Originally Posted By Mr X ***The banks could foreclose on a house and sell it at a profit, for awhile.*** K2M, there wasn't even a need for foreclosures generally, since anyone could re-fi at a significant profit every six months or so ad nauseam.
Originally Posted By Dabob2 Yes, that was the scam, Ponzi scheme, whatever you want to call it. And a lot of these companies sold people on the idea that even if they couldn't seemingly afford a home on the salary they made, not to worry - the home will appreciate, you'll have "made" all this money, and you'll re-fi and things will be sweet. Why, you'll practically be PAID to live in this house. Because houses "always" go up in value, right, and just look at what has happened in the past several years! You don't want to "miss out" on that, do you? And look how low the payments are for the first 12 months. You can swing that! And by the time the higher rate kicks in, your house will be worth more, so no problem... That's how an awful lot of people were sold on buying more than they could afford. It was a hard sell, too. Yes, you can say, the borrowers should have read the small print, and should have known that nothing lasts forever, but these companies are called "predatory lenders" for a reason. After the sales, they were happy to bundle these bad loans as "instruments" and sell them - getting their fees for THAT transaction as well as for the original sale. And that's how these defaults are affecting not just the original home lenders, but the rest of the financial sector as well. And it had nothing to do with political pressure to lend to the poor. That pretty much only happened in this specific area of home sales, and only because the lending companies figured out how to make a bundle enticing people with teaser rates and convincing them their house would always appreciate - and then bundling the bad loans up and selling them to someone else. Eventually it caught up with them all, as all Ponzi schemes must. And now they're begging for help - as fkurucz said, they were happy to privatize the profits, but they'd like to socialize the risks. And in the case of the larger financial companies who are "too big to fail," the government (i.e. the taxpayers) has pretty much no choice but to bail them out.
Originally Posted By DouglasDubh <Yes, the fallback excuse for every disaster this administration has gotten us into. I didn't realize that the Bush administration was such ardent admirers of President Clinton that they used his administration as a template for every step they made.> They're not, and they didn't. But they no more had control over what has happened to the economy in the last year as the Clinton administration had over what happened in 2000. <This is a luxury afforded President Bush only by his most faithful fans.> What nonsense. I hold the President accountable for the things he is accountable for. Just because I refuse to join in criticizing him for things he is not accountable for does not make me a faithful fan.
Originally Posted By DouglasDubh <And it had nothing to do with political pressure to lend to the poor.> Of course it didn't. Because you guys say so. And everyone in business is greedy except you guys, right? I notice no one has given one example of someone who actually said, "Too bad for the little guys, but we can't let a big corporation fail." But why let facts get in the way of a good round of blame throwing?
Originally Posted By dshyates "For many years, liberals have complained that banks didn't lend money to the poor. The banks responded to political pressure by lowering the barriers to credit, and now they're being blamed for handing out too much money." Yes, but it was the Bush administration and the lenders like Countrywide who lobbied the Republican controlled Congress and Senate that got the laws changed. Bush is still bragging about it on the White House website. <a href="http://www.whitehouse.gov/infocus/achievement/chap7.html" target="_blank">http://www.whitehouse.gov/info cus/achievement/chap7.html</a> "Why would a bank make a loan to someone who could never pay it back?" Because with the way the real eastate market was when this stared it was profitable for banks to make the loan, have them default, take the house and sell it for a profit at auction. That way, they have all the equity the ownwers payed, plus the inflated rate they were getting at auction becuase of all the speculators armed with the knowledge to be savy real estate mogals learned from a DVD they bought from a 1-800 number at 2:00am while watching FOX News.
Originally Posted By Sport Goofy << Because with the way the real eastate market was when this stared it was profitable for banks to make the loan, have them default, take the house and sell it for a profit at auction. >> Not correct. It was profitable for banks to collect fees on originating mortgages, re-fi's, and home equity lines of credit. There isn't much money to be made by banks in foreclosures. Banks make money on fees. They swelled the ranks of people originating loans to increase the pool of people paying them fees. What happened to the loans and homes in the long run is really irrelevant (except for the investment banks that ended up holding the crummy paper).
Originally Posted By dshyates For the most part that is true, but the banks were actively taking peoples homes in areas that home sales were relly hot, like Denver, SF, NY, and DC. Trust me before the collapse, banks were NOT interested in helping people stay in their homes. They couldn't have been nastier. Now I hope they choke on their own vomit.
Originally Posted By fkurucz <<That's how an awful lot of people were sold on buying more than they could afford.>> Correct. What really amazed me was that no one on Wall St. thought that maybe, just maybe, families with incomes below 100K shouldn't be getting 500K loans. But as Dabob said, the big lie was that you would always be able to refinance into another teaser rate loan. Actually it was better than that. You would be able to refi into another teaser AND take a lump sum out for that new car you can't really afford, plus an expensive vacation (at a Deluxe resort in WDW?). The scary thing is that people actually did that. IIRC, I read that prior to the bubble burst about 50% of all new car sales in Florida were financed with refi cash backs. Something tells me that 2008 might be a great year (price wise) to buy a used BMW.
Originally Posted By DouglasDubh <it was the Bush administration and the lenders like Countrywide who lobbied the Republican controlled Congress and Senate that got the laws changed.> Actually, the American Dream Downpayment Act was passed while the Senate was controlled by Democrats. It had bipartisan suppport.
Originally Posted By Mr X **But they no more had control over what has happened to the economy in the last year as the Clinton administration had over what happened in 2000.** Bull. If that were true, why the late effort at a stimulus package? Why the "better late than never" senate hearings against the lenders? It was obvious what was going on, why didn't they do something? They had control, they simply didn't act. Now they're trying to play catchup and things have snowballed to a frightening degree.
Originally Posted By Sport Goofy << Actually, the American Dream Downpayment Act was passed while the Senate was controlled by Democrats. It had bipartisan suppport. >> This law contributed nothing to the housing boom and bust. There's a number of reasons why it was a non-factor, most significantly that it wasn't even enacted until the end of 2003. The boom was in progress long before this, and the bust began in mid-2005 -- not enough time after this particular legislations was approved to show any cause and effect relationship. Furthermore, this legislation requires households that take advantage of the program to adhere to some traditional home lending standards, to declare income, purchase price, and have a down payment -- which doesn't explain the explosion in stated income loans, no-doc loans, interest only ARMs, and other creative products used to fuel the subprime mess.
Originally Posted By fkurucz ^^Agreed. It was merely a down payment assistance program that targeted a small demographic. According to the HUD website: "The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula." This is but a pimple on a bubble the size of the superdome. <<which doesn't explain the explosion in stated income loans, no-doc loans, interest only ARMs, and other creative products used to fuel the subprime mess.>> And don't forget the no money down lending. Had lenders required a mere 5% down payment, we wouldn't be in the mess we are in now. The zero down lending also enabled speculation (AKA "flipping"). This was so bad in some communities that it promoted massive overbuilding. For instance, there are several thousand vacant homes in Las Vegas that have never been occupied. In many cases these homes were sold from one flipper to another, until the party ended. There is such a surplus in places like Las Vegas, the "Inland Empire" and Florida (just to mention a few) that they can't even be rented out. Banks are sitting on foreclosures because they are afraid to flood the market even further. What is especially amazing is that builders continue to build in these markets. In many cases they are undercutting resellers who bought at the peak of the bubble. There are plenty of horror stories of people who bought a new house for 500K in the past 2 years, only to see the builder selling the same model now for 400K or less. Because of this many buyers, especially the no money down buyers, are going to surrender their house to the banks, take the credit rating hit, and start over later when prices bottom out. The irony of the situation is that renting used to be considered "throwing your money away". With tumbling prices that honor now belongs to ownership, especially in markets where rents are 1/3 of a monthly payment (or less). Without double digit appreciation, ownership in such markets is hard to justify. Why buy an 800K house if you can rent it for 2K month?
Originally Posted By DouglasDubh <If that were true, why the late effort at a stimulus package? Why the "better late than never" senate hearings against the lenders? It was obvious what was going on, why didn't they do something?> How do the answers to these questions prove the Bush administration is any more responsible for the current bubble burst than the Clinton administration was for the one in 2000?
Originally Posted By Dabob2 <<And it had nothing to do with political pressure to lend to the poor.>> <Of course it didn't. Because you guys say so> No, not because we say so, but because that's the fact. If there was all this supposed "political pressure to lend to the poor," we would have seen a marked increase in loans to the poor outside of the realm of home mortgages. Did we? Can you show that? Didn't think so.
Originally Posted By Bob Benchley "<If that were true, why the late effort at a stimulus package? Why the "better late than never" senate hearings against the lenders? It was obvious what was going on, why didn't they do something?> How do the answers to these questions prove the Bush administration is any more responsible for the current bubble burst than the Clinton administration was for the one in 2000?" Oh God. Yet another transparent attempt by you to move the goalposts and shift the debate away from the topic of the thread. YOU (DouglasDubh) introduced Clinton into this thread by saying Bush was no more responsible than was Clinton for the tech bubble, classic misdirection. If YOU want to have a thread on that, start one, no one's stopping you. Meanwhile, if YOU can't address the simple issue of why the current administration has been relatively lifeless during this mortgage mess without trying to change things around and confuse the issues to where debate with you is pointless, then admit as much.
Originally Posted By DouglasDubh <No, not because we say so, but because that's the fact.> Once again you are confusing fact with opinion.
Originally Posted By DouglasDubh <Yet another transparent attempt by you to move the goalposts and shift the debate away from the topic of the thread.> Hardly. The attempt to blame the Bush administration was a shift away from the topic of this thread. The topic of this thread asserted that people who said that regular people should lose their homes approved of corporate welfare. No one has given an actual example of anyone doing that.
Originally Posted By Dabob2 <<No, not because we say so, but because that's the fact.>> <Once again you are confusing fact with opinion.> No, that's your M.O. The first interjection of this idea was yours. You asserted that it was political pressure to lend more money to the poor that was behind all this. I said that if that were the case, we should have seen a marked increase in lending to the poor in areas outside of home mortgages. I asked you to provide proof of that if you could, since after all, it was your assertion that all this lending to the poor was going on. Still waiting. Since this didn't happen, the logical conclusion is that this increased lending on mortgages to the poor happened not because of political pressure, but because lenders saw a way to increase their pool of customers beyond what it had been before. And in the bundling and selling of mortgages to other investors, they saw a way to minimize their risk after making the sales and collecting their fees. Remember, the first assertion was yours. Pressed to prove it, predictably you can't.
Originally Posted By DouglasDubh <No, that's your M.O.> No, it's not. I don't need to provide anymore evidence to support my premise than I have given. It's been established that there was political pressure to increase lending to the poor - if there hadn't, the bill noted wouldn't have passed. <Remember, the first assertion was yours.> No, it wasn't. My assertion was a counterassertion. If you want to "prove" me wrong, and others right, then you need to present some evidence, rather than just restating opinion.
Originally Posted By Dabob2 <<No, that's your M.O.>> <No, it's not.> Yes it is, and usefully, we're seeing it right here. <I don't need to provide anymore evidence to support my premise than I have given.> Which would be none. <It's been established that there was political pressure to increase lending to the poor - if there hadn't, the bill noted wouldn't have passed.> That doesn't follow. First of all, that bill could just as easily have passed because the financial companies WANTED it to pass, and lobbied very hard for it, and not out of altruism. So your claim that your theory has been "established" is rubbish. Second, as has already been pointed out by others (in #31 and #32), that particular law is essentially an non-factor to what is happening now. So it would be a moot point even if you could show it (which you can't). <Remember, the first assertion was yours.> <No, it wasn't. My assertion was a counterassertion. If you want to "prove" me wrong, and others right, then you need to present some evidence, rather than just restating opinion. > You think you're getting away with THAT blatant a goalpost move? Think again. No one mentioned anything about "political pressure to lend more to the poor" until you did. Since no one had brought this up, your "counterassertion" is a non-sequitur. The beauty of a board like this is that this is up there for anyone to see.
