"They feared they could not pay, but signed they say, under pressure"

[xmas13]

Are mortgage companies run by La Cosa Nostra in New York area?

http://www.businessandmedia.org/arti...404172912.aspx

?Karen and David Shearon, working people who made less than $30,000 a year at the time, refused to be intimidated and fought foreclosure ? claiming the mortgage broker promised them a fixed-rate, low-interest loan on their $335,000 house,? said ABC correspondent Jim Avila.

?At closing, they were presented with a high-interest package and balloon payments they feared they could not pay, but signed they say, under pressure,? Avila said.

[stephane76]

30k revenues and buying a 335k house?
i mean come on...

[Some Guy]

They, they should be living in a trailer with that kind of income.

[spunkmister]

unless the lender has a gun to their head they had the choice of walking away once they saw the fees...but they didn't...love how everyone wants to blame everyone else but not take personal responsibility....

[Gunni]

shouldn't the bank take some responsibility for lending them money they must have known 100% they couldn't pay?
In Spain they will not give you a mortgage that requires you to pay more than 33% of what you make per month.

[spunkmister]

Originally Posted by Gunni

shouldn't the bank take some responsibility for lending them money they must have known 100% they couldn't pay?
In Spain they will not give you a mortgage that requires you to pay more than 33% of what you make per month.

You can get 10 credit cards with 10K limit each pretty easily...doesnt mean you should get them and then max them all out with no way of paying them back and then blame the credit card company for sending you the cards...

yes I agree banks were irresponsibile as well for lending the way they did but most of the responsibilty still needs to go to the end user who borrowed beyond their means...if you dont know your own finances and know what you can and can't afford then I have no sympathy for you.

[ADL Colin]

Originally Posted by Gunni

shouldn't the bank take some responsibility for lending them money they must have known 100% they couldn't pay?

They have. To the tune of $232 Billion in subprime losses SO FAR.

The CEO's of CityBank, Merrill Lynch, H&R Block and Germany's Landesbank Sachsen have resigned. The co-President of Morgan Stanley resigned. I'm sure there are more. Banks, investment firms and mortgage companies are taking severe losses.

The banks, their officers and their shareholders are getting their asses handed to them.

[ADL Colin]

In this particular case though it is awfully difficult to even hold an opinion without seeing their contract. Maybe it WAS a "bad loan". Maybe the contract was fraudulent or unclear as to the terms. Not enough information.

About the brokers in general though.I can't tell you how many mortgage brokers and real estate agents I know who told me a few years ago that housing prices never go down. When I gave the excellent example of Japan they told me "that's not the US". Mortgage brokers and real estate agents are salespeople; many without a full understanding themselves of the industry, its history, finance, interest rates, bubbles manias and so on. Nearly any I spoke to in recent years knew of the much higher interest rates in the 70s and early 80s or had given thought to the future possibility of a return to higher rates,. Im short, the brokers are usually only marginally more financially sophisticated than the customers and in many cases are not.

[Fizzgig]

Dishonest real estate brokers? What's next, dishonest politicians? i swear I don't know what the world is coming to!

[Gunni]

Originally Posted by ADL Colin

They have. To the tune of $232 Billion in subprime losses SO FAR.

Have they?
I thought the government bailed them out... http://www.afterdowningstreet.org/node/31800

Originally Posted by ADL Colin

The CEO's of CityBank, Merrill Lynch, H&R Block and Germany's Landesbank Sachsen have resigned. The co-President of Morgan Stanley resigned. I'm sure there are more. Banks, investment firms and mortgage companies are taking severe losses.

The banks, their officers and their shareholders are getting their asses handed to them.

And so they should. Whoever said above people shouldn't borrow beyond their means, would you lend a bum on the street 1000$ if he promised to pay you back? (or someone that makes 30k$ a year 330k$?). It's just bad business and the whole world is paying for that now

[kane]

It used to be that getting a mortgage was a hard thing to do. They scoured your credit and you had to explain every little blemish. You needed a down payment, a solid work history and they needed to know that you were able to pay back the loan. I had been told several times banks wanted to keep your mortgage payments at or around 25-30% of your monthly income. In the last 6 years or so that has changed. Now they will sell to anyone that is breathing. There are a lot of people to blame here and we all now paying the price.

I think a lot of people spent more than they could afford figuring that they would live in the house 4-5 years then sell it or refinance it when the variable rate became unlocked and went up and they would walk away with some cash in hand. What they didn't plan on was that millions of other people had the same idea or just didn't understand what they were getting into. A friend of mine lives in an area where they have a ton of new houses. 5-6 years ago they sold everyone of the houses in the development before they were even built. Now, literally, 35% of them are for sale. He laughs because the houses on both sides of him and across the street are all for sale it makes him look like he has a haunted house or something. It is driving down the value of all the houses in the area.

What pisses me off is how the media is making it out to be the banks fault solely. They seem to take the slant that these people that are being foreclosed on are victims. The reality is both are reaping what they sowed. The bank lent money to someone they knew might have trouble paying it back and the lender bought more house than they could afford and now they are stuck together.

I'm of the opinion that the white house and the fed reserve worked hard in 2000-2001 to lower rates which artificially inflated the housing market and set off a housing boom. This help lift a flagging economy and made things appear to be better than they were. Very little was actually done to strengthen the economy and now it is biting us in the ass and there is no little band aid they can put over the gaping wound we are starting to see appear.

[ADL Colin]

Originally Posted by Gunni

Have they?
I thought the government bailed them out... http://www.afterdowningstreet.org/node/31800

They absolutely have. Here are the losses and write-downs for just 5 institutions (so far):

UBS $37.7 billion
Citigroup $24.1 billion
Merrill Lynch $22.5 billion
HSBC $17.2 billion
Morgan Stanley $10.3 billion

Total write-downs currently in excess of $200 billion total with more certain to come. Bank and finance stocks have been slammed. Bank profits dropped 80% this year, the worst since 1991 crisis.

The problem is worldwide with large losses at French, German, UK, Swiss, French and Canadian banks.

[ADL Colin]

For those interested, Soros' new book on the subject is excellent. It is currently available as a download with the hardcover coming I think next month.

[ADL Colin]

Originally Posted by kane

.

What pisses me off is how the media is making it out to be the banks fault solely. They seem to take the slant that these people that are being foreclosed on are victims. The reality is both are reaping what they sowed. The bank lent money to someone they knew might have trouble paying it back and the lender bought more house than they could afford and now they are stuck together.

Agree with you. This pattern just keeps repeating for every boom and bust cycle. Were the Henry Blodget's of the world responsible for the NASDAQ boom and bust? ($400 price target on Amazon). Should investors in the late 90s tech stocks be refunded their losses because they weren't "sophisticated"? Everyone should take their lumps.

Another interesting point is that 40% of real estate sales in 2005 were second homes; "investment homes".

Both do have to reap what they sow with some caveats. Obviously if people really were duped (incorrect info in contract) the contract should be null and void. Institutions should be allowed to fail unless it threatens the entire system.

Unfortunately financial innovation has brought unparalled and historic leverage into the system in addition to a large amount of counterparty risk. As far as leverage, the top 25 banks hold $180 trillion dollars of derivative contracts. That's more than 10 times the size of the whole annual US economy. The underlying assets only make up 6% of that. Now you combine that financial leverage with counterparty risk. Institutions put together derivative contracts for other institutions. Bear Stears, it is estimated, is holding $10 trillion worth of derivative contracts for other institutions. This is why they couldn't be allowed to fail. Bear Stearns goes under and suddenly a domino effect wipes out a chunk of the financial system. There are going to be further tough decisions between permitting "moral hazard" and preventing a domino effect of failures.

Things are gonna change.

[pocketkangaroo]

Originally Posted by ADL Colin

They have. To the tune of $232 Billion in subprime losses SO FAR.

The CEO's of CityBank, Merrill Lynch, H&R Block and Germany's Landesbank Sachsen have resigned. The co-President of Morgan Stanley resigned. I'm sure there are more. Banks, investment firms and mortgage companies are taking severe losses.

The banks, their officers and their shareholders are getting their asses handed to them.

In a way. They are also getting bailed out by the government. Historic drops in interest rates so they can "fix their problems" and the $30 billion dollar taxpayer funded bailout of Bear Stearns doesn't help either. Lets not forget that we are now loaning money to investment firms, something the Fed has never done before.

Most of those company's you listed had CEO's take HUGE buyouts and left with tens of millions of dollars. Heck, Countrywide's CEO (the one that ran them into the ground) got like a $60 million dollar buyout.

So the banks might hurt temporarily, but long term the government will step in and fix their problems. They have no risk unlike the people taking out mortgages.

Both sides should be responsible (banks and borrowers), but we don't punish banks, so they'll never stop.

[protect yourself my nuts]

Mortgage Brokers didn't care at all what happened after the loan went through. They got their fee and they were happy. They pushed a lot of people into bad situations just so they could get their fee.



A lot of Brokers closed up shop after the run ended. They went back to selling used cars for a living.

[Snake Doctor]

Not to defend these people or what they did, because my philosophy is caveat emptor......BUT.....I will say that it's very hard to walk away from a closing table.

You spend months trying to find the right house, you pay out of pocket to have inspections done, appraisals done, all sorts of shit like that.....if it's not your first house then you've already sold the house where you were living.....if it is your first house you've already given the landlord notice and he's likely already rented the place to someone else.....so if you walk away because the broker changed the terms on you at the last minute (that happened to me once) you're out all of the money you've paid already, plus you have nowhere to go and need to find a place ASAP.

In cases like these the brokers/lenders are at least partially at fault.

[ADL Colin]

Originally Posted by pocketkangaroo

So the banks might hurt temporarily, but long term the government will step in and fix their problems. They have no risk unlike the people taking out mortgages.

NO risk? So you would load up on Washington Mutual, Wachovia and Lehman Brothers stock?

[tony286]

Originally Posted by Snake Doctor

Not to defend these people or what they did, because my philosophy is caveat emptor......BUT.....I will say that it's very hard to walk away from a closing table.

You spend months trying to find the right house, you pay out of pocket to have inspections done, appraisals done, all sorts of shit like that.....if it's not your first house then you've already sold the house where you were living.....if it is your first house you've already given the landlord notice and he's likely already rented the place to someone else.....so if you walk away because the broker changed the terms on you at the last minute (that happened to me once) you're out all of the money you've paid already, plus you have nowhere to go and need to find a place ASAP.

In cases like these the brokers/lenders are at least partially at fault.

Very good point and also people forget the avg consumer is not smart.

[ADL Colin]

Originally Posted by pocketkangaroo

So the banks might hurt temporarily, but long term the government will step in and fix their problems. They have no risk unlike the people taking out mortgages.

On January 25, 2008, Douglass National Bank, Kansas City, MO was closed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

On October 4, 2007, Miami Valley Bank, Lakeview, Ohio was closed by the Ohio Department of Commerce, Division of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

On September 28, 2007, NetBank, Alpharetta, Georgia was closed by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. All insured depositors are now customers of ING Bank, fsb (ING DIRECT), member FDIC. No advance notice is given to the public when a financial institution is closed.

On February 2, 2007, Metropolitan Savings Bank, Pittsburgh, Pennsylvania was closed by the State of Pennsylvania, Department of Banking and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

NEW YORK (MarketWatch) -- March 26, 2008. Federal banking regulators will hire 140 new employees in an effort to reassure the public they are well-positioned to deal with a possible increase in bank failures over the next year, the Federal Deposit Insurance Corp. said Tuesday.

** Federal Reserve Chairman Ben Bernanke raised some eyebrows last month when he suggested during congressional testimony that the U.S. will likely see some banks fail in upcoming months due to increasing writedowns and a tightening credit climate.

[ADL Colin]

Originally Posted by tony404

Very good point and also people forget the avg consumer is not smart.

Who forgets it and why should that matter?

[bdld]

unless their signatures were forged, i wouldnt agree to a bail-out.

[tony286]

Originally Posted by ADL Colin

Who forgets it and why should that matter?

People that are smart forget and assume everyone knows about reading all the documents before signing and the difference between fixed and adjustable and the pros and cons. They preyed on these people, I had to tell my mortgage broker 5 times if its not fixed we arent doing business. People believe what they are told by a suit. I dont think the government should bail everyone out but they should tell the banks you created this fucking mess fix it,make deals with these people. What can you pay ? Ok then we will extent your mortgage out 50 yrs and when things get better we can revisit. This prevents blocks of abandoned houses, keeps house prices from going in to the toilet and it doesnt cost the tax payer.

[kane]

Originally Posted by Snake Doctor

Not to defend these people or what they did, because my philosophy is caveat emptor......BUT.....I will say that it's very hard to walk away from a closing table.

You spend months trying to find the right house, you pay out of pocket to have inspections done, appraisals done, all sorts of shit like that.....if it's not your first house then you've already sold the house where you were living.....if it is your first house you've already given the landlord notice and he's likely already rented the place to someone else.....so if you walk away because the broker changed the terms on you at the last minute (that happened to me once) you're out all of the money you've paid already, plus you have nowhere to go and need to find a place ASAP.

In cases like these the brokers/lenders are at least partially at fault.

I agree and understan. My brother had this happen. He gave notice at the place he was living and they had new renters ready to move in. He had signed the preliminary contract on the house then it came back a week later that the bank had not accepted the terms eventhough they had already agreed on them before they were now changing their minds. So they go a different bank with new terms, higher interest, higher payment and higher selling price on the house and he felt like he didn't have any other choice. He did have a few weeks until he had to move out he could have put everything in storage and rented a small apartment for he and the family, but he wanted the house so he accepted the terms. He paid way too much for the house and his payments were outrageous. He shouldn't have bought it, but he did because he felt pressured.

I think if the broker pre-approves the terms then at the last minute changes them you should be able to back out and they should have to pay you back for all the money you have put out for inspections, appraisals etc.

[kane]

Originally Posted by tony404

People that are smart forget and assume everyone knows about reading all the documents before signing and the difference between fixed and adjustable and the pros and cons. They preyed on these people, I had to tell my mortgage broker 5 times if its not fixed we arent doing business. People believe what they are told by a suit. I dont think the government should bail everyone out but they should tell the banks you created this fucking mess fix it,make deals with these people. What can you pay ? Ok then we will extent your mortgage out 50 yrs and when things get better we can revisit. This prevents blocks of abandoned houses, keeps house prices from going in to the toilet and it doesnt cost the tax payer.

I agree. the banks got themselves into a lot of this trouble by lending to anyone that can walk and chew gum at he same time. you would think it would be in their best interest to rework the contracts with these people and keep them in the house instead of going to the cost and trouble fo foreclosing, selling, possibly then sueing for the difference owed and trying to resell the house.

[Ron Bennett]

Originally Posted by ADL Colin

...NEW YORK (MarketWatch) -- March 26, 2008. Federal banking regulators will hire 140 new employees in an effort to reassure the public they are well-positioned to deal with a possible increase in bank failures over the next year, the Federal Deposit Insurance Corp. said Tuesday.

** Federal Reserve Chairman Ben Bernanke raised some eyebrows last month when he suggested during congressional testimony that the U.S. will likely see some banks fail in upcoming months due to increasing writedowns and a tightening credit climate.

Wow, I just realized after reading through this thread that I own BankFailure.com / BankFailures.com ... regged them many years ago - looks like they may come in handy afterall for a site about bank failures, which seemed silly back then, but perhaps not anymore, if many more banks fail.

Ron

[Snake Doctor]

Originally Posted by kane

I agree. the banks got themselves into a lot of this trouble by lending to anyone that can walk and chew gum at he same time. you would think it would be in their best interest to rework the contracts with these people and keep them in the house instead of going to the cost and trouble fo foreclosing, selling, possibly then sueing for the difference owed and trying to resell the house.

The problem with this....matter of fact the problem that led to most of these problems is that the banks don't hold the mortgages anymore.

They came up with these nifty "collaterallized debt obligations" or CDO's as they're known in the industry....and the mortgages were all packaged together and sold as bonds/commercial paper on the open market.
So in alot of cases, the company that services your mortgage doesn't have the authority to renegotiate, because the actual mortgage is owned by thousands of individual investors.

The banks had no problem giving out risky loans because they didn't have to hold them to maturity, they sold them on the open market and made their money at the closing table on points and fees.

The businesses in trouble right now because of this aren't the banks who made the loans, it's the brokerage firms who bought all of the commercial paper that was backed by the mortgages. (i.e. Bear Stearns)

[kane]

Originally Posted by Snake Doctor

The problem with this....matter of fact the problem that led to most of these problems is that the banks don't hold the mortgages anymore.

They came up with these nifty "collaterallized debt obligations" or CDO's as they're known in the industry....and the mortgages were all packaged together and sold as bonds/commercial paper on the open market.
So in alot of cases, the company that services your mortgage doesn't have the authority to renegotiate, because the actual mortgage is owned by thousands of individual investors.

The banks had no problem giving out risky loans because they didn't have to hold them to maturity, they sold them on the open market and made their money at the closing table on points and fees.

The businesses in trouble right now because of this aren't the banks who made the loans, it's the brokerage firms who bought all of the commercial paper that was backed by the mortgages. (i.e. Bear Stearns)

That makes it more clear to me now. I would imagine this is why my mortgage keeps getting sold too. I have had the house about 6 years and the mortgage has been sold twice already.

[wtfent]

[wtfent]

[wtfent]

[ADL Colin]

Originally Posted by Snake Doctor

They came up with these nifty "collaterallized debt obligations" or CDO's as they're known in the industry....and the mortgages were all packaged together and sold as bonds/commercial paper on the open market. So in alot of cases, the company that services your mortgage doesn't have the authority to renegotiate, because the actual mortgage is owned by thousands of individual investors.

What's interesting is that these and similar products have been around for decades. CMOs for example were created in 1983 and helped to bring about the downfall of Kidder Peabody in 1994. They created $200 billion in CMOs in their last 5 years in business. Kidder peabody did business with a number of hedge funds which bought and sold these CMOs from them. Then the FED unexpectedly raised interest rates and their heavily hedged positions buried them.

Some interesting comments in this 1995 filing by Capstead Mortage
http://sec.edgar-online.com/1995/08/...8/Section7.asp

"Of the $160 million of Mortgage pass-throughs formed during the first quarter of 1995, $137 million were were baqcked by adjustable rate mortages".

[ADL Colin]

Snake Doctor, and how best to even regulate that? The financial innovations of the past 25 years allow risk to be bought and sold. Are we going to regulate the buying and selling of risk by two interested parties? How about the leverage being built into these products? I wrote "$180 trillion" in derivative contracts above but BIS recently put the figure at $516 trillion most of it in interest rate contracts but $51 trillion in credit derivatives. $51 trillion is more than 4 x the entire US annual GDP.

BIS paper: http://www.bis.org/publ/otc_hy0711.htm

This amount of leverage is certainly a serious threat.

[collegeboobies]

Thats crazy, that kind of stuff happens all the time, i got strung alone by a broker for a month before he showed me a ARM starting 2% higher than the fixed I wanted. I said fuck off

[Snake Doctor]

Originally Posted by ADL Colin

Snake Doctor, and how best to even regulate that? The financial innovations of the past 25 years allow risk to be bought and sold. Are we going to regulate the buying and selling of risk by two interested parties? How about the leverage being built into these products? I wrote "$180 trillion" in derivative contracts above but BIS recently put the figure at $516 trillion most of it in interest rate contracts but $51 trillion in credit derivatives. $51 trillion is more than 4 x the entire US annual GDP.

BIS paper: http://www.bis.org/publ/otc_hy0711.htm

This amount of leverage is certainly a serious threat.

Honestly, as liberal as I am, I don't think it should be regulated. The government shouldn't step in and do anything.

They already have programs for people to refinance if they never missed a payment before the adjustable rate went up and if they have equity in the home (i.e. put money down)

The government shouldn't bail people out who bought homes they couldn't afford, and they shouldn't bail out investors who bought the mortgages. The way capitalism works, the buyers should get foreclosed and the investors should lose a portion of their money for making a risky investment.

We're getting into "moral hazard" territory here and I don't like it. For instance I took a fixed rate mortgage two years ago....now I could have taken an ARM or interest only deal and bought a bigger house but I didn't....I bought what I knew I could afford long-term....and yet now the government wants to take my tax dollars and use it to bail out people in McMansions who got in over their head? That's bullshit if you ask me.

[ADL Colin]

September, 13 1991 testimony of STEPHEN P. PIZZO
Hearing: Subcommittee on Telecommunications and Finance

A bill to Amend the Federal Securities Laws to Equalize the Regulatory Treatment of Participants in the Securities Industry

"As for re-admitting banks into the securities marketplace, bankers will of course readily agree to to firewalls that will prohibit them from using their money to fund or prop up their securities trading affiliate or its customers. But of course, on the street, these firewalls will pose no real barrier at all.

As we autopsied dead savings and loans, we were absolutely amazed by the number of ways thrift rogues were able to circumvent, neuter, and defeat firewalls designed to safeguard the system against self-dealing and abuse. One of the favorite methods was to link up like-minded thrifts in the daisy chains through which they could circulate inflated assets and hide their rotten loans to each other and to each other's customers from regulators.

Banks that need to get money to a trouble securities affiliate will do exactly the same thing. By linking up three or more banks, each with its own securities subsidiary, a daisy chain will facilitate a round robin of reciprocal loans in times of need. Then, the next time we have a Black Monday on Wall Street, this daisy chain will swing into action as a handful of mega-banks try to prop one another's securities subsidiaries and their customers as the market plummets.

In such a scenario, billions of federally insured dollars will disappear in the twinkle of a few program trades.

That will happen, not might happen but will happen, and when it does these too-big-to-fail banks will have to be propped up with Federal money. In the smoking aftermath, Congress can stand around and wring its hands and give speeches about how awful it is that these bankers violated the spirit of the law, but once again, the money will be gone, the bill will have come due, and taxpayers will again be required to cough it up. "

[ADL Colin]

Originally Posted by Snake Doctor

Honestly, as liberal as I am, I don't think it should be regulated. The government shouldn't step in and do anything.

What happens though when institutions create leveraged products that threaten the entire financial system? If large banks and financial institutions are permitted to just fail with all the existing counterparty holdings and leverage out there we could have a failure of the entire financial system. Of course the Federal reserve is by law and design already the lender of last resort.

However the leverage problem is something else entirely. We already have such regulations on leverage for individuals. For personal securities accounts margin requirements are already regulated by the Federal Reserve Board and the individual exchanges. Why not have some sort of requirement for these derivative products? Are we ok with more than $500 trillion in derivative contracts and all the counterparty risk on top of that? $500 trillion against only $11 trillion in asset value? These contracts went from $220 trillion to $516 trillion in 3 years. Credit derivatives went from $4.5 trillion to $51 trillion in 3 years. Total US GDP is somewhere around $14 trillion.

if we're not going to regulate it would we be ok with say a quadrillion dollars in derivative contracts written by some banks and sold to other banks against an entire world GDP of $70 trillion or so?

[tranza]

Lol, that was just dumb to do...

[Snake Doctor]

ADL Colin, you're talking about apples, I'm talking about oranges.

I don't really want to get into a long winded discussion about a quadrillion dollars in derivative contracts. I'm just saying the government shouldn't be using my money to bail out people who behaved irresponsibly.

A guy making 50K a year who bought a 500K home never thought he'd be able to stay there the rest of his life, he knew he wouldn't be able to afford the mortgage after the teaser period was over....his intention was to sell the property for a profit before the mortgage rate reset.

He gambled, he lost, we shouldn't bail him out anymore than the guy who lost his life savings in Vegas at the roulette wheel.

[IllTestYourGirls]

No one should be bailed out. Banks and people have failed in the past and they will fail in the future. We as tax payers should not bail anyone out, banks included. Be it bailing out by printing money, causing inflation or taxing. That will only make the problem worse than it is.

If you really think people should be bailed out then start a non-profit and take donations then take applications from people who want to be bailed out. My guess is you will get few donations because everyone thinks "the government" should do it. But people forget "the government" is using the taxpayers money and it is not fair to those who did not invest poorly to bail out banks that gave bad loans or those who took those bad loans.

[ADL Colin]

Originally Posted by Snake Doctor

He gambled, he lost, we shouldn't bail him out anymore than the guy who lost his life savings in Vegas at the roulette wheel.

I agree with you there.