Home foreclosures

[detbuch]

Originally Posted by sokinwet

Kind of a "cliffnotes" version! You want to by a home. A "predatory" lender; usually an " XYZ Mortgage Co" offers you a "deal" mortgage; generally an ARM that you probably will have a hard time affording but...(the hook) you will be able to refinance to a more affordable fixed 30 yr. once you get in the house. The lender sells the loan on the secondary market to investors who buy it at a discount. They will resell it again or hold it hoping for the long term profit over the loan term. You don't get your 30 yr. fixed because the Predatory lender is long gone with his profit and the new holder of your mortgage isn't about to give you a new loan because your credit score is "0" or perhaps the value of your home isn't what it was. Add in bundled mortgages and mortgage backed securities a depreciating housing market and we here we are today. Plenty of blame..starting with the uneducated borrower, greedy finance industry, government regulators alseep at the wheel or in bed with those they were "regulating". So in the end the loser is us.

Sounds like the secondary market investors, by buying unworthy loans and then not giving the new loan that was promised by the original "predatory" lender, is stuck with the bad loan and by stupidity becomes the predator against himself. Can there be that much stupidity in this convuluted process, or are the parties depending on some invisible hand to come to the rescue? The Government, perhaps? And if so, how in the world did the government get involved in such a mess to begin with? Did it have something to do with beginning the process? If the government did not, even with the best intentions, insert itself into the housing market beyond the most basic regulatory necessity, would we be at this place now?

[spence]

Originally Posted by detbuch

Sounds like the secondary market investors, by buying unworthy loans and then not giving the new loan that was promised by the original "predatory" lender, is stuck with the bad loan and by stupidity becomes the predator against himself. Can there be that much stupidity in this convuluted process, or are the parties depending on some invisible hand to come to the rescue? The Government, perhaps? And if so, how in the world did the government get involved in such a mess to begin with? Did it have something to do with beginning the process? If the government did not, even with the best intentions, insert itself into the housing market beyond the most basic regulatory necessity, would we be at this place now?

The problem was that the risk was so obfuscated nobody really understood what was a good loan and what was a bad loan. I don't think for a second the market bet on this scheme because they thought the Government would back them up, quite simply, they never thought the housing market would fail and the money was too good to be true.

Had there been less government regulation the problem would likely be even worse. We don't have a barter and trade system...our markets rely on paper and credit. i.e. you can't have it both ways...

-spence

[detbuch]

Originally Posted by spence

The problem was that the risk was so obfuscated nobody really understood what was a good loan and what was a bad loan. I don't think for a second the market bet on this scheme because they thought the Government would back them up, quite simply, they never thought the housing market would fail and the money was too good to be true.

Had there been less government regulation the problem would likely be even worse. We don't have a barter and trade system...our markets rely on paper and credit. i.e. you can't have it both ways...

-spence

It just seems that the obfuscated system, didn't appear full blown. Otherwise, the massive failure would have happened long ago. The buying and selling of mortgages to secondary and tertiary sources, the bundling, the lowering of standards, ESPECIALLY the lowering of standards that wooed major lending institutions from time tested lending practices, surely, didn't JUST HAPPEN. Every disease begins with a germ. A massive, complex system has to be developed. It has to evolve from something simpler. I don't know the history of these phenomena, but I recall a time when it was much more difficult to get a mortgage loan. Then I recall government programs that made it easier. It seemed to be a good thing. But the culture of home buying was radically changed, and, as in every evolutionary process, no one could predict what new paths would be taken. Is it possible that if the more solid lending practices, which banks used to regulate themselves, were not tampered with, the housing market would have found more natural ways to provide affordable housing? Where there is money to be made, enterprising entrepeneurs will find a way to earn it. And if, say, a government makes it easier by changing banking standards, why struggle, just follow the new path.

[spence]

Originally Posted by detbuch

It just seems that the obfuscated system, didn't appear full blown. Otherwise, the massive failure would have happened long ago. The buying and selling of mortgages to secondary and tertiary sources, the bundling, the lowering of standards, ESPECIALLY the lowering of standards that wooed major lending institutions from time tested lending practices, surely, didn't JUST HAPPEN. Every disease begins with a germ. A massive, complex system has to be developed. It has to evolve from something simpler. I don't know the history of these phenomena, but I recall a time when it was much more difficult to get a mortgage loan. Then I recall government programs that made it easier. It seemed to be a good thing. But the culture of home buying was radically changed, and, as in every evolutionary process, no one could predict what new paths would be taken. Is it possible that if the more solid lending practices, which banks used to regulate themselves, were not tampered with, the housing market would have found more natural ways to provide affordable housing? Where there is money to be made, enterprising entrepeneurs will find a way to earn it. And if, say, a government makes it easier by changing banking standards, why struggle, just follow the new path.

You keep trying to drag this back to the government like some socialistic parasite is at the root of the problem, but it simply is not, there is no clear chicken and egg here.

You are right to say that lending used to be different. A significant component of this is that in years past the government didn't allow commercial, investment banks and insurance houses to mingle. A repeal of this law in 1999 dramatically changed the way financial products were offered and traded as the banks now had the ability to profit from multiple facets of the same investment.

These changes weren't made for purely idiological reasons. Industry lobbied hard for changes and influence the actions of our politicians. They argued that more flexibility would allow them to better serve their customers. I'm sure there were some legitimate reasons, but hindsight is 20:20.

Was this the only reason? Heck no, as I stated above there are many pieces to this pie. If you want to place blame, place it on our continued inability to learn from past mistakes.

-spence

[EarnedStripes44]

Originally Posted by spence

You are right to say that lending used to be different. A significant component of this is that in years past the government didn't allow commercial, investment banks and insurance houses to mingle. A repeal of this law in 1999 dramatically changed the way financial products were offered and traded as the banks now had the ability to profit from multiple facets of the same investment.

BINGO!!!! I believe you maybe referring to the Gramm-Leach-Bliley Act, which peeled back some restrictions put in place in early 30s.

I couldnt agree more with the learning from history part. My old man used to tell me all the time when I was teenager that "you kids think your 1st to ever do it".

[RIJIMMY]

Originally Posted by EarnedStripes44

BINGO!!!! I believe you maybe referring to the Gramm-Leach-Bliley Act, which peeled back some restrictions put in place in early 30s.

I couldnt agree more with the learning from history part. My old man used to tell me all the time when I was teenager that "you kids think your 1st to ever do it".

That was why Clinton was on Time's "people to blame" list.
Although its Bush getting all the deregulation blame.

[spence]

Originally Posted by RIJIMMY

That was why Clinton was on Time's "people to blame" list.
Although its Bush getting all the deregulation blame.

It was a Republican sponsored bill which the Dems in congress mostly opposed. You can't really blame Clinton for signing it into law as the economy was cranking at the time and he wasn't about to get in the way of industry.

There's not much difference between Clinton and Bush on policy here, although it was under Bush that the sub-prime lending really took off. Some of this could have been just timing though.

-spence

[detbuch]

Originally Posted by spence

You keep trying to drag this back to the government like some socialistic parasite is at the root of the problem, but it simply is not, there is no clear chicken and egg here.

You are right to say that lending used to be different. A significant component of this is that in years past the government didn't allow commercial, investment banks and insurance houses to mingle. A repeal of this law in 1999 dramatically changed the way financial products were offered and traded as the banks now had the ability to profit from multiple facets of the same investment.

These changes weren't made for purely idiological reasons. Industry lobbied hard for changes and influence the actions of our politicians. They argued that more flexibility would allow them to better serve their customers. I'm sure there were some legitimate reasons, but hindsight is 20:20.

Was this the only reason? Heck no, as I stated above there are many pieces to this pie. If you want to place blame, place it on our continued inability to learn from past mistakes.

-spence

I didn't mention socialism here. I asked if government might not be at "the root of the problem." Your response is that in the past "government didn't allow commercial, investment banks and insurance houses to mingle." And then, in a bi-partisan move, government DID allow it. (BTW, Joe Biden voted for Gramm-Leach-Blilely.) Government didn't allow, Government did allow, Government regulated, Government didn't regulate . . . Government, Government, Government. And your description of the mess is that it is too obfuscated to tell a bad loan from a good. That there is no chicken or egg dispute. That everybody is to blame.

[spence]

Originally Posted by detbuch

I didn't mention socialism here. I asked if government might not be at "the root of the problem." Your response is that in the past "government didn't allow commercial, investment banks and insurance houses to mingle." And then, in a bi-partisan move, government DID allow it. (BTW, Joe Biden voted for Gramm-Leach-Blilely.) Government didn't allow, Government did allow, Government regulated, Government didn't regulate . . . Government, Government, Government. And your description of the mess is that it is too obfuscated to tell a bad loan from a good. That there is no chicken or egg dispute. That everybody is to blame.

The point is, all along, that there is plenty of blame and you can't take one element out of context and try to find fault.

Ultimately it's a systems problem.

-spence

[detbuch]

Originally Posted by spence

The point is, all along, that there is plenty of blame and you can't take one element out of context and try to find fault.

Ultimately it's a systems problem.

-spence

Ultimately, all problems are systemic. Each system requires its own cure. If your body, a unique system of myriad integral parts suffers a broken tibia, you don't go to a cancer specialist. If it is cold, you put on a coat. So to what system are you referring? If GM has problems, it goes to the government? If Citibank has problems, it goes to the government? Such a system!!

There is a cultural, generational divide here. If you were to study every American generation from 1776 to now you would, surely find much in common. But, I believe, you would find evolving differences in what each generation expects from government. I would guess you'd find a large shift in expectations post Roosevelt. I believe the founders suscribed to the notion that government governs best when it governs least. I believe that, probably inevitably, generations gradually expected more from government, and we may be at the tipping point, if it hasn't already tipped, where we believe government does best when it governs most. It seems to have pervaded almost every aspect of our lives, with BENEVOLENT INTENTIONS. And we cannot resist the helping hand.

The divide here is, in one way, between those who believe the constitution to be a plain spoken, immutable, foundation for freedom from government, a charter of negative liberties if you must, and those who believe it is living, breathing, to be interpreted, changed to suit new times, even discarded when defunct. In another way, the divide is between those who were born into a generation that has evolved way past the 1776ers into one that, a priori, accepts government's hegemony in our lives, and those who still honor the original resistance.

And we talk past each other.

[Nebe]

excuse me but when did I call Barney Frank a pickle smootcher?

I said barney fwank.. thus comenting on is silly accent.

that is all.. carry on