Wall St. wins Capt Obvious award

[pauldun170]

Originally Posted by smileyman

Technoligically speaking L.O.s have so much more data to play with they should be able to make a good sound loan. Cash flow analysis software, credit scoring models, regional trend analysis.

What it seems to boil down to is the human element is easily distracted and seduced. Originating for bonuses, doing solids for your frat boys, inter bank rivalries, ego, got coked up and was doing the secretary while I was approving loans...On and on. And internal audit and review gets told to look the other way when the board likes the bottom line.

If those originating the loan took ownership of the product (in other words, instead of selling it off they owned the relationship) do you think those screwballs would clean up their act?

[goof2]

Originally Posted by pauldun170

If those originating the loan took ownership of the product (in other words, instead of selling it off they owned the relationship) do you think those screwballs would clean up their act?

I know the question wasn't directed to me but if you look at the financial problems Countrywide, and by extension BoA had the originators appear to have been holding on to more than enough loans to screw themselves up and that did nothing to check their decision making.

[pauldun170]

Originally Posted by goof2

I know the question wasn't directed to me but if you look at the financial problems Countrywide, and by extension BoA had the originators appear to have been holding on to more than enough loans to screw themselves up and that did nothing to check their decision making.

From what I recall...prior to the buy out BOA had its hands clean of the mortgage mess. They bought Countrywide because it was a good deal (it has paid off for them and in the long run was a good buy)

Countrywides issue was they were kings of the "give mortgage to anybody" and then sell the loans off. In the end...they could dump them anymore and were stuck with them.

I guess the reality of it is that taking ownership (of the debt/obligations) would only work with smaller banks. Stringent lending practices without the pressure to turn the mortgage business into a cash cow.

[101lifts2]

Originally Posted by goof2

.....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......

This is exactly what is going to happen. The ARMs are in adjustment and the homeowner cannot refi because their house is still too upside down, regardless of the down payment. If these banks want to keep these people, they need to fix their primary mortgage rate or there will be a second wave of foreclosures.

[nhgunnut]

A contributing factor to this is American public has no memory. We been through this before on a smaller scale in the late 80's and early 90's. We saw what was then "Record Foreclosures" and people acting like it was the banks fault then. Yet by the end of the 90 and the beginning of the new millennium the public was back to signing ARM's and assuming a level of risk that would break them. We are going to repeat this mess if the public in general doesn't get off the credit pipe!
I am old enough to remember when buying something on credit was considered something to be a little ashamed of.
The public was and largely still is the Un-named Co-conspirator in this latest economic meltdown.

[Kaneman]

Legalize pot!!

[goof2]

Originally Posted by pauldun170

From what I recall...prior to the buy out BOA had its hands clean of the mortgage mess. They bought Countrywide because it was a good deal (it has paid off for them and in the long run was a good buy)

Countrywides issue was they were kings of the "give mortgage to anybody" and then sell the loans off. In the end...they could dump them anymore and were stuck with them.

I guess the reality of it is that taking ownership (of the debt/obligations) would only work with smaller banks. Stringent lending practices without the pressure to turn the mortgage business into a cash cow.

That is why I put the "by extension BoA" part. BoA was in good shape but they didn't buy Countrywide because it was a good deal, they bought them because the government begged (some allege threatened) them to. It was a horrendous deal and took BoA from being financially healthy to being one of the largest recipients of TARP.

Smaller banks haven't faired much better. This is a list of banks that have failed in the 2000s along with when they failed. Notice the list is almost exclusively small banks. There is no reason given for the failure of each bank but I think it is safe to say mortgages played a large role for the majority of them.

http://www.fdic.gov/bank/individual/.../banklist.html

[pauldun170]

Originally Posted by goof2

That is why I put the "by extension BoA" part. BoA was in good shape but they didn't buy Countrywide because it was a good deal, they bought them because the government begged (some allege threatened) them to. It was a horrendous deal and took BoA from being financially healthy to being one of the largest recipients of TARP.

Smaller banks haven't faired much better. This is a list of banks that have failed in the 2000s along with when they failed. Notice the list is almost exclusively small banks. There is no reason given for the failure of each bank but I think it is safe to say mortgages played a large role for the majority of them.

http://www.fdic.gov/bank/individual/.../banklist.html

No...BOA bought Merrill Lynch under government pressure.
Countrywide was by choice and the long term gains outweighed the losses.
BOA was more than capable to absorb all the losses and captilize on Countrywides market presence.
When Merrill Lynch was in talks with BOA (initially) for a rescue it looked promising because Lewis was not happy with the performance of BOA's investment house for some time. Merrill had a lot of expertise to bring to the table. However once they looked closely at it they'd backed off. That's when the administration pulled their bullshit.

You have a point with small banks. I guess I was thinking more local banks like credit unions.

[smileyman]

Originally Posted by pauldun170

If those originating the loan took ownership of the product (in other words, instead of selling it off they owned the relationship) do you think those screwballs would clean up their act?

No. In the system producers are rewarded, only a mountain of defaults and write offs would sink an officer, relegate him to admin only kinda duty. And at higher dollar levels it is committee approval, so in effect zero individual accountability.

[smileyman]

Our society has become a consumer spending crack pipe. Consumer buy all they can period. Consumers have adjusted to the income/inflation deficiencies over the years. Revolving credit, crunch down mortgage consolidations, went from 24 mo auto financing in the 70s to 72 mo finances and leases today. Mortgages from 10 yrs to 30, then adjustable rates to afford even longer effectual amortization.

this has been brewing for decades fellas. The middle class aged and shrank. Corporations turned out profit at the expense of long term viability. And I dont buy the global market crap. We started the global market by becoming huge importers, allowing a huge trade deficeit, closing off our natural resources for cheaper foreign alternatives, oil dependency, policing the world while fighting communism with trade deals that dealt us out...



shit I am tires of thinking about it.