Mortgage too much? Join the crowd, walk away

[Brad Johnson]

Laurent,

Your argument is patently one-sided.

You are stating that, if there is a loss, the borrower and lender shares the burden equally.  You've said nothing about what happens if there is a gain so I must presume you intend for the borrower to reap all the benefits.

Sorry, ain't happenin'.  If the lender is to share in the loss, they must also share in the gain.  Fair is fair.  Since fair is what you claim to be proposing the you must, by definition, agree with the logic.

Brad

[Gewehr98]

I don't get this:

if your bank has not actively sabotaged the value of your house,

Huh?  When does that happen?  Correct me if I'm wrong, but the value of one's house fluctuates with the housing market, not some guy in a suit at a bank pushing a button and instantly knocking 6 figures or more off your home's appraised value.   

[Laurent du Var]

Why is there a loss in the first place?
Is it because of bad luck - too bad ?
Or is the bank at the very origin of the loss of the value of the  house
which they helped you buy ?
If they always had correctly verified the borrowers means and income and matched it to the estimate value of an affordable house we wouldn't have this problem.
You throw Ninja money at a guy who in my book never should qualify for a loan
in the first place - he just walks out on you and calls it rent. I don't like him any better than the banks but it takes two to dance.

And actually, yes now that you've said it - if the value of the property goes up
and you have helped me correctly to buy it, why not call it an investment and share
some of the added value? And take out another loan at your place to buy the next, bigger house. I've changed from my bank of ten years to the bank who really helped me a lot
to buy my place and they are taking care of all my business now. I like them, but will leave them in a heartbeat if they are at fault for reducing the value of my home.

[makattak]

Why is there a loss in the first place?
Is it because of bad luck - too bad ?
Or is the bank at the very origin of the loss of the value of the  house
which they helped you buy ?
If they always had correctly verified the borrowers means and income and matched it to the estimate value of an affordable house we wouldn't have this problem.
You throw Ninja money at a guy who in my book never should qualify for a loan
in the first place - he just walks out on you and calls it rent. I don't like him any better than the banks but it takes two to dance.

And actually, yes now that you've said it - if the value of the property goes up
and you have helped me correctly to buy it, why not call it an investment and share
some of the added value? And take out another loan at your place to buy the next, bigger house. I've changed from my bank of ten years to the bank who really helped me a lot
to buy my place and they are taking care of all my business now. I like them, but will leave them in a heartbeat if they are at fault for reducing the value of my home.

So, when you sell your house and buy a smaller one, you cut a check to the bank for part of the profit, right?

[Brad Johnson]

Why is there a loss in the first place?

Or is the bank at the very origin of the loss of the value of the  house
which they helped you buy ?
If they always had correctly verified the borrowers means and income and matched it to the estimate value of an affordable house we wouldn't have this problem.

What?

Laurent, buddy, I'm about to start calling you some not-very-nice names.  You. Need. To. Listen.  We've covered this already...

Income verification is a COMPLETELY SEPERATE PROCESS from identifying the value of the property.

Verification of income is based on your... income.  You supply the lender documentation of your income, your bank statements, and retirement account statements.  Once those items are examined AND VERIFIED the lender will loan you money up to an amount determined by your debt-to-income ratio.

There used to be a thing called a stated income loan, but that was available only to people who had a very high credit score, no delinquincies, and no collections against them.  Those three things were considered proof that you knew how to responsibly handle your finances.  However, stated income loans were a very small part of the market, and were one of the first casualties of the changes in fed lending regs.  They were actually a very good product with a proven record.  Unfortunately, changes in lending regs BY THE GOVERNMENT caused a bunch of people to be able to qualify when they previously wouldn't have.

As for the property value, the bank doesn't just pull a number out of their butt.  Property value is determined by an independent appraiser.  The appraiser finds comparable properties that have sold within the last 6-12 months, determines the average value for the properties, and applies that average to the prospect property.  In other words, value is determined on the bases of comparable homes recently sold in the same market.  It's not a guess.  It's cold numbers.

So, again, your proposition is fundamentally flawed and inherently self-limiting.

Brad

[Laurent du Var]

Brad, I take that chance.

Would you please tell me about Ninja loans and how they have an impact on the value of real estate ?

I totally get it that your clients are not walking away from their houses and everything is straight on your end.

Maybe I am wrong and what I read is not relevant with the housing bubble and the bank bail out  and in that case you're welcome to call me names. 

Could what  you said about verifiying the income, the assets and maybe asking a down payment which would keep
everybody from walking away and  a totally sepperate evaluation of the value of a property lead to todays crisis ? 

Or is there  a relation, a direct connection between the approvals  of  loans and the value of the houses
on a larger scale which you can not dissociate?


Here is what I read :

Housing bubbles may occur in local or global real estate markets. In their late stages, they are typically characterized by rapid increases in the valuations of real property until unsustainable levels are reached relative to incomes, price-to-rent ratios, and other economic indicators of affordability. This may be followed by decreases in home prices that result in many owners finding themselves in a position of negative equity—a mortgage debt higher than the value of the property. The underlying causes of the housing bubble are complex. Factors include historically low interest rates, lax lending standards, and a speculative fever.

[cassandra and sara's daddy]

but that was available only to people who had a very high credit score, no delinquincies, and no collections against them.

nope i had none of the above and got a stated income.  there was some real shady behavior out there.  the loan officers they jailed out here were with bigger banks too

[Headless Thompson Gunner]

A bank that lends on an asset which is going to plummet in value is just as culpable as the consumer who borrows to buy it.  

Nope, not at all.  You borrow, you repay, period.  If you sign the loan, you're agreeing to pay back a certain value in Dollars, irrespective of the value of the asset.  Even if the bank makes a mistake lending on a declining asset, that doesn't absolve you of your obligation to repay.  The bank largely doesn't care why you're borrowing or what's going to happen to the asset.  They held up their half of the bargain (they gave you their cash), so you need to hold up yours and repay.

Listen, folks.  All of you who feel that the value of your house should have any bearing on your obligation to repay the loan, get it in writing.  If you and your bank agree that this is the right way to do business, make sure the mortgage contract says so.  Then there won't be any histrionics resulting from your default.

If you don't get this concept put into the contract, and you choose to sign it anyway, then you've agreed that the value of the house has nothing to do with the number of Dollars you've promised to repay.  So man up and honor your agreement.  Repay the loan in full even if your house can't sell for fifty cents on the open market.

And it also has financial "experts" who are supposed to estimate those sorts of things, as opposed to consumers who are generally not in the business of doing long-term asset pricing.

If you're not sufficiently savvy to know what you're doing, then don't do it.  If you do it anyway, any problems arising from your ignorance are your fault and your mess to clean up.

[Brad Johnson]

Would you please tell me about Ninja loans and how they have an impact on the value of real estate ?

Maybe I am wrong and what I read is not relevant with the housing bubble and the bank bail out  and in that case you're welcome to call me names.  

Could what  you said about verifiying the income, the assets and maybe asking a down payment which would keep everybody from walking away and  a totally sepperate evaluation of the value of a property lead to todays crisis ?  

Or is there  a relation, a direct connection between the approvals  of  loans and the value of the houses on a larger scale which you can not dissociate?


Here is what I read :

Housing bubbles may occur in local or global real estate markets. In their late stages, they are typically characterized by rapid increases in the valuations of real property until unsustainable levels are reached relative to incomes, price-to-rent ratios, and other economic indicators of affordability. This may be followed by decreases in home prices that result in many owners finding themselves in a position of negative equity—a mortgage debt higher than the value of the property. The underlying causes of the housing bubble are complex. Factors include historically low interest rates, lax lending standards, and a speculative fever.

First, be careful what you see in the news.  News outlets use the terms "bubble" and "crash" without any concern for context, or for actually being accurate.  The majority of the housing provblems were limited to seven states with three of those accounting for a full 80% of foreclosures nationally.  Unfortunately those three states then to drive trends, and the newsies yelling "The sky is falling!" didn't help.  Those two items alone were enough to make consumer confidence do a nosedive.  When confidence drops, activity follows.  A slowdown in activity means fewer buyers for home, which means dropping prices.  Once a trend like that is established nationally it's hard to stop. Eventually it affects markets around the country that should be in otherwise good shape, so much so that people will tell you there's a housing crisis even when you'vejust given them hard data showing the market in their area is fine.  They cannot comprehend that the market in their area is actually okay because, well... "didn't you see on the news there's a housing crisis!"

You keep wanting to make the banks directly responsible for housing prices.  That is incorrect.  The MARKET is responsible for housing prices.  The market is buyers and sellers.  The banks REACT to the market, not drive it.  The only thing the banks do is lend money, securing that loan with a lien against the property.  The property value is verified by analyzing the sale of comparable sold properties.  In other words, the banks don't set the price.

You keep wanting the loan approval to be conditional on a particular price of house, or for the lender to dictate which house shall be purchase.  That is incorrect.  The lender determines how much money the buyer can borrow, then the buyer goes out and chooses a house based on that amount of money plus whatever amount they want to put down in cash.  The lender's only concern is that the house appraise for a market value that will cover their interests should the buyer default.

You keep trying to make the loan process dictate the value of a particular home.  It does not.  All the loan process does is dictate how much money a particular individual can borrow.  The buyer chooses their own own, and decides how much to pay.  If they want to pay more in cash to make up the difference between the loan and what the house actually costs, they can.  If you want a $1 million home but only qualify for a $100,000 mortgage?  Fine.  Come up with $900,000 and it's yours.

Brad

[GigaBuist]

You keep wanting to make the banks directly responsible for housing prices.  That is incorrect.  The MARKET is responsible for housing prices.  The market is buyers and sellers.  The banks REACT to the market, not drive it.

That's a perfectly valid stance if we had a static money supply but we don't.  Not taking the side of our overseas friend that thinks banks should just accept losses either, just trying to make a point.

When the banks started handing out loans to anybody that'd walk in the door they increased the money supply to that sector of our economy.  That drove prices up.  Then, when the irresponsible people that borrowed more than they could actually afford lost their homes prices crashed because there were so many of them.  The responsible people that need to sell a home because their life circumstances changed are now competing against defaulted properties.  It's not fun.  Trust me.

You keep trying to make the loan process dictate the value of a particular home.  It does not.  All the loan process does is dictate how much money a particular individual can borrow.

The loan process doesn't dictate the price of a home but it certainly considers it.  When I purchased my place (which I am not in the process of selling) the appraisal came in considerably higher than my purchase price. I knew the number was BS when I saw it.  If the home was worth that it would have sold for that.  The lender needed that number to come back to them so they sent out a guy that would give them that number.  They had to because I was getting a mortgage with 0% down.  They had to cook the numbers a bit to get my business.  I knew it.  I'm sure they knew it.  I'm not angry about it either.  It got me the home I wanted at a fair price.  I THOUGHT I bought at the bottom of the drop-out but I was really wrong.  So, I'm upside down but that's fine.  I can pay the mortgage even after taking a 15% in my salary 2 weeks after I bought it.

If either party, the borrowers or the lenders, had kept their heads in the last 5 years none of this would have happened.  The blame is certainly shared but I do maintain that the lenders were in a much better position to stop this madness.  Every last one of them had to have known this was a bad idea.

[Scout26]

The one thing that everyone missed in this discussion is over-supply.

Part of what drove up housing prices is that with .gov pushing looser standards in lending via FannieMae and FreddieMac.  That pushed up demand.  There was money to be made in Real Estate.  People bought 2, 3, 4, 12 homes to "Flip".  Builders went wild throwing up houses and strove to outbid each other buying land, any land.  Then suddenly when all those people that never should have bought a home or too big a house, couldn't pay their mortgage, the securities that the banks and investment firms started to collapse and only because less then 10% of the underlying mortgages were heading south, dragging the good ones down with them.  Real Estate and Housing prices had become crazy stupid and rather then letting the market clean up the mess, by allowing prices to fall, and the bad loans (and banks that had been bad) be purged by failing, the .gov tried to re-inflate the bubble, which has only made matters worse, by allowing the bad loans to persist.

What could have and shold have been a short term recession, is tetering on the brink of a depression due to the unprecedented growth in the money supply, which could cause hyper-inflation.

For a historical parallel, read about the Dutch Tulip Mania, substitute the word "House" for "Tulip". 

[Jamisjockey]

Like Brad said, only a couple of states really caused the whole thing.  In Florida, the occupancy rate in new developments is something like 25%.  There are entire condo complexes that are empty.  People were buying up property because of the double digit profit margins.  When the slowdown started, places like that tanked, and the media fed into the frenzy. 
Plus, read Scout's analysis.  Pretty much spot on.

[Laurent du Var]

You keep wanting to make the banks directly responsible for housing prices.  That is incorrect.  The MARKET is responsible for housing prices.  The market is buyers and sellers.  The banks REACT to the market, not drive it.  The only thing the banks do is lend money, securing that loan with a lien against the property.  The property value is verified by analyzing the sale of comparable sold properties.  In other words, the banks don't set the price.

You keep wanting the loan approval to be conditional on a particular price of house, or for the lender to dictate which house shall be purchase.  That is incorrect.  The lender determines how much money the buyer can borrow, then the buyer goes out and chooses a house based on that amount of money plus whatever amount they want to put down in cash.  The lender's only concern is that the house appraise for a market value that will cover their interests should the buyer default.

You keep trying to make the loan process dictate the value of a particular home.  It does not.  All the loan process does is dictate how much money a particular individual can borrow.  The buyer chooses their own own, and decides how much to pay.  If they want to pay more in cash to make up the difference between the loan and what the house actually costs, they can.  If you want a $1 million home but only qualify for a $100,000 mortgage?  Fine.  Come up with $900,000 and it's yours.
Brad

Please mind that I am talking for quite some time about NINJA loans and nothing else. I am sure that you know way more about those loans than I could read on the net and that your answer could end all discussions quite quickly.

The topic was about people walking away from a mortgage  and I assume that people wouldn't walk away from a mortgage if they had made a down payment or had any assets or justifiable income the bank could take away from them if they walked out on their obligations.

Here is what I think:

- If you grant Ninja loans more houses will be bought. The more you sell houses the cheaper they get. This is how banks influence the MARKET. They don't drive the market, otherwise they wouldn't need the 700 billion bail out, but they influence it and not in a good way.

- The loan approval must be conditional on a particular  house because what else would they be looking at ? Your promising
future since you don't have a job, income or assets already ? In my opinion they used Ninjas as  strawmen to buy places they "thought" would gain in value and come back to them when the Ninja disappeared into thin air.

- So how much should an individual be able to borrow ? 5 times the yearly amount of what he doesn't earn ? 9 times
the down payment he is unable to make, twice the assets he doesn't have ?  Or maybe just the amount he needs to buy the big house ?    
 

[Jamisjockey]

The Ninja loans you're singling out were a small portion of the overall picture.  And the real questionable and illegal stuff is an even  smaller piece of the whole picture.

IMHO, a bank shouldn't have to worry about if a person can pay back a loan or not.  There used to be a day when loans were made simply on a handshake in a bank office.   You take out a loan, you know the terms, you do everything within your power to meet those terms.  If your credit is so bad the only way you can buy a house is on a NINJA loan, high interest ARM, etc....well, maybe you shouldn't buy the house.  Of course, the banks assumed that those homes would be worth more than they are, and the risk they were taking had a chance of reward either way:  Buyer repays loan, or forcloses on house worth more than loan in a few years. 

Most idiots took ARMs without planning for the adjustment in 3-5 years time, expecting to turn a tidy profit on the house by flipping it. 

[Brad Johnson]

Please mind that I am talking for quite some time about NINJA loans and nothing else. I am sure that you know way more about those loans than I could read on the net and that your answer could end all discussions quite quickly.

Like Jamis sais, NINJA loads were a tiny fraction of loans overall.  The majority of loans were, and still are, one of three types - conventional, FHA insured, or VA guaranteed.

The topic was about people walking away from a mortgage  and I assume that people wouldn't walk away from a mortgage if they had made a down payment or had any assets or justifiable income the bank could take away from them if they walked out on their obligations.

You assume wrong.  People are not all just, reasonable, and rationed.  In fact, when it comes to money a lot of people are just plain stupid.  People do the darndest things for the dumbest reasons.  I’ve seen people walk away from thousands of dollars in equity over a $50 light fixture. 

As for the down payment or assets, to some people any amount of down payment or equity is irrelevant.  All they care about is that is has become inconvenient to make that monthly payment.

- If you grant Ninja loans more houses will be bought. The more you sell houses the cheaper they get. This is how banks influence the MARKET. They don't drive the market, otherwise they wouldn't need the 700 billion bail out, but they influence it and not in a good way.

Huh?  The more houses sell, the stronger the market.  The stronger the market, the greater the market value growth.  Basic economics.

Again, you keep coming back to your “Stick it to Big Bank” mentality.  It’s laughably incorrect.  And it’s getting old.  You have a beef with lenders.  We get that.  Problem is, emotion doesn’t win a financial debate.  Facts do.  All emotion and no substance is fine for liberals and media hounds, but the rest of us live in this place called Reality.

The loan approval must be conditional on a particular  house because what else would they be looking at ? Your promising future since you don't have a job, income or assets already ? In my opinion they used Ninjas as  strawmen to buy places they "thought" would gain in value and come back to them when the Ninja disappeared into thin air.

Incorrect.  The loan approval has nothing to do with a particular home.  Again, you can get loan approval before ever even searching for a home.  You must think I am lying to you because you keep coming back to this, and obsessively so.  It’s a little scary, really, and bordering on tin-foil hattery.  You are trying to make a connection that isn’t there in order to accommodate or validate your idea of some great bank conspiracy.  All I can do is keep telling you it isn’t so, but if you aren't going to believe someone who lives the business everyday then I suppose you aren't going to believe anyone.

Also, you are still hung up on the NINJA loan like it's an overpowering market force.  IT IS NOT.  It was such a small portion of the market that I never even saw one.  Heck, I never even heard of one until it was mentioned on the news many months after the mortgage mess was in full swing.  They were an inconsequential part of the mortgage market.  Period.

- So how much should an individual be able to borrow ? 5 times the yearly amount of what he doesn't earn ? 9 times the down payment he is unable to make, twice the assets he doesn't have ?  Or maybe just the amount he needs to buy the big house ?   

Again, you're obsessing over the NINJA loans like that is the kind of loan everyone has.  That is incorrect, and grossly so.  Most loan products still conform to a maximum of appx 50% of your gross annual income in combined debt obligations, including things like car, loan, and mortgage payments.

Laurent, I admire your zeal and tenacity, but your information is flawed and your suppositions seriously skewed by what appears to be a vendetta against banks in general.  I applaud your effort, but your application leaves much to be desired.

Brad

[roo_ster]

2)  Unsound lending practices are not the problem with home values.  Consumer idiocy is.

I would debate that. 

Consumer idiocy can only do so much damage.  For a truly great cock-up, it needs to be on both sides.  Sound lending practices protect not only the lender, but the entire industry from consumer idiocy.  Heck, sound lending practices protect many of those idiot consumers.

The gov't mandated unsound lending practices via legislation and threats made to lenders.  Then, gov't-backed creations (Fannie & Freddie) provided a convenient place for crap loans to land after the lenders saluted the flag, did their duty, made the crap loans, and wanted to be rid of it ASAP.

The majority of the housing provblems were limited to seven states with three of those accounting for a full 80% of foreclosures nationally.

True, true. 

And this can be traced down to particular cities/counties and even neighborhoods that account for the lion's share.  What's more, these can be traced to particular lenders.  The MSM won't dig that deep, though, as it:
1. Demonstrates how thoroughly gov't intervention screwed up the housing market
2. Shows very un-PC results that absofreakinglutely must not be examined closely to maintain the multi-cultist world view

I would suggest anyone interested in this topic to datamine Steve Sailer's website, as he has done a yeoman's job quantitatively analyzing these loans by location, income, race, etc.  He dares to stuff into a spreadsheet what the MSM dares not whisper in its sleep.

[makattak]

I would debate that. 

Consumer idiocy can only do so much damage.  For a truly great cock-up, it needs to be on both sides.  Sound lending practices protect not only the lender, but the entire industry from consumer idiocy.  Heck, sound lending practices protect many of those idiot consumers.

The gov't mandated unsound lending practices via legislation and threats made to lenders.  Then, gov't-backed creations (Fannie & Freddie) provided a convenient place for crap loans to land after the lenders saluted the flag, did their duty, made the crap loans, and wanted to be rid of it ASAP.



True, true. 

And this can be traced down to particular cities/counties and even neighborhoods that account for the lion's share.  What's more, these can be traced to particular lenders.  The MSM won't dig that deep, though, as it:
1. Demonstrates how thoroughly gov't intervention screwed up the housing market
2. Shows very un-PC results that absofreakinglutely must not be examined closely to maintain the multi-cultist world view

I would suggest anyone interested in this topic to datamine Steve Sailer's website, as he has done a yeoman's job quantitatively analyzing these loans by location, income, race, etc.  He dares to stuff into a spreadsheet what the MSM dares not whisper in its sleep.

It's even worse:

http://www.cato.org/pubs/policy_report/v32n1/cpr32n1-1.html

From the article:

In 1988, financial regulators from the G-10 agreed on the Basel (I) Accords. Basel I was an attempt to standardize the world's bank-capital regulations, and it succeeded, spreading far beyond the G-10 countries. It differentiated among the risks presented by different types of assets. For instance, a commercial bank did not have to devote any capital to its holdings of government bonds, cash, or gold — the safest assets, in the regulators' judgment. But it had to allot 4 percent capital to each mortgage that it issued, and 8 percent to commercial loans and corporate bonds.

Each country implemented Basel I on its own schedule and with its own quirks. The United States implemented it in 1991, with several different capital cushions; a 10 percent cushion was required for "well-capitalized" commercial banks, a designation that carries privileges that most banks want. Ten years later, however, came what proved in retrospect to be the pivotal event. The FDIC, the Fed, the Comptroller of the Currency, and the Office of Thrift Supervision issued an amendment to Basel I, the Recourse Rule, that extended the accord's risk differentiations to asset-backed securities (ABS): bonds backed by credit card debt, or car loans — or mortgages — required a mere 2 percent capital cushion, as long as these bonds were rated AA or AAA or were issued by a government-sponsored enterprise (GSE), such as Fannie or Freddie. Thus, where a well-capitalized commercial bank needed to devote $10 of capital to $100 worth of commercial loans or corporate bonds, or $5 to $100 worth of mortgages, it needed to spend only $2 of capital on a mortgage-backed security (MBS) worth $100. A bank interested in reducing its capital cushion — also known as "leveraging up" — would gain a 60 percent benefit from trading its mortgages for MBSs and an 80 percent benefit for trading its commercial loans and corporate securities for MBSs.

Astute readers will smell a connection between the Recourse Rule and the financial crisis. By 2008 approximately 81 percent of all the rated MBSs held by American commercial banks were rated AAA, and 93 percent of all the MBSs that the banks held were either triple-A rated or were issued by a GSE, thus complying with the Recourse Rule. (Figures for the proportion of double-A bonds are not yet available.) According to the scholars I mentioned earlier, the lesson is clear: the commercial banks loaded up on MBSs because of the extremely favorable treatment that they received under the Recourse Rule, as long as they were issued by a GSE or were rated AA or AAA.

When subprime mortgages began to default in the summer of 2007, however, those high ratings were cast into doubt. A year later, the doubts turned into a panic. Federally mandated mark-to-market accounting — the requirement that assets be valued at the price for which they could be sold right now — translated temporary market sentiment into actual numbers on a bank's balance sheet, so when the market for MBSs dried up, Lehman Brothers went bankrupt — on paper. Mark-to-market accounting applied to commercial banks too. And it was the commercial banks' worry about their own and their counterparties' solvency, due to their MBS holdings, that caused the lending freeze and, thus, the Great Recession.

Read the whole thing.

Again, as I've said over and over, the recession was caused by the government perverting incentives.

[Brad Johnson]

I would debate that. 

Sorry, I should have been more specific.  Consumer idiocy in that people will take on a debt obligtion they patently cannot afford to service, or take on a debt obligation with such rediculous terms as to be unworkable within their personal finances, and the general public's willing regurgitation of inflammatory news headlines as absolute and unerring fact.

Brad

[Jamisjockey]

Sorry, I should have been more specific.  Consumer idiocy in that people will take on a debt obligtion they patently cannot afford to service, or take on a debt obligation with such rediculous terms as to be unworkable within their personal finances, and the general public's willing regurgitation of inflammatory news headlines as absolute and unerring fact.

Brad

+1billion

[Laurent du Var]

Brad,

I love this little thread here. I really do  - if you would answer the questions I've asked and back your answers up with data, maybe some numbers or links - I promise I will read them.

If you believe that the entire crisis is due to consumer idiocy, fine. I like to think  of  customers as kings and not some sort of  cheating, irresponsable illiterates.
50/50 is what I would think the real share of fault is.     

If you say Ninja loans and subprimes are only a tiny fraction - good, how many are we talking? You're obviously not in one of the concerned states and have never seen one - maybe they don't even exist?

You said you've seen people walk away from thousands of dollars of equity for a 50 Dollar light fixure - did you tell the person to rather take the equity ? Or were you just snickering to yourself : Another idiot, I knew it?

Why would I be obsessed and wanting to stick it to your banks, again ?  What happens here is that I keep reading articles on the internet and write about on APS and you telling me :Not true at all. You're getting it wrong. My fellow citizens are just too stupid to read a contract or unwanting to honour their obligations. I find that hard to believe.           

[AJ Dual]

I'd say it's 33%/33%/33% culpability.

1. 1/3rd belongs to Democrats/Liberals loosening loaning practices under the CRA, going all the way back to Carter, ACORN et-al, and the new round of loosening runder Clinton, Bawney Fwank and co. in bed (literally) with Fannie Mae and Freddie Mac mortgage holding Co.'s.

And like literally EVERY social engineering/welfare/wealth-transfer program. (In this case, in the form of subsidized high-risk loans to inner-city minorities.) The net result just left them off worse than before. Now they're upside-down on lousy properties with ruined credit.

1a Alan Greenspan and his followers are in this first third too, treating the Fed's duty to our money supply like a mandate to try and control/protect/throttle/pump the market. The market will and should take care of itself, period. Protect the value of the dollar, and do nothing else, thanks... But obviously you couldn't.

2. 1/3rd is the banks fault. There wasn't much they could realisticaly do about the CRA, or ACORN threatening to label them as "racist" if they didn't make the junk loans. However it IS their fault for using the unintended consequences of the CRA to start trading debt insturments as high risk-high profit securities.

3. 1/3rd is the buyers fault. Buying more home than they could afford, flipping, taking shady ARM's with insane terms.

And I don't approve of ANYONE being able to "walk away". Banks, bailouts, or the individual borrowers. If it RUINS your business, your bank, or your personal life, that's GOOD. That is what will teach the overall market to DAMN WELL NOT DO IT AGAIN.  

[Jamisjockey]

My fellow citizens are just too stupid to read a contract or unwanting to honour their obligations. I find that hard to believe.           

Yeah you need to watch Youtube, MTV, and Reality TV for a few days straight.  You'll understand it.
During the meltdown, CNN had the nerve to trot some idiots out to tell us thier awful story.  Thier 9% loan (going rate when they got the loan was between 5-6%), had adjusted to over 15%.  They were boohooing how they couldn't pay the loan anymore.  No good reason, husband still had a job. 
When I got my last home loan, I saw page after page of documents with the interest rate and loan terms.  Page after page.
Yes, the average American has been dumbed down to the point of not understanding a freaking contract.

[Brad Johnson]

Brad,

I love this little thread here. I really do  - if you would answer the questions I've asked and back your answers up with data, maybe some numbers or links - I promise I will read them.

I already have.  Several times.  You keep wanting me to say that the banks control the housing market and I've shown you they don't.  If you refuse to listen, that's your problem.

Brad

[Matthew Carberry]

The Ninja loans you're singling out were a small portion of the overall picture.  And the real questionable and illegal stuff is an even  smaller piece of the whole picture.

IMHO, a bank shouldn't have to worry about if a person can pay back a loan or not.  There used to be a day when loans were made simply on a handshake in a bank office.   You take out a loan, you know the terms, you do everything within your power to meet those terms.  If your credit is so bad the only way you can buy a house is on a NINJA loan, high interest ARM, etc....well, maybe you shouldn't buy the house.  Of course, the banks assumed that those homes would be worth more than they are, and the risk they were taking had a chance of reward either way:  Buyer repays loan, or forcloses on house worth more than loan in a few years.

Little quibble. Ninja loans were a sub-prime thing from private lenders, not FNMA or FMHLC and they weren't around long.  Mostly available from turn and burn outfits at incredible point costs, the kind of places that were hiring car salesmen who didn't know diddly about real estate.

Fannie and Freddie and the larger private outfits ran lower verification loans called NINA and SISA.

You couldn't get a NINA (no income, no asset) or SISA (stated income, stated asset) loan with bad credit.  Also, while your income and assets weren't verified you were required to meet pretty good loan-to-value ratios and did have to have your employment verified.  The underwriting standards included market tables for various areas to make sure what you were claiming (or not claiming) was realistic compared to the monthly.

The sad fact is that, regardless of what the lender may or may not have done unethically, anything anyone who could read needed to know about not getting in over their head was available for free from the public library, the internet, competing lenders and numerous community service organizations.  Every facet of the loan was disclosed to them prior to signing giveing them time to double check all the numbers.

If you got "tricked" it was because you were an idiot.  As Tuco would say, you made yourself a sheep.

Also, why is the text box skipping around when I try to type rather than scrolling.  It never did that before the past couple upgrades.

[Scout26]

Also, why is the text box skipping around when I try to type rather than scrolling.  It never did that before the past couple upgrades.

I thought it was just me.....