Wall St. wins Capt Obvious award

[t-homo]

Originally Posted by pauldun170

In your opinion who should be able to buy a house?(of those that can)

Anyone. Maybe they should use enough personal responsibility to not try to get the biggest house they could afford if they made 10-15K a year more than they do.

[pauldun170]

Originally Posted by t-homo

Anyone. Maybe they should use enough personal responsibility to not try to get the biggest house they could afford if they made 10-15K a year more than they do.

Agreed.

Unfortunately...there will always be idiots and there will always be defaults.
Unfortunately they have removed the human element from the process...the person who had the freedom to say "Your an idiot and I'm not gonna loan you any money"

[OneSickPsycho]

Originally Posted by pauldun170

In your opinion who should be able to buy a house?(of those that can)

Anyone who can afford it... REALLY afford it. If you're buying a house with zero down and starting payment near the top of your budget, you shouldn't be signing a loan with payments that double a few years down the road. It's common sense...

"I didn't know" or "I expected to be in a better place" and any of the other whiney bullshit excuses I heard in sob stories on the 6 o'clock news when the whole thing was collapsing just about made me sick.

There are plenty of other less extreme scenerios, but the bottom line is... if it weren't for people being irresponsible in the first place, the whole housing crisis wouldn't be at all what it is today.

[pauldun170]

Originally Posted by OneSickPsycho

Anyone who can afford it... REALLY afford it. If you're buying a house with zero down and starting payment near the top of your budget, you shouldn't be signing a loan with payments that double a few years down the road. It's common sense...

"I didn't know" or "I expected to be in a better place" and any of the other whiney bullshit excuses I heard in sob stories on the 6 o'clock news when the whole thing was collapsing just about made me sick.

There are plenty of other less extreme scenerios, but the bottom line is... if it weren't for people being irresponsible in the first place, the whole housing crisis wouldn't be at all what it is today.

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.

[goof2]

Originally Posted by pauldun170

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.

Originally Posted by pauldun170

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?

[pauldun170]

Originally Posted by goof2

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.

[goof2]

Originally Posted by pauldun170

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.

It sure doesn't seem that way down here. That impression isn't helped by practically every short-sale/foreclosure house I've been in being completely destroyed. That includes a scary number of houses that were lived in less than a year or two.

What really makes me nervous about the real estate market is the current record number of foreclosures even with interest rates at historical lows. I am increasingly incredulous about the claim there has basically been no inflation over the past 2 years. What is going to happen with all the ARMs that are currently in good standing once interest rates increase by 4%+? I foresee bad stuff coming down the road.

While "Wall St." is starting to claim profits again, I believe there are a whole lot more write-offs coming for supposedly "good" mortgages when they do go bad.

[OneSickPsycho]

Originally Posted by pauldun170

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.

[goof2]

Originally Posted by OneSickPsycho

Anyone who can afford it... REALLY afford it. If you're buying a house with zero down and starting payment near the top of your budget, you shouldn't be signing a loan with payments that double a few years down the road. It's common sense...

"I didn't know" or "I expected to be in a better place" and any of the other whiney bullshit excuses I heard in sob stories on the 6 o'clock news when the whole thing was collapsing just about made me sick.

There are plenty of other less extreme scenerios, but the bottom line is... if it weren't for people being irresponsible in the first place, the whole housing crisis wouldn't be at all what it is today.

I agree with this to a point. That point is crossed with some of the ridiculously low standards that were set for some loans.

Say you have a methed out relative who wants to borrow money. He says he can pay you back but can't demonstrate how (stated income loans) and hasn't paid back other people you know (poor credit history), yet you loan him the money anyway. When he doesn't pay you back a lot of the responsibility falls on you for making the loan in the first place.

Originally Posted by pauldun170

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.

There are two problems I'm aware of off the top of my head with that system.

First, large organizations get scared of loosing oversight when it ultimately comes down to two people at a desk. The worry is that their representative at the desk is going to make a stupid decision the organization is ultimately responsible for. As it turned out the organization was making stupid decisions anyway, but that still doesn't change the fact that an organization is going to want to depend on its own judgment rather than that of one of their individuals.

Second, without a demonstrable system that removes judgment from individuals an organization opens itself up to discrimination suits. That system gives the organization something to point to showing that the standards are the same for everyone, regardless of race, color, or creed. I'm sure you are aware that lenders get sued all the time for discrimination. Their race, gender, and creed neutral systems function as a defense. Once the system becomes the mind of an individual that defense is lost.

[pauldun170]

Originally Posted by goof2

There are two problems I'm aware of off the top of my head with that system.

First, large organizations get scared of loosing oversight when it ultimately comes down to two people at a desk. The worry is that their representative at the desk is going to make a stupid decision the organization is ultimately responsible for. As it turned out the organization was making stupid decisions anyway, but that still doesn't change the fact that an organization is going to want to depend on its own judgment rather than that of one of their individuals.

Your looking at it wrong.
The person at the desk is the entry point..not the whole system.

Originally Posted by goof2

Second, without a demonstrable system that removes judgment from individuals an organization opens itself up to discrimination suits. That system gives the organization something to point to showing that the standards are the same for everyone, regardless of race, color, or creed. I'm sure you are aware that lenders get sued all the time for discrimination. Their race, gender, and creed neutral systems function as a defense. Once the system becomes the mind of an individual that defense is lost.

Absolutely correct.
Financial institutions have to be able to report that they are complying with state and federal laws. However that doesn't deny the institutions to ability to mitigate risk. The key thing is documentation.