Have we learned nothing

[Flopper]

Today I saw two local ads for zero down mortgages. Potential homeowners that can not pay anything down on a mortgage certainly have a higher rate of default. The inability of homeowners to meet mortgage payments was a major cause of the recession. I seriously doubt that there will be any meaningful regulation of the lending industry.

 

[Jarhead]

Today I saw two local ads for zero down mortgages. Potential homeowners that can not pay anything down on a mortgage certainly have a higher rate of default. The inability of homeowners to meet mortgage payments was a major cause of the recession. I seriously doubt that there will be any meaningful regulation of the lending industry.

I agree with the premise of your thread.

But I must correct something you said.

Mortgage defaults had nothing to do with the recession. They had everything to do with the credit meltdown.

They were and still are two completely different events.

 

[Douger]

Today I saw two local ads for zero down mortgages. Potential homeowners that can not pay anything down on a mortgage certainly have a higher rate of default. The inability of homeowners to meet mortgage payments was a major cause of the recession. I seriously doubt that there will be any meaningful regulation of the lending industry.

I agree with the premise of your thread.

But I must correct something you said.

Mortgage defaults had nothing to do with the recession. They had everything to do with the credit meltdown.

They were and still are two completely different events.

I'll correct you.
This whole movie was caused by dumb asses trying to live like movie stars.

 

[California Girl]

Today I saw two local ads for zero down mortgages. Potential homeowners that can not pay anything down on a mortgage certainly have a higher rate of default. The inability of homeowners to meet mortgage payments was a major cause of the recession. I seriously doubt that there will be any meaningful regulation of the lending industry.

I agree with the premise of your thread.

But I must correct something you said.

Mortgage defaults had nothing to do with the recession. They had everything to do with the credit meltdown.

They were and still are two completely different events.

I am at a loss as to why people don't get that.

 

[Patriot214]

There does not need to be MORE government regulations on lenders to prevent borrowers from defaulting on their home loans. This was one of the main causes for so many of the foreclosures across the country. Banks and lending institutions provided loans to many Americans who could not pay them back. Why would they do this? Because they are regulated to do so by the Federal Government. Banks are obligated to give out a specific number of loans to lower and middle class borrowers each month. Much of this began with the Community Reinvestment Act of 1977. Loosen the regulations and allow the lenders to decide who they loan to and how. Not the government.

 

[Jarhead]

There does not need to be MORE government regulations on lenders to prevent borrowers from defaulting on their home loans. This was one of the main causes for so many of the foreclosures across the country. Banks and lending institutions provided loans to many Americans who could not pay them back. Why would they do this? Because they are regulated to do so by the Federal Government. Banks are obligated to give out a specific number of loans to lower and middle class borrowers each month. Much of this began with the Community Reinvestment Act of 1977. Loosen the regulations and allow the lenders to decide who they loan to and how. Not the government.

True, but there is no law in place that says one must lend to a certain percentage of high risk applicants.

There are, however, government incentives to do so, and threats from activists if you dont.

I agree. Let the banks lend to whom they wish. All will balance out in the end.

 

[Flopper]

The whole meltdown in real estate is pretty interesting. In the 1970's mortgage-backed securities came into existence but it wasn't until the era of deregulation that they were widely traded. Wall street began creating more and more exotic securities backed by mortgages. Because of the way the mortgages were packaged, no one could tell just how safe the securities were. Prior to the 1980’s, the two major rating services, Standard and Poor and Moody's generated most of their revenue by offered their rating service on a subscription basis. The services then made a major change. They started collecting fees from the issuers of the securities that they were rating. If a company didn’t like their ratings, they could take their business elsewhere. Since the rating services could not really determine the credit worthiness of the securities any better than Wall Street most ended up with AAA ratings.

To make the whole mortgage backed security industry work, lots of mortgages were needed. Congress helped out by pressuring lending institution to write more mortgages and the Fed kept interest rates low. The banks responded by creating variable rate mortgages and jumbo mortgages. Suddenly everyone could afford a mortgage. The banks seeing the profit potential of writing and selling them in 30 days changed almost over night to a retail operation. They would write and sell them as fast as they could which eliminated almost all risk. Remember, in prior years banks only made money on mortgages if the homeowner made his payments, but under this new way of operating the banks had little or no incentive to say no to anybody.

So thanks to aggressive lending practices, low interest rate, real estate prices went through the roof. In 2006, investors became concerned that mortgage backed securities were overrated. Then as the default rate grew, no one wanted to own these securities. Then it was just a matter of time before the whole house of cards came down. The market for the securities dried up. Suddenly just about ever large banking house in the world was knee deep in mortgage-backed securities or their derivatives which they couldn’t sell.

Defaults did play a part in the whole debacle, but it’s Congress and Wall Street that must bear most of the responsibility. Neither Congress nor Wall Street was willing to be a party pooper by instituting regulations.

 

[Avatar4321]

Today I saw two local ads for zero down mortgages. Potential homeowners that can not pay anything down on a mortgage certainly have a higher rate of default. The inability of homeowners to meet mortgage payments was a major cause of the recession. I seriously doubt that there will be any meaningful regulation of the lending industry.

The problem isnt lack of regulation. It's lack of honesty between both the purchasers and the lenders.

 

[txlonghorn]

How about this....

Don't buy a house you can't afford. Just because the bank says you can, doesn't mean you ignore what you already know deep in your heart. You're the only one who can honestly say whether you can afford the mortgage you take on or not. So if you're going to learn something...learn some damn self control.

 

[uscitizen]

Buy a house to use as a home not as an investment. Or source of equity capital.

buy what you need not what you want as a status symbol.

And no very few of us have learned anything yet.

 

[Flopper]

"The problem isnt lack of regulation. It's lack of honesty between both the purchasers and the lenders."
If lenders and purchaser were honest and mortgage bankers valued their customers more than the fast buck we wouldn't need regulations. But until that times comes we need regulations and laws.

"Don't buy a house you can't afford. Just because the bank says you can, doesn't mean you ignore what you already know deep in your heart. You're the only one who can honestly say whether you can afford the mortgage you take on or not. So if you're going to learn something...learn some damn self control."
Sounds good. How are you going to get people to do this? Remember it's not just the home buyer who defaults that gets hurt. It's everyone who owns real estate, loses their job or their retirement nest egg.

Buy a house to use as a home not as an investment. Or source of equity capital.
buy what you need not what you want as a status symbol.
And no very few of us have learned anything yet.
I agree. Buyers should use common sense, but what does all this have to do with solving the problem? Absolutely nothing.

 

[Avatar4321]

"The problem isnt lack of regulation. It's lack of honesty between both the purchasers and the lenders."
If lenders and purchaser were honest and mortgage bankers valued their customers more than the fast buck we wouldn't need regulations. But until that times comes we need regulations and laws.

I disagree. Nature will regulate itself.

"Don't buy a house you can't afford. Just because the bank says you can, doesn't mean you ignore what you already know deep in your heart. You're the only one who can honestly say whether you can afford the mortgage you take on or not. So if you're going to learn something...learn some damn self control."
Sounds good. How are you going to get people to do this? Remember it's not just the home buyer who defaults that gets hurt. It's everyone who owns real estate, loses their job or their retirement nest egg.

Accept life and deal with it. You dont know what's going to happen in life. Our worlds may change tomorrow. If we don't accept that, we cant face reality.

Buy a house to use as a home not as an investment. Or source of equity capital.
buy what you need not what you want as a status symbol.
And no very few of us have learned anything yet.
I agree. Buyers should use common sense, but what does all this have to do with solving the problem? Absolutely nothing.

How does suggesting practical solutions that dont involve government not solve the problem?

If buyers use common sense, so to speak, what need is there for regulation?

 

[Flopper]

How does suggesting practical solutions that don't involve government not solve the problem?
It's not a practical solution unless you have a way of implementing it.

Greed is what makes capitalist work, not honesty, integrity, or fair play. Unregulated capitalism does not work because the goal of capitalism is to destroy competition. In this country we have regulated capitalism. Without regulations our economic system would devour itself. Likewise pure socialism as describe by Marx does not work because it destroys the incentive to produce.