the mortgage backed securities were all making decisions based on the theory that, even if a borrower stopped paying, the property was held as security and was only increasing in value. They all believed that property couldn't be overvalued, based their decisions on that construct, and got bit in the ass big time because of it.

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Originally Posted by pauldun170 View Post
My original post that most people shouldn't be offered complex mortgages still stands in the way that teens shouldn't be given "big people" credit cards.
OK, but how do you determine who should have their options restricted? Is there a test they have to pass or do they have to prove they hired an attorney before they can view the full "menu"? If the same restriction on options is put in place for everyone then it is nothing more than I stated, catering to the lowest common denominator.

If I were a real estate investor an interest only adjustable rate mortgage would be a very attractive option. Should that option not be available to me simply because other people don't understand that the payment will change substantially in 5 or 10 years?
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Old 10-15-2010, 01:38 PM   #7
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OK, but how do you determine who should have their options restricted? Is there a test they have to pass or do they have to prove they hired an attorney before they can view the full "menu"? If the same restriction on options is put in place for everyone then it is nothing more than I stated, catering to the lowest common denominator.

If I were a real estate investor an interest only adjustable rate mortgage would be a very attractive option. Should that option not be available to me simply because other people don't understand that the payment will change substantially in 5 or 10 years?

2 people sitting at a desk.
One, the person that wants to money to buy something
The other with the money.

In the big rush to standardize and streamline and automate everything, they have eliminated judgment.

There is no test or cheat sheet or standard. Its judgment and common sense of someone with experience.
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Old 10-15-2010, 01:43 PM   #8
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Unfortunately a big chunk of foreclosures nowadays are by folks who, at the time of signing were solid candidates for the mortgage they got into.
As they say...shit happens.
You're right, but by and large those folks weren't what caused the bubble to pop.
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Old 10-15-2010, 11:14 AM   #9
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Hell, higher minimum wages are what creates more unemployment than anything. Most of the mass production jobs are minimum or just above it, and if the companies have to spend more for each employee, they can't hire as many people. Simple economics.
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Old 10-15-2010, 04:33 PM   #10
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http://finance.yahoo.com/real-estate...realestate-buy
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