Posted on: 29th Jan, 2008 06:13 am
Considering that subprime mortgage lenders were not regulated where due diligence on extending credit to individuals was unchecked, who is to be blamed for this? when lenders found that the debt was of poor quality, they simply kept selling their portfolio to banks and hedge funds to throw the debt on their books and gain immediate profit.
Where was the SEC or Fed Resv to ensure compliance? for the past 5 years or so, the R.E.market has been booming.Were they not aware that the bulk of the industry was fueled by low interest rate offers 3/27 financing schemes? how stupid was the Government to sit back and not realize the growing risks? Now that the sh** has hit the fan are the NECONS ( SEC/Fed Resv) starting to probe into this issue. Typical typical ! now we are in a free fall. Do you think that the USD 38Bln dollar injection of the Fed reserve will solve this problem? its only a temporary solution to liquidity.
Where was the SEC or Fed Resv to ensure compliance? for the past 5 years or so, the R.E.market has been booming.Were they not aware that the bulk of the industry was fueled by low interest rate offers 3/27 financing schemes? how stupid was the Government to sit back and not realize the growing risks? Now that the sh** has hit the fan are the NECONS ( SEC/Fed Resv) starting to probe into this issue. Typical typical ! now we are in a free fall. Do you think that the USD 38Bln dollar injection of the Fed reserve will solve this problem? its only a temporary solution to liquidity.
We can't blane anybody as the sloe reason for this crunch, everybody were greedy. I mean, the borrowers, brokers, loan officers, lender etc etc. We tried to make profit out of every oppurtunity and now we are facing the consequences. Now because of this crunch, the rules for mortgage will be much strict and the process will be streamlined, I believe we will come out of this soon.
Whoever made the most money out of it is the ones to blame.
Banks wanted more profit so they made easier guidelines. Brokers wanted more profit so they sold mortgages without explaining the pitfalls to their clients. Borrowers wanted more money so they got into high risk loans leveraged on the fact that they will sell them in a yr or 2 for profit.
And here we are.
Banks wanted more profit so they made easier guidelines. Brokers wanted more profit so they sold mortgages without explaining the pitfalls to their clients. Borrowers wanted more money so they got into high risk loans leveraged on the fact that they will sell them in a yr or 2 for profit.
And here we are.
I will just paste a blog post I made related to it. I am reserved at pointing the finger but I pointed it at a few parties....
Greg,
Welcome to the forum and thanks for that post.
There is definitely enough blame to spread around. Most forget that many consumers are just as much to blame as all the others. The number of people just walking away from their homes (that they can still afford but have dropped in value) amazes me.
Welcome to the forum and thanks for that post.
There is definitely enough blame to spread around. Most forget that many consumers are just as much to blame as all the others. The number of people just walking away from their homes (that they can still afford but have dropped in value) amazes me.
As a couple who have been careful to manage our finances and not get into more debt than we could afford, we are appalled at how people could take out loans for homes that they could not afford. Our mortgage is $1165 a month and we (my wife does tax returns) see people paying $3000 a month and more. What were people thinking?!
Now, for the legality side of it. A merchant has a higher bar to clear when it comes to legal matters during the course of their business transactions. And if they knowingly allowed false information, or did not do due diligence of information about an applicants finances, then they should be held accountable. The banks should be held accountable for passing off these bogus investment products. However, mostly they won't. Maybe some loan processors and brokers will be prosecuted, and maybe a bank will fail. Some CEO's will lose their jobs (Most CEO's will walk away with millions), but our Government is not interested in going after the culprits and they all just want this mess swept under the carpet.
I don't have a crystal ball... But I think we've just seen the tip of the crash. I don't trust a thing the mainstream media is telling us.
As far as people losing their homes to foreclosure, I feel for families being forced out of their homes. I feel for the children who will be displaced and feel the shame of their parents. However, we only have ourselves to blame. If you put your name on the dotted line you better know what you are getting into. Don't say afterward that you didn't know. And don't trust anyone. Read it for yourself. Look at the numbers. Ask questions. As the Russian saying goes, "Trust but verify".
If we had done a little more verifying (at all levels of the transactions) we wouldn't be in the situation we are now.
So I blame people for getting into too much debt and not understanding the ramifications of the contracts they were signing. I blame loan processors, mortgage companies and brokers for knowingly passing on false information and I blame banks for selling what they knew to be worthless securities on to investors.
A~
Now, for the legality side of it. A merchant has a higher bar to clear when it comes to legal matters during the course of their business transactions. And if they knowingly allowed false information, or did not do due diligence of information about an applicants finances, then they should be held accountable. The banks should be held accountable for passing off these bogus investment products. However, mostly they won't. Maybe some loan processors and brokers will be prosecuted, and maybe a bank will fail. Some CEO's will lose their jobs (Most CEO's will walk away with millions), but our Government is not interested in going after the culprits and they all just want this mess swept under the carpet.
I don't have a crystal ball... But I think we've just seen the tip of the crash. I don't trust a thing the mainstream media is telling us.
As far as people losing their homes to foreclosure, I feel for families being forced out of their homes. I feel for the children who will be displaced and feel the shame of their parents. However, we only have ourselves to blame. If you put your name on the dotted line you better know what you are getting into. Don't say afterward that you didn't know. And don't trust anyone. Read it for yourself. Look at the numbers. Ask questions. As the Russian saying goes, "Trust but verify".
If we had done a little more verifying (at all levels of the transactions) we wouldn't be in the situation we are now.
So I blame people for getting into too much debt and not understanding the ramifications of the contracts they were signing. I blame loan processors, mortgage companies and brokers for knowingly passing on false information and I blame banks for selling what they knew to be worthless securities on to investors.
A~
Hi Bigmac,
Thanks for sharing your thoughts with us. It seems you too have gone through some problems in your mortgage. Well, if you think there's anything we can do for you, please do not hesitate to ask.
As a community we have been trying to help people with suggestions from our experts and members. So, you can discuss your situation freely and hopeful we can come up with a solution too.
Good luck
Thanks for sharing your thoughts with us. It seems you too have gone through some problems in your mortgage. Well, if you think there's anything we can do for you, please do not hesitate to ask.
As a community we have been trying to help people with suggestions from our experts and members. So, you can discuss your situation freely and hopeful we can come up with a solution too.
Good luck
There've been some excellent explanations for the fall-out. Simplified into one word, it was greed. Look a little deeper and you will find our culture has this strange feeling of a 'right of entitlement' coupled with poor impulse control. Blame lies on every level as there was greed on every level.
Typical scenarios:
The consumer - never satisfied with living within their means, immediate gratification, and lack of commitment to long-term goals.
The loan originator - caring more about ways to generate the most amount of income than what was the most appropriate solution for the consumer.
Real estate agents - pushing under-qualified buyers and pre-selling them into terrible loans, of which many agents were using themselves. Of course, many agents are now also finding themselves in foreclosure.
The broker/banker - wantonly hiring unethical originators as it provided maximum profits and arming their companies with mortgages in which ignorant people could sell and ignorant people could use.
The CEO's of publicly held companies - constantly pitching their performance spiels, constantly boasting enormous liquidity, constantly stressing the solidity of their company, driving their companies toward the brink of their own extinction.
Wall St. - seeing the insane profit wrapped in all things mortgage related blindly following trends and not looking for solid foundations. Analysts and economists ignoring the obvious Ponzi scheme. Believing only what they chose to believe and listening only to the reports that fit their hopes, leaving common sense by the wayside.
Foreign investors - following suit en masse.
The federal government - allowing lending institutions to offer programs to the masses that were truly designed for the few. Some of this country's greatest minds sit in positions of power with the FOMC. It is pathetic that the first public acknowledgement of potential trouble (the famous Greenspan micro-bubble speech) came at such a late stage. Adjustments to the Fed Funds and Discount rates were far too aggressive and only helped to fuel the potential for the fall-out.
Sure there were ethical industry professionals and responsible borrowers but it sure seemed like they were the minority.
Keep in mind, this isn't relegated to subprime. There are many products, including the option ARMS, 100% 'A' paper IO's, 100% first position 'Flex Saver' HELOCs, 100% LTV investor loans, etc., that are an enormous part of a bigger problem of which we've yet to really see the depth. This will ensure a great supply of inventory of REOs and Short Sales.
The optimism:
It was easy to foresee the problem and it is just as easy to see the benefit. There are now opportunities once again for buyers to enter the marketplace and purchase a home that is truly within their means. Many people watched on the sidelines with restraint. First time homebuyers may now buy homes for up to 50% less than what these home were selling just two years ago. It's a major buyer's market. Mortgage rates are once again nearing 40 year lows. Programs have become more restrictive and are forcing more vested interest from the consumer. This is a benefit for all parties involved. Shop for the best but don't worry about trying to time the market for the best rate and price, in five years you will look back and shake your head at how smart you were and how well you did. Now is a great time for owner occupied purchases and Q4 of '08 should be the best time for investors. Buying homes with long term goals in mind will provide greater rewards. Pay less attention to the mainstream media and pay more attention to seasoned industry professionals, sound judgment and reasoning.
I look forward to all of the great stories I will be hearing from people that will be thrilled they bought real estate in 2008-2009, as I've enjoyed listening to the stories of people that bought in 1996-1997.
Best regards,
Typical scenarios:
The consumer - never satisfied with living within their means, immediate gratification, and lack of commitment to long-term goals.
The loan originator - caring more about ways to generate the most amount of income than what was the most appropriate solution for the consumer.
Real estate agents - pushing under-qualified buyers and pre-selling them into terrible loans, of which many agents were using themselves. Of course, many agents are now also finding themselves in foreclosure.
The broker/banker - wantonly hiring unethical originators as it provided maximum profits and arming their companies with mortgages in which ignorant people could sell and ignorant people could use.
The CEO's of publicly held companies - constantly pitching their performance spiels, constantly boasting enormous liquidity, constantly stressing the solidity of their company, driving their companies toward the brink of their own extinction.
Wall St. - seeing the insane profit wrapped in all things mortgage related blindly following trends and not looking for solid foundations. Analysts and economists ignoring the obvious Ponzi scheme. Believing only what they chose to believe and listening only to the reports that fit their hopes, leaving common sense by the wayside.
Foreign investors - following suit en masse.
The federal government - allowing lending institutions to offer programs to the masses that were truly designed for the few. Some of this country's greatest minds sit in positions of power with the FOMC. It is pathetic that the first public acknowledgement of potential trouble (the famous Greenspan micro-bubble speech) came at such a late stage. Adjustments to the Fed Funds and Discount rates were far too aggressive and only helped to fuel the potential for the fall-out.
Sure there were ethical industry professionals and responsible borrowers but it sure seemed like they were the minority.
Keep in mind, this isn't relegated to subprime. There are many products, including the option ARMS, 100% 'A' paper IO's, 100% first position 'Flex Saver' HELOCs, 100% LTV investor loans, etc., that are an enormous part of a bigger problem of which we've yet to really see the depth. This will ensure a great supply of inventory of REOs and Short Sales.
The optimism:
It was easy to foresee the problem and it is just as easy to see the benefit. There are now opportunities once again for buyers to enter the marketplace and purchase a home that is truly within their means. Many people watched on the sidelines with restraint. First time homebuyers may now buy homes for up to 50% less than what these home were selling just two years ago. It's a major buyer's market. Mortgage rates are once again nearing 40 year lows. Programs have become more restrictive and are forcing more vested interest from the consumer. This is a benefit for all parties involved. Shop for the best but don't worry about trying to time the market for the best rate and price, in five years you will look back and shake your head at how smart you were and how well you did. Now is a great time for owner occupied purchases and Q4 of '08 should be the best time for investors. Buying homes with long term goals in mind will provide greater rewards. Pay less attention to the mainstream media and pay more attention to seasoned industry professionals, sound judgment and reasoning.
I look forward to all of the great stories I will be hearing from people that will be thrilled they bought real estate in 2008-2009, as I've enjoyed listening to the stories of people that bought in 1996-1997.
Best regards,
Now it's crystal clear as to why and how the credit crunch affected the common people, the lenders, and all others in the mortgage business as well as related financial markets. The best thing is to keep this in mind and move on thereby getting rid off factors that have led to the crisis and taking wise financial decisions.
jason, thank you for your reasoned and reasonable words.
yes, indeed, far too many people profited by the policies that are now dragging so many of them, and others, down today.
i am truly gratified to read your last two paragraphs, stating your optimism in what is next on the threshhold (in fact, already in place). i have been appalled by the media coverage of this "crisis," which has served to frighten and alarm so many consumers who otherwise might be ready to spring into action.
i am in agreement that this is the time that sound and thoughtful advice needs to be heeded. those of us who have been through the throes of financial struggles in the past (both personally and professionally) must make our voices heard above the chicken littles of the world and help to guide those most in need of encouragement.
the sky is not falling - in truth, it never has.
let's all move forward with confidence in what we know and what we are capable of doing.
yes, indeed, far too many people profited by the policies that are now dragging so many of them, and others, down today.
i am truly gratified to read your last two paragraphs, stating your optimism in what is next on the threshhold (in fact, already in place). i have been appalled by the media coverage of this "crisis," which has served to frighten and alarm so many consumers who otherwise might be ready to spring into action.
i am in agreement that this is the time that sound and thoughtful advice needs to be heeded. those of us who have been through the throes of financial struggles in the past (both personally and professionally) must make our voices heard above the chicken littles of the world and help to guide those most in need of encouragement.
the sky is not falling - in truth, it never has.
let's all move forward with confidence in what we know and what we are capable of doing.
The Press. You know the press just pound on this subject and keep driving fear into America. It gives people an excuse to let their mortgage go and feel like it is ok. I heard a fellow say "Everyone is doing it and the economy is horrible" Funny thing is that there was no other reason. No income change. No unexpected expense. Perfect example of how borrowers contribute.
Not all of them are getting away with it. Several of the recently bankrupt subprime lenders are not just facing bk, they are also facing criminal charges. Because you are correct it is not legal to be a predatory lender. And the fraud involved on the back end, cooking the books, etc.... does not go over well with regulating bodies. Take the Fremont I&L shutdown. The FDIC investigated their actions as they went belly up. I know there where others as well.
I want to make this point very clear. In my opinion it is not the governments job to babysit for us. It is up to every individual no matter who you are to think about what you are doing, and take responsibility for his/her actions. Not every loan officer is evil and not every customer is ignorant. I don't see how... with all the news and hoopla... that people are still getting I/O and negative ammortization loans. Now who's fault is that? The lenders for offering money as a loan for a profit? The borrowers for constantly looking for a way to "save" some extra money? It is everyones fault at the same time. Lenders DO have the right to offer any program they want, and guess what?, customers have an even greater right to refuse and turn the offer down.
I want to make this point very clear. In my opinion it is not the governments job to babysit for us. It is up to every individual no matter who you are to think about what you are doing, and take responsibility for his/her actions. Not every loan officer is evil and not every customer is ignorant. I don't see how... with all the news and hoopla... that people are still getting I/O and negative ammortization loans. Now who's fault is that? The lenders for offering money as a loan for a profit? The borrowers for constantly looking for a way to "save" some extra money? It is everyones fault at the same time. Lenders DO have the right to offer any program they want, and guess what?, customers have an even greater right to refuse and turn the offer down.
i absolutely agree, eric.
we all need to take responsibility for the choices we make, whether as a loan officer suggesting a specific product to a borrower or the borrower requesting a specific product that makes sense to nobody but that particular borrower.
we should not have to be babysat; no doubt about that. however, it is because of abuse that truth-in-lending came along; it is because of abuse that equal credit opportunity came along; it is because of abuse that fair credit reporting came along. we have had a long history of abuses in the banking/credit markets, and this is not likely to change simply because a bunch of companies and individuals got their hands slapped and/or went into bankruptcy.
if we go into things with our eyes half-shut, i dare say we deserve much of the aggravation we receive; whether that is regulatory in nature or even to the point of criminal action. we have seen both of those results.
i still remain optimistic despite all, at least in part because some of the worst offenders are no longer in the business (until they change names and hop back in).
we all need to take responsibility for the choices we make, whether as a loan officer suggesting a specific product to a borrower or the borrower requesting a specific product that makes sense to nobody but that particular borrower.
we should not have to be babysat; no doubt about that. however, it is because of abuse that truth-in-lending came along; it is because of abuse that equal credit opportunity came along; it is because of abuse that fair credit reporting came along. we have had a long history of abuses in the banking/credit markets, and this is not likely to change simply because a bunch of companies and individuals got their hands slapped and/or went into bankruptcy.
if we go into things with our eyes half-shut, i dare say we deserve much of the aggravation we receive; whether that is regulatory in nature or even to the point of criminal action. we have seen both of those results.
i still remain optimistic despite all, at least in part because some of the worst offenders are no longer in the business (until they change names and hop back in).