Amazingly, these comedians did this bit back in 2007.  Makes you sick to know this financial hide-the-sausage game has been going on for so long and nobody got worked up about it until now.

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Free markets are one thing, but when you know that the system is being gamed, that's when you have to step in with reform and oversight.  As is the case with all of these things, lot's of factors come into play.  Forcing banks to make bad loans pretty much forced then to come up with the "ingenuity" to still make a profit.

No matter what your view is, the video is funny.

;D

I sent this to my daughter to forward to her macroeconomics teacher.  I think her teacher will enjoy it.

Thanks,

George

Quote:

that's when you have to step in with reform and oversight.

Can someone...anyone... please explain to me how "YOU" "ME" or "US" can do that?

The average person trying to hold on to their job, raise their kids decently, put food on the table and find gas money to get to work...hasn't got squat to say about changing any of this inequity.  We just get to sit and watch these thieves take billions of our tax money.

BTW...this is a legitmate question I'm asking.  Someone "splain" it to me.

Well Linda, ya gets you a jar of Vaseline and ya just bends over.....

BarbaraD wrote on Sep 28^th, 2008 at 10:03am:

Well Linda, ya gets you a jar of Vaseline and ya just bends over.....

OH MY!


But, it's true.......we- who didn't naively take a loan we could not afford are the ones who will bail out those who did.
BTW, these people who are upside down in their mortgages are not guilty of taking avantage of a generous lender....they were NAIVE! The Mortgage Broker told them what they could  in afford monthly payments and the buyers, listening to the expert, believed this to be true!
Expert says Borrower can afford $1500 per mo........
                 Buyer says                    OK!
Kids in sports, taking music classes, car needs work, diapers are expensive......these things are not taken into consideration-buyer is set up with a budget that is already stretched.  The Broker doesn't care! The consumer, being the naive one, buys at the top of his comfort zone, rather than tell his Realtor he knows that is unrealistic, and he'd like to look at houses slightly under that.......
THAT's how it works when the Realtor sits down with the buyer....

In my opinion, the Owners and CEOs should all be placed in the stockades. Every potential homeowner should have to do more than simply fog a mirror in order to get a mortgage, and our Govt should NOT be bailing out the banks-they should be bailing out the naive homebuyers, and making them attend a series of Economics classes prior to bailing them out.
GREED  is at the bottom of this!! WA MU is failed........the CEO has been in position for 3 weeks! 3 WEEKS! In his contract, it states he will have a 10 MILLION dollar severance package! Did he drive that bus into the wall? We will never know........

Oh, one more thing.......almost across the board, our parents scrimped and saved till they had 20% down before they could buy a house. Fully aware of the fact that prices have skyrocketed, FHA created(over 30 yrs ago), a 97% loan that they were comfortable guaranteeing. NOW, we are going back to just that-and it's a good thing!
I think I'll go turn on the morning news.......let's see what today has wrought.........
Pretty disgusted cathi

A few years back a friend of mine had a house up for sale and got a contract on it. Something didn't sit just right with her and she brought the stuff to me to look over (I've been a RE broker for about 30 years, but don't list or sell houses - I mostly do closings and deal with lawyers on that part).

Anyhow, the loan was going thru a Mortgage Banker for "more" than the loan amount and she was supposed to give "back" about $10k at closing to the Mortgage Banker for "decorating expenses". I called the broker and asked what the hell was this all about and she got snotty with me and told me if I knew anything about RE I'd understand it.

Needless to say, this was just as illegal as the devil and I ended up killing the sale and the broker got a reprimand (unfortunately didn't lose her license as she should have) and nothing was done to the Mortgage Banker. But this was going on back years ago and apparently nobody was watching the hen house and the foxes were taking over.

And Cathi you're right - the RE agents just look for a "sale" - they don't "qualify" buyers. Back when I was selling houses (when we still had to lite the street lites with a torch at night :) ) we would go thru all the "how much do you spend on groceries a month, how much on gas, etc." And we'd try to figure the house payments on ONE income. We'd "explain" buy what you can afford NOW and build up some equity and then trade up to something you want later.

But there's just a different mind-set today. And we've gotten into a mess with it. Our kids have never been thru a good recession. Don't know how they're gonna learn to "like" beans and cornbread, but they might ought to develope a taste for them.

Hugs BD

Cathi_Pierce wrote on Sep 28^th, 2008 at 10:30am:

Kids in sports, taking music classes, car needs work, diapers are expensive......these things are not taken into consideration-buyer is set up with a budget that is already stretched.

Don't forget the cost of electric, sewer/water, insurance, maintainence, heating...  Many, and I mean MANY, do not figure these monthly costs into their budget when wanting to purchase a home.  I'll admit we were guilty of it in the past as we were young and didn't understand, but fortunately we understand it now.  Hard lessons tend to do that. :(

Yes, Mel, young homebuyers don't figure that, but real estate agents SHOULD and if they don't then BANKS definitely should. They use "credit scores" to jack up interest so they can sell off the paper and go ahead and lend the money to people who really don't qualify for the amount of the mortgage - that's the "crime" in all this.

I know this looks like I'm REALLY getting old, but I can remember the old "hometown" banks where the banker KNEW everyone and KNEW who could afford what and if you were late on a payment called to see what was wrong and what they could do to help. I've had the bank president call me several times to "remind" me to drop my deposit book off at the bank (I have a terrible habit of making out a deposit and then forgetting to take it to the bank). But back then we started with what we could afford and worked up to what we wanted. Maybe that's what's going to have to happen again.

Hugs BD

Who is going to get stuck with all the property taxes to the local towns and cities on all this bad paper.....Us? >:(

I need a bailout! Where is the line for bailouts. Do I have to go to Washington? Can I do it without anyone checking on what I do? I dont need a brazilian, just enough to fill my gas tank. :D
all the best
thebb

Although there has been alot of poorly written loans, not all the mess is due to that alone.  In many (not all, but many) cases the loans were written at levels the family COULD afford "at the time".  However, due to lay offs, down sizing, and thin employment markets, people are taking jobs at far less than they were previously making, if they can find work at all.  They simply don't have the same income they used to to pay the mortgage.

They didn't nievely take on these loans.  The job market simply isn't what it was 40-50 years ago.  It's seldom anymore that people work for the same company all their lives.   Companies ARE laying off people who have been with them for eons just to cut the payroll numbers because they can toss the work on to another person who is collecting half that salary.  

Redd, the housing bubble set it all off.  Just look at Point and all the construction going on of homes that are priced at $250,000 and up!  Hell, the going rate for rent of the condos behind Fleet Farm start at $1200 a month. :o

Remember when a $100,000 - $150,000 house was where the "rich" people lived??

Oh I'm well aware of that Mel.    The new Windsor Apartment Living community with it's own pool, and fitness and entertainment center off Hoover and HH is another example.  

Trouble is, they are 1-2 bedroom units and I can assure you, the price range is not something I'd ever be able to afford.

I remember when too...  Ahhhh the good old days... :o

That was a terrific pair of posts Barb! Makes me madder and madder and I like that. Keeps my blood pumping.

Mel, you're right too and some of the most hideous monstrosities have been built overlooking our once beautiful lake. Many of them, no one can afford to occupy by people that had no business investing in them in the first place. START PRINTPAGEMultimedia File Viewing and Clickable Links are available for Registered Members only!!  You need to or END PRINTPAGESTART PRINTPAGEMultimedia File Viewing and Clickable Links are available for Registered Members only!!  You need to or END PRINTPAGE and will never getto enjoy them.

Charlie

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I remember applying for our first home loan in 1989. Interest rate on a 30-yr fixed was something like 10.5%. This loan officer at the bank comes in and tells us that we could afford somewhere between 28 and 32% of our gross monthly income on housing. A quick calculation in my head and I just looked at the guy and said something akin to, "you've gotta be f'n kiddin' me."

In my experience, banks have always been willing to lend a lot more than we were comfortable with.

One of the major problems with most of the loans that are failing is not the job market, but the loans that started out with an "introductory" rate that went up in about five years to where it should have been to begin with, but the buyers could not qualify at that rate.  The rational was that they would refinance at that time and get another good rate, but the rates started going up.  We had been at record lows for several years, but the mortgage people were still selling ARMs to unsophisticated buyers who were gambling that prices would continue to go up so that they could refinance and continue to be able to cover the payments.  Real economics is not being taught in our schools now days and people don't understand how money works.

The biggest problem with the situation though is that banks were not allowed to pass on some of the loans due to the "Community Reinvestment Act" pushed by the Clinton administration.  This Act required banks to make loans to "underserved" sectors of the communities they served.  There was a good reason those areas were underserved.  They were not economically viable.  However, "community organizers" claimed racial discrimination was the issue, and banks dared not turn down a loan or face draconian fines from the Federal Government.  ACORN was one of the biggest organizations pushing these institutions to make bad loans.

I am by no means excusing the fraud that occurred within some of the financial institutions and by the CEOs like the one at WA MU.  In his defense however, WA MU was on the brink when he was brought in.  He just had the sense to make sure his back side was covered if he couldn't make it survive.  I might have done the same thing if I was in his shoes, but I doubt I would have had the cajones to ask for that much! ::)

Jerry

Callico wrote on Oct 1^st, 2008 at 1:19am:

One of the major problems with most of the loans that are failing is not the job market, but the loans that started out with an "introductory" rate that went up in about five years to where it should have been to begin with, but the buyers could not qualify at that rate.

I agree.


Callico wrote on Oct 1^st, 2008 at 1:19am:

The biggest problem with the situation though is that banks were not allowed to pass on some of the loans due to the "Community Reinvestment Act" pushed by the Clinton administration.

I disagree. If you look on the Wall Street Journal website, Forbes, and other places where there are a many economists writing, only a few far-right economists rate this as a major factor.  We just went through a real estate bubble with the same shape as the Japanese bubble.  It wasn't the bottom 20% that are responsible. A year or two ago, anyone who could sign their name got a mortgage for as much as they wanted.  

The biggest reason for giving millions of people more than they could handle was that banks and lending companies no longer had to hold the loans for 15 or 30 years. They bundled the loans into big packages, and sold them off on Wall Street. In the old days, they made a few points spread over many years. The clever new game was to make money off of origination fees - it didn't matter if the loan made sense or not because someone else was buying it ... that deregulation destroyed any concept of accountability on the part of the people making loans.

The half-built subdivisions all around the country were not built for the poor.  A friend of the wife's is unemployed after a back injury and will lose her modest middle class house, owing more money than she can sell it for ... she wasn't poor, but will be.  


Callico wrote on Oct 1^st, 2008 at 1:19am:

I am by no means excusing the fraud that occurred within some of the financial institutions and by the CEOs like the one at WA MU.

Nor the fraud committed by loan agents ('just add a bit to your income, no one will check'), conflicts of interest by the rating agencies and property appraisers, people buying and selling 'credit default swaps' that no one understood, etc. etc.   Very few parts of the system functioned optimally, and together, it was a catastrophe.

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There are different situations countrywide. As a rule, in Oregon, buyers KNOW what their budgets will support a a monthly pymt. When we lived in CA, people (buyers) asked their agents to push the envelope. Yes, there are some more conservative Californians, and some less conservative Oregonians, but, Oregon is NOT in the tank like CA.
Realtors need to listen and counsel their buyers. They are the ones who must suggest these extras as a regular and necessary addition to a buyer's budget,. Mel is right, with all utilities going up, this has to be added to the equation.
Personally, I think ALL first-time homebuyers should be responsible for taking a finance class prior to closing escrow.......
BTW-Barb......I am a Realtor.........none of my buyers get off without some kind of lecture....based on their needs......and, somehow, regardless of WHAT the Mortgage Broker told my buyers they could swing, they have always bought INSIDE their comfort  zone......know how I know?? For 16 yrs(my career in this business) NONE of my clients have lost a home yet! Am I proud?? YOUBETCHA! I have some pretty savvy clients!!!
That said, Callico and Monty are right....these intro, 2/3/5 yr introductory loan.or how bout the interest only for an intro period loan, have been put out there by the lenders.. mortgage brokers pick them up as a new product...."MORE HOUSE FOR LESS $$".........
but they fail to open a discussion about the risk..can you say Negative Amortization?? OKOK>.that term is now illegal, but the practice, till the sky began to fall, was NOT defunct....just renamed.....Teaser Rate, Texas Mortgage, Equity Builder, Principle Deferral....sound innocuous, don't they? They all mean, one day you WILL pay the piper, and it's gonna cost you more THEN, than it would at the inception of your loan! If there is a lesson to be learned by consumers across the board, it's GO BACK TO THE BASICS! Appreciate what you have, work hard to own a home(and bring your own hard -earned 20% down as well), save what you can, drive a 10 yr old car if you must.......and put some money in a pillow for a rainy day......

I also feel like the Maytag Repairman, and I wish this whole thing would GO THE HELL AWAY!!

Bored and lonely Cathi :-/ (caused by greed and avarice) >:(

Cathi - sounds like we need to get together for coffee. I think we think along the same lines..

But this housing crisis will pass and it will come back - always does, but we're in for a few years of a down market. People with some disposable income will come in a buy up the low-priced houses and hold them till the market stabilizes and then sell them for a profit.

Hugs BD