So where did all the money go?

[Encryptshun]

Okay, so as we plunge headlong into certain financial doom, I have a question. Since you guys are probably the most intelligent people I come into contact with daily, I'm asking you.

Where did all the money that was being tossed around during the whole subprime lending spree actually go when those markets crashed? I know we have that other thread talking about the timeline of the mortgage crisis, yadda yadda yadda, but I'm not interested in pointing fingers or placing blame. What I want to know is the following (blatantly ripped off someone's post on another forum from back in January):

1. John Apple lives in a $100K house.

2. John Doe buys said $100K house for $200K, borrowing $200K from Bank of Loans; John Apple pays off his loan and pockets $100K.

3. John Carson buys John Doe's $200K house for $300K, borrowing $300K from Bank of Loans; John Doe pays off his loan and pockets $100K.

4. Bank of Loans splits John Carson's loan of $300K into 3 pieces and sells it to Bank of England, Bank of France, and Bank of Germany. Each bank gives Bank of Loans $100K, understanding that they will make a return equal to the APR of the loan.

5. John Carson's APR adjusts and he cannot pay for the home. House is foreclosed, Carson is out whatever he paid into the home plus the fact that he's now homeless. Bank of Loans is stuck with an overpriced property with a severely negative LtV ratio.

6. Banks of England, France, and Germany get notice that their share of that loan is now zilch. They are out the $300K they collectively paid for the loan.

So my question is this? What happened to the $300K that Bank of Loans got from England, France, and Germany? And what happened to the $100K that John Apple and John Doe got from the inflated sale of their property?

Is this money crisis real or is it a redistribution of wealth? And why, if so much foreign currency flowed into the US during the mortgage securities craze, did the value of the dollar go down? Where did all that money go?

Please don't me. I've really been trying to wrap my head around this.

[S13_love]

http://www.thisamericanlife.or...=1242

^ that hour long podcast pretty much tells you everything about the mortgage crisis and all that

if you are wondering where all the money ended up...well it actually dissappeared, as in the people were paying back for the loans but the money pretty much ended up in a furnace

This whole mortgage deal got way out of hand when something called the NINA (no interest, no assest) loans came around, basically those loans ($300+ k) were given to A LOT of people who couldn't afford them

This whole situation is a BIG mess, investors got rich, people got screwed over, housing market bubble exploded...etc

[SteveTheTech]

Its got to be in someones' pocket. The people who did profit significantly most likely lost more money in the long road investing in other properties. Hopefully they get theirs.

I am sorry that people are loosing their houses in this mess. There really needs to be more accountability for people making stupid decisions that will effect their own financial future based on what a salesman tells them. Seriously if they buy a house a rate they can barely afford with an adjustable rate mortgage and the market at a very high level. It's basic common sense.

[audtatious]

It turned into bonus money to those in high positions. See the last link I posted in the Penny Pritzker thread as to how much money some of the players made and who they are advising now (It aint McCain).

[Cold_Zero]

Let's see, John Apple, John Doe all made $100,000 each. In reality its either the builders that build a house and sell it for a profit or investors that buy the home at a cut rate, sometimes fix the house up and sell it for a profit. If the loan that John Carson takes out gets paid off and the house value doesn't go down there isn't much of a problem. Most of the time the value doesn't go up that radically.

Anyway in reality Encryptshun Mortgage lent John Carson $300,000 for his mortgage. In reality, John Carson probably rolled 75,000 in credit card debt. Now John Carson has a 125% loan to value, with one probably two ARMs (one to cover the down payment and the other for the balance of the loan. You pulled all kinds of tricks and probably either lied or didnt check into the borrower credit worthiness when financing him. Well, Encryptshun Mortgage turns around and sells John Carson's loan to NICO MAE (a secondary lender run by Cold_Zero). I pay you 'par' for the loan ($375,000) and you turn around and make a new loan for some other borrower. As far as you are concerned, you are done with the loan.

Now, I take John Carson's loan and pool it together with other subprime loans. I put the security on the secondary market where everyone from funds to banks invest in the debt. I continue to take John Carson's monthly payments. Charge him all sorts of late fees and other fees. Capitalize his interest and fees. Well John Carson walks away from his house and NICO MAE is on the hook for this 375,000 asset. In most scenarios, I take this loan out of the security and replace it with an better performing loan. RBS (Royal Bank of Scotland), UBS (Union Bank of Switzerland) and Deutsche Bank my biggest investors are happy. I hold on to the property and attempt to sell it for the balance or short sale it for a smaller loss.

A year goes by, no one bites on the property and the foreclosures sky rocket in John Carson's old neighborhood. As the foreclosure rates go up in this neighborhood (not helped by the fact that as home values fall refinancing becomes even harder for everyone else who are trying to get out of their ARMs or double ARMs Mortgages), coupled with a glut in the number of homes in the area and the values of all the homes in John Carson's old neighborhood start to fall. Now my 375,000 asset is now worth $125,000 and I have a $250,000 write down on my books for the quarter. On the earnings call I get crucified and investors ask all sorts of questions. Things get pretty shaky with my investors and my stock price plummets. This hurts my ability to borrow money to buy more of your loans as my credit rating is shot. Not to mention that my securities have very low ratings. Basically to buy more of your loans the cost of me to borrow money just got more costly and I am going to have a harder time making up that 250,000 write down on my books. So I either:1. Fly out to Dubai to get them to invest in my company2. Wait for another lender or financial company to buy me out3. Seek out a merger or private equity deal 4. File Bankruptcy 5. Sell off some of our performing assets to raise capital6. We eat this loss and go on buying more loans paying more for the money to do so.

This one loan inside of itself isn't a big problem, but when this scenario grows exponentially then it becomes a big problem. When you factor in that companies like AIG (American Insurance Group) went out on a limb and insured my securities and RBS, UBS and Deutsche Bank are so heavily invested in my securities it starts to bring a whole lot of people inter twined with these guys (in the US Financial Markets and the World Markets) into this mess. Now the US Government gets worried and extends NICO MAE $80 billion in short term debt from the US Treasury to keep me afloat. Since NICO MAE going into bankruptcy will start panic in the financial markets, will make originating more Home Mortgages harder and will probably lay off a whole lot of people. Sound good? No.The US Treasury monetizes the debt by printing $80 billion US dollars. Thus the US dollar goes down and makes the US prone to inflation. Think that this loan comes without strings? Nope, the US Government starts to get into my business now that they (and by proxy the taxpayer) own a majority share in NICO MAE.

Now if someone can refine or correct my analysis please feel free to do so. This is by no means an expansive or detailed account of the Sub Prime Mortgage Crisis. There are all sorts of facets as to where the money goes and where the money comes from.bud

[Cold_Zero]

I guess my question is this, if Mortgage lenders are charging higher interest rates (which is a form of security for people that default on their loans) and PMI (Private Mortgage Insurance) to guard against this stuff, what good does higher interest rates and PMI really do? Do they just encourage defaults?

[Encryptshun]

Now if someone can refine or correct my analysis please feel free to do so.

Hell, I'd need a semester of econ just to UNDERSTAND your analysis.

j/k, bud. Thank you. Extremely well-written explanation.

[S13_love]

yup, that explanation cold-zero wrote there gives you a decent idea of whats going on, this whole housing crisis is pretty bad, and i hope that its going to end soon, things right now in the financial market are not good

[audtatious]

Interesting editorial, truth or spin?:

---------------------------------------------------------------------------Congress Tries To Fix What It Broke

By INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 17, 2008 4:20 PM PT

Regulation: As the financial crisis spreads, denials on Capitol Hill grow more shrill. Blame an aloof President Bush, greedy Wall Street, risky capitalism — anybody but those in Congress who wrote the banking rules.

Such denials won't hold against the angry facts banging on their doors. The only question is whether the guilty party can keep up the barricade until Election Day.

A visibly annoyed House Speaker Nancy Pelosi rejected suggestions that Democrats share blame for the meltdown. "No," she snapped at reporters who dared ask.

Stick to our narrative, she scolded: The bursting of the housing bubble was another story of market failure and deregulation.

"The American people are not protected from the risk-taking and the greed of these financial institutions," she said, while calling for investigations of the industry.

Only, the risk-taking was her idea — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.

They were the ones who screamed — "REDLINING!" — and sent banks scurrying for cover in low-income neighborhoods, where they have been forced to lower long-held industry standards for judging creditworthiness to make the subprime loans.

If they don't comply, they are threatened with stiff penalties under the Community Reinvestment Act, or CRA, a law that forces banks to make home loans to people with poor credit risks.

No fewer than four federal banking regulatory agencies are responsible for enforcing the law. They subject lenders to racial litmus tests and issue regular report cards, the industry's dreaded "CRA rating."

The more branches that lenders put in poor neighborhoods, and the more loans they make there, the better their rating. Those lenders with low ratings can not only be fined, but also blocked from mergers and other business transactions needed to expand.

The regulation grew to monstrous proportions during the Clinton administration, obsessed as it was with multiculturalism. Amendments to the CRA in the mid-1990s dramatically raised the amount of home loans to otherwise unqualified low-income borrowers.

The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical "housing rights" groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.

HUD, in turn, pressured Fannie Mae and Freddie Mac to purchase more subprime mortgages, and Fannie and Freddie, in turn, donated to the campaigns of leading Democrats like Barney Frank and Pelosi who throttled investigations into fraud at the agencies.

Soon, investment banks such as Bear Stearns were aggressively hawking the securities as "guaranteed." Wall Street's pitch was that MBSs were as safe as Treasuries, but with a higher yield.

But they weren't safe. Everyone in the subprime business — from brokers to lenders to banks to investment houses — absolved themselves of responsibility for ensuring the high-risk loans were good.

The mortgage lenders didn't care, because they were going to sell the loans to other banks. The banks didn't care, because they were going to repackage the loans as MBSs. The investors and traders didn't care, because the MBSs were backed by Fannie and Freddie and their implicit government guarantees.

In other words, nobody up and down the line — from the branch office on main street to the high-rise on Wall Street — analyzed the risk of such ill-advised loans. But why should they? Everybody was just doing what the regulators in Washington wanted them to do.

So everybody won until everybody lost, including the minorities the government originally mandated the banks to serve.

The original culprits in all this were the social engineers who compelled banks to make the bad loans. The private sector has no business conducting social experiments on behalf of government. Its business is making profit. Period. So it did what it naturally does and turned the subprime social mandate into a lucrative industry.

Of course, it was a Ponzi scheme, because they weren't allowed to play by their rules. The government changed the rules for risk.

In order to put low-income minorities into home loans, they were ordered to suspend lending standards that had served the banking industry well for centuries. No one wants to talk about it, so they just scapegoat Wall Street. Even John McCain has joined the Democrat chorus on this.

The FBI is now investigating 24 large mortgage lenders for alleged abuses. But who will investigate the pols and the lobbyists and the community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?

[S13_love]

Interesting editorial, truth or spin?:

---------------------------------------------------------------------------Congress Tries To Fix What It Broke

By INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 17, 2008 4:20 PM PT

1)Only, the risk-taking was her idea — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.

2)The FBI is now investigating 24 large mortgage lenders for alleged abuses. But who will investigate the pols and the lobbyists and the community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?

1) Thats what the NINA loans were all about... and look what happened, $hit hit the fan....big time.

2) I hope the FBI kicks someones @$$, there was injustice done here, no doubt

In the end, i still cant believe that no-one saw that giving unqualified people money who cant afford to pay it back as a bad idea...

I mean, if you take part a role in helping to lead the country, shouldn't one of the qualifications for the job be...well...have your head pulled out your @$$... i think so

[Cold_Zero]

Hell, I'd need a semester of econ just to UNDERSTAND your analysis.

j/k, bud. Thank you. Extremely well-written explanation.

Thanks guys. The thing to remember of my analysis is that one bad thing isn't major and won't crash the system. But when you get all the pieces inter twined and you start growing the foreclosures exponentially, a lot more people have huge exposure to the risk involved. While there is always risk involved with the markets (the whole 'nothing ventured nothing gained' proverb) the rate at which this problem grew leading up to the crash, just keeps sending shock waves through the financial systems. I hate to say it, but our financial system has circuit breakers designed in the system to identify these types of problems, stop the activity and prevent it from happening again. That is what is happening now. Unfortunately, the revelation about how big this problem is, should tell us all that this problem won't be fixed in the short term. We were told at work that they are looking 5 years down the road until this crap blows over and the markets free up cash to get back to business.

But in a sense we are all exposed to the risk, especially since now we own parts of these firms that just got nationalized, that the money printed to buy out these shares were monetized and expose us to inflation down the road. But hey, if I pay my mortgage and everything is dandy, I am still at risk if everyone in my neighborhood is foreclosing as my property value will surely drop if the homes are sold at a loss and by fact of the glut of homes on the market.

[Cold_Zero]

I wouldn't be surprised to see a backlash on foreclosures, something close to student loan defaults prior to the 1980 were Congress and the President stepped in and made Federal Student loan debt non discharge-able in a bankruptcy. Either something through the Federal Government or through the states. I was listening to this one show on MSNBC where a guy called in to ask for advice. He owned a condo for a quarter of a million dollars and re-assessments were coming due soon. The condo had lost a bunch of value. He was contemplating taking out a second mortgage to buy a new home and then foreclose on the condo. Hello?

[S13_love]

I wouldn't be surprised to see a backlash on foreclosures, something close to student loan defaults prior to the 1980 were Congress and the President stepped in and made Federal Student loan debt non discharge-able in a bankruptcy. Either something through the Federal Government or through the states. I was listening to this one show on MSNBC where a guy called in to ask for advice. He owned a condo for a quarter of a million dollars and re-assessments were coming due soon. The condo had lost a bunch of value. He was contemplating taking out a second mortgage to buy a new home and then foreclose on the condo. Hello?

[audtatious]

In the end, i still cant believe that no-one saw that giving unqualified people money who cant afford to pay it back as a bad idea...

I feel the same way with socialistic agendas. Giving people money or services at the expense of others simply because it "feels right". Unfortunately the welfare state in most areas tell you that doing such will simply create generations of welfare families that simply won't work to support themselves or put forth the effort to grow.

Similarly, didn't Obama recently make a statement that he would hold off on increasing taxes on the "rich" because it would put additional hardship on the current economy? Isn't that admitting that increasing taxes will result in less growth and possible recession regardless of the circumstances which means it's NOT a good idea?

[S13_love]

"I feel the same way with socialistic agendas. Giving people money or services at the expense of others simply because it "feels right". Unfortunately the welfare state in most areas tell you that doing such will simply create generations of welfare families that simply won't work to support themselves or put forth the effort to grow."

Agreed.

"Similarly, didn't Obama recently make a statement that he would hold off on increasing taxes on the "rich" because it would put additional hardship on the current economy? Isn't that admitting that increasing taxes will result in less growth and possible recession regardless of the circumstances which means it's NOT a good idea?"

Um, havent heard too much on that...hmm i dont understand how the delay of the increase of taxes on the rich would hurt the economy at all. If increasing taxes on the rich (by their standards, people w/ an income of 2 mil.+ right?) does result less growth, would that only affect the rich people with high incomes, which makeup like at most 2% of our population?

[C-Kwik]

The problem is your model excludes one John. John Scrooge. He owns the development property he sold for a pretty penny to a development company. John Carson ended up upgrading into one of the new homes built on John Scrooge's land after selling his home. As John Apple and John Doe reinvested into their new homes, they didn't necessarily net any profit. Especially since the property values came down now and left many with less equity than they started with before the values increased. Of course some of the John Carsons may have pocketed the money and either squandered it elsewhere or still have it (perhaps in safer investments.)

[audtatious]

Um, havent heard too much on that...hmm i dont understand how the delay of the increase of taxes on the rich would hurt the economy at all. If increasing taxes on the rich (by their standards, people w/ an income of 2 mil.+ right?) does result less growth, would that only affect the rich people with high incomes, which makeup like at most 2% of our population?

He is saying he will raise taxes on those making $250k and higher. This impacts all business owners directly as his first step is to wipe out the 102k cap on Social Security taxation to those over 250k by imposing the 6.2% tax on their whole incomes as a way to supposedly fix Social Security. Since employees are not the only ones who pay into SS, their employers will also be binged with that additional 6.2%.

Additionally, he wants to raise capital gains taxes, but has not stated by how much. He has proposed taxing dividends similar to capital gains but has not specified a figure yet.

There are additional "catches" with his tax stance that has come up before concerning money markets and such but I'll have to let someone else answer those. IMO, we need to focus spending only where it is needed and fix our own internal issues first. His proposal to give billions to the UN to help fight global poverty is absolutely insane talk as we need to help our own first.

As I stated above, he is now claiming that he will not get rid of the Bush tax cuts immediately after getting into office due to stress on the fragile economy but he intends to do the above after the Bush cuts expire in 2010 (or before, who knows as he keeps changing his mind). What does that tell you?

[Cold_Zero]

Here is another example of how things are so inter twined. Conseco (Indianapolis based insurance company) revealed yesterday that they were heavily invested in Washington Mutual, AIG and Lehman Brothers.

The insurer disclosed it had $103 million invested in three companies wracked by losses in the high-risk mortgage business. That was down from $166 million on June 30 and reflected a $40 million loss taken when it sold off stock in the three companies: American International Group, Lehman Brothers and Washington Mutual.

Conseco stock to a 42% hit yesterday.

The next investment company to watch is Washington Mutual. After that Goldman Sachs.bud

[smockers83]

CZ, that was pretty much right on. The actual money didn't disappear, there just wasn't enough of it and it was spread out too thin. When a bank makes a loan, they're making loans on money they are holding in excess of their reserves (the Fed has a reserve requirement for banks that is a percentage of deposits). The bank, when they give a loan out, essentially create a checking account for the borrower, therefore increasing their deposit creation, allowing the bank to use most of that money to lend out again (if the required reserve ratio was 10%, the bank would hold 10% in reserves and loan out the remaining 90%). Or, like in your example, they sold the loan and used those proceeds to make another one. So, do you see where this is going? The banks are essentially creating money without anymore money physically in circulation through deposit creation. So what happens when people don't pay their loans back is that the demand for money through all this deposit creation exceeds the supply of money and therefore we end up in crisis.

The only thing wrong with your example is that AIG = American International Group.

[Cold_Zero]

The only thing wrong with your example is that AIG = American International Group.

You didnt get that memo? I changed their name two weeks ago.. I will have to go back and fire my secretary.bud

Quote » So what happens when people don't pay their loans back is that the demand for money through all this deposit creation exceeds the supply of money and therefore we end up in crisis.[/quote]It also doesnt help that guys like Federal Home Loan and Bank and Goldman Sachs go super conservative on their lending to other Financial Instituations and Banks out of fear that these banks may have subprime loans and expose them to too much risk.

[AZhitman]

Its got to be in someones' pocket. The people who did profit significantly most likely lost more money in the long road investing in other properties. Hopefully they get theirs.

Steve, please don't take this personal, because I'm just using your post as an example...

WAIT A DAMN MINUTE. How is it that anyone making a profit on anything nowadays is a "bad guy"?

Folks, Tom Freakin Cruise (assclown) makes a metric butt-ton of money for acting like someone else for a month, but when an investor flips a property and makes a tidy profit, he's a "bad guy"?

I bought a house for $70K in 1995. It's worth $250K (well, it was a year ago, lol)... If I sell it tomorrow for $220K, why should I feel bad about the profitability of that sale? Why would you hope I "get what's coming to me"?

I am SICK and tired of the Left treating those who make wise financial choices as some sort of pariah, or the cause of all ills.

Here's the deal - When someone starts a business, WHO takes on ALL the risk? The guy starting the biz. If it goes Tango Uniform, who's left holding the debt? He is. So why SHOULDN'T he turn a tidy profit for his risk and his efforts? Keep in mind, many of you are employed by such a person or entity.

I am sorry that people are loosing their houses in this mess. There really needs to be more accountability for people making stupid decisions that will effect their own financial future based on what a salesman tells them.

It's basic common sense.

I don't. Not at all. The fine print on your mortgage says that at ANY time during the course of the loan, the lender can call your debt. This means you have to come up with ALL the money RIGHT NOW. That's in the contract, and everyone who buys something on credit SIGNS it.

Don't blame the "salesman". Blame the guy who puts the financial stability of his family on the back burner in pursuit of a house he CAN NOT afford. Blame the guy who makes $35K a year and yet somehow is under the impression that he "deserves" a $400K home. Blame the guy who saves NOTHING for his future, and if there's $100 left over after the beer, cigs, jet ski, big screen, mortgage and bills are paid, he goes out drinking with the guys or spends it on useless crap.

I'm not sorry for them at ALL.

I'm sorry for the account holder in the bank that MADE the $400K loan that the mortgagee defaulted on, who, on his way out, trashed the house, stole the fixtures and ripped out all the copper to sell as scrap to pay off his big screen TV (that he's now watching in an apartment)... rendering the house worth $100K at auction... and that account holder sees the financial health of his bank suffer because of it.

No, I'm sorry for the innocent victims. People like you and I who have to pay MORE because of their idiocy. People like the mortgagee's kids, who have to move in the middle of the night into a 1-br apartment surrounded by a bunch of other "former homeowners".

You ARE right in that it IS "basic common sense". Don't buy something you can't afford. It's not YOUR money you're playing with.

[S13_love]

"WAIT A DAMN MINUTE. How is it that anyone making a profit on anything nowadays is a "bad guy"?"

Well, when its at the expense of millions of americans, then yes, he/she is maybe considered a bad guy, investors found a way to get a lot of money and that was by making loans available to unqualified people.

Whatever happened to ethics?

"Folks, Tom Freakin Cruise (assclown) makes a metric butt-ton of money for acting like someone else for a month, but when an investor flips a property and makes a tidy profit, he's a "bad guy"? "

Flip thousands of properties, then how much profit will that be?

Nobody cares about tom cruise...

"Don't blame the "salesman"."

Maybe not the salesman directly (depends)...but the one who hired the salesman to go door to door to sell the mortgages...and those unqualified people got money because they looked qualified (their income was falsified on paper by whomever)

[audtatious]

"WAIT A DAMN MINUTE. How is it that anyone making a profit on anything nowadays is a "bad guy"?"

Well, when its at the expense of millions of americans, then yes, he/she is maybe considered a bad guy, investors found a way to get a lot of money and that was by making loans available to unqualified people.

Whatever happened to ethics?

This is kinda a catch-22. From what I understand, starting with Jimmy Carter, there was a requirement to have a percentage of home sales to potentially "unqualified people" or the agencies/companies would be penalized. In this case, you can't necessarily blame the company for doing what they were told to do in order to make a profit. Of course, this does not give a pass to those (like the financial advisers on Obama's campaign) who used this policy to make huge bonus's.

"Folks, Tom Freakin Cruise (assclown) makes a metric butt-ton of money for acting like someone else for a month, but when an investor flips a property and makes a tidy profit, he's a "bad guy"? "

Flip thousands of properties, then how much profit will that be?

Nobody cares about tom cruise...

What is wrong with flipping properties? Investment/real estate companies buy a house below market value, fix them up and sell them at market value to make a profit. Nothing wrong here as this has nothing to do with the sub-prime issue.

Someone must care about Tom Cruise, Barbra Streisand and others as the MSM seem to love quoting them.

"Don't blame the "salesman"."

Maybe not the salesman directly (depends)...but the one who hired the salesman to go door to door to sell the mortgages...and those unqualified people got money because they looked qualified (their income was falsified on paper by whomever)

If the mortgages met the Gov criteria then you can't blame them. If they intentionally fudged numbers then you can blame them. If they intentionally committed fraud in order to make huge bonus money then you can blame them. Otherwise, you have to blame the direction on pressing forth the requirement of banks to make a percentage of these loans directly at the Gov't officials who pressed this action. If you trace the paper trails you usually seem to run into Dem party officials and representatives (of course, not always the case).

Further, as Greg has stated, the people taking out these stupid loans for homes they can't afford are to blame as well regardless of how some people try to spin that they are not culpable.

[S13_love]

Lol sorry about that...forget what i said about flipping homes and all that... i was totally thinking of something else

I was looking at some info about this stuff and i found an interview of a guy who defaulted on his loan, in reality he only made about 45k a year but on his mortgage contract or whatever it was, it said he made 16k a month

If i remember right, he said all he had to do was just sign and the bank or mortgage lender or whoever it was would take care of the rest

hmmm....

[audtatious]

And if the finance company did that intentionally then they should be slammed with fraud charges. The guy who agreed to the loan should have his balls cut off in order to keep his genes out of "the pool".

Guess if your credit already sux then you really don't care if you have a default/foreclosure on it as you will be living the "high life" as a home owner for a while. Pretty pathetic.

[S13_love]

And if the finance company did that intentionally then they should be slammed with fraud charges. The guy who agreed to the loan should have his balls cut off in order to keep his genes out of "the pool".

Guess if your credit already sux then you really don't care if you have a default/foreclosure on it as you will be living the "high life" as a home owner for a while. Pretty pathetic.

Imo no doubt that there has been/is/was (whatever) fraud...tell me, does the bank have the final say in deciding if a person should get a home loan...i mean if these unqualified people had their actual income number and/or credit on paper, would you really think a bank would actually give them that 200 or 300k+? just a thought

[audtatious]

Someone "down the chain" has to approve the home loan. It may be a computer program based upon numbers plugged in or an actual person, I don't know. If there was fraud involved they should get nailed for it, including the homeowner as he had to have known the numbers were fudged.

The last time I refinanced this house and when I initially purchased it, the financing was "shopped" for the lowest rates. This pretty much consisted of sending the paperwork to financial institutions for their rates. In this case, the financial institution is only going by what they receive so any fraud with the numbers is not on their shoulders. I'm currently looking at another refi to lower the overall term from 30 years (25 left) to 10 years and the amount of "glut" that numerous companies try to hide in the contract is ridiculous. My home is through Citi right now and the amount of hidden fee's they try to sneak in is a crock of crap so they have pretty much been told to go pound sand in their azz.

[S13_love]

Someone "down the chain" has to approve the home loan. It may be a computer program based upon numbers plugged in or an actual person, I don't know. If there was fraud involved they should get nailed for it, including the homeowner as he had to have known the numbers were fudged.

The last time I refinanced this house and when I initially purchased it, the financing was "shopped" for the lowest rates. This pretty much consisted of sending the paperwork to financial institutions for their rates. In this case, the financial institution is only going by what they receive so any fraud with the numbers is not on their shoulders. I'm currently looking at another refi to lower the overall term from 30 years (25 left) to 10 years and the amount of "glut" that numerous companies try to hide in the contract is ridiculous. My home is through Citi right now and the amount of hidden fee's they try to sneak in is a crock of crap so they have pretty much been told to go pound sand in their azz.

Haha...damn...

whoops, sorry i forgot to mention the homeowner that was interviewed didnt even know the numbers were fudged

[audtatious]

He had to sign the contract which has all the numbers listed. No signature, no loan.

[Cold_Zero]

No doubt guys, there is culpability on all sides for this mess:1. Builders who went crazy building a glut of homes in some areas.2. Private assessors who assessed homes for more than they were really worth.3. Real Estate Investors who speculated the crap out of homes.4. Realtors who fed the frenzy of buying homes or didn't represent their customer's best interest. Maybe it would be better to wait, save for a down payment and then buy a home.5. Mortgage Lenders who didn't do their due diligence in determining a borrower's credit worthiness. Some of them outright lied on the applications for the borrower or engaged in predatory lending. Others who financed borrowers up to 125% loan to value and now have taken on debt that was not initially theirs (IE consolidated credit card debt).6. Investors that didn't perform a risk analysis of the securities (containing sub prime mortgages) they invested in.7. Regulators that didn't crack down on Fannie and Freddie taking on a debt load filled with sub prime mortgages.8. Buyers that were greedy and felt entitled to a house they couldn't afford or people who got swept up in the rush to buy a home and didn't figure out what their payments were going to be when they hit repayment or when their rates re-adjusted.

I pretty much think that everyone turned a blind eye to what was going on in the market. Probably because the getting was good and no one wanted to rock the boat. I must admit that if we had to go through the same standards that my parents went through to buy their house in the 1980's , we probably would not have been able to buy our home. We had help from FHA and a private program to come up with our down payment.