For the past 5 years or so, mortgage lenders have been loaning money to people who should never have been qualified to borrow that money. They have also been loaning money to people to buy way more house than they could afford. They did this by lowering their credit standards and by offering artificially low interest rates that would increase "in the future but don't worry about that right now". So-called sub-prime loans or ARMS. Now that the future is here, a large number of those borrowers "suddenly" discover they can't afford their new mortgage payments and are defaulting on their home loans. Countrywide Mortgages and New Century are just 2 lenders now moaning and groaning and warning and giving earnings warnings. This in turn in dragging the stock market down. Believe me, I am no financial guru but what did these companies EXPECT to happen when you loan money to people who are not qualified to borrow that money? Am I understanding all of this correctly or is there more to it?
Am I Understanding This Correctly?
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An ARM is not necessarily a Sub-prime loan - however in a very simplistic nutshell you have summed it up. Some folks were shoe horned into loans that are not simply appropriate. Some of these folks thought they would grow into the loan, refinance, flip the house for an easy $100K gain - but most are just stupid, ignorant, pi~~ poor arsholes who can't financially think their way beyond their paper thin scrotums. Why any jacksmart "investor" would buy into these companies is even more silly.
What I hate is the taint put on the good companies, the good REIT's, and as mentioned the entire stock market by this junk.
What I hate is the taint put on the good companies, the good REIT's, and as mentioned the entire stock market by this junk.
If our house of cards, or house of sub prime loans collapses, so goes the economy. Greedy mortgage lenders building up the housing boom, only to take the whole economy down.
Getting too deep into debt is not good, even if it is real estate that only goes up
Getting too deep into debt is not good, even if it is real estate that only goes up
And I fear we will see something similar in regards to CitiBank offering credit cards to "undocumented" people who don't have social security cards. No social security number = no credit history = people receiving credit who shouldn't. Can you spell d-e-f-a-u-l-t? Next CitiBank will be whining.
Once again the taxpayer will pick up the bill as almost all mortgages are backed by the government one way or another. The builders, developers, mortgage brokers and real estate sales forces will keep their profits and move on and we will pay the bill.
And another thing, being subprime loans I doubt that the buyers had 20% to put down so the loans should be covered by PMI, right? So whats the big deal?
Well, many people by nature are stupid.
Teaser low rates, and ARMS really fueled the fire.
These are the same types of people that don't care what a car costs, but ask "what's the payment on it?".
Oh, well we can afford x amount of dollars for a mortgage, then they don't consider anything else.
Teaser low rates, and ARMS really fueled the fire.
These are the same types of people that don't care what a car costs, but ask "what's the payment on it?".
Oh, well we can afford x amount of dollars for a mortgage, then they don't consider anything else.
I don't blame the buyers, its the system that sold them the house with less than good credit scores. But since the system will get bailed out by the taxpayer, why are they bitching?
I thought it was Bank of America that was doing this. Is CitiBank doing it too?
"Believe me, I am no financial guru but what did these companies EXPECT to happen when you loan money to people who are not qualified to borrow that money?"
Well-put question!
"Once again the taxpayer will pick up the bill as almost all mortgages are backed by the government one way or another. The builders, developers, mortgage brokers and real estate sales forces will keep their profits and move on and we will pay the bill."
Well-put answer -- but only the First Half of it.
Second Half of answer:
When the American masses are taxed out the wazoo, so the government can use their money to bail out the shiftless borrowers and protect the profits of the improvident corporate lenders, then said masses will be greatly vexed. And in a fit of righteous wrath 40% of them will state, as always, that we must elect D's to get us out of this fix; and 40% of them will state, as always, that we must elect R's to get us out of this fix; and 20% of them will state, as always, "Huh? Could you repeat the question?"
And either the D's or the R's will get elected, and the corporate lenders will make off with billions in taxpayer-funded profits, and the shiftless borrowers will celebrate their escape from any consequences by heading for the shopping malls, credit cards in hand. And the taxpayers, according to their preferences, will insist -- as always -- that if only we'd elect MORE D's (or R's) THAT would surely clean up this mess once and for all.
And the grinning billionaire fatcats, behind the gated-and-guarded walls of their multimillion-dollar mansions, will grin from ear to ear and say "That's right, yokels: just elect more D's (or R's) and your problems will all be over!"
Well-put question!
"Once again the taxpayer will pick up the bill as almost all mortgages are backed by the government one way or another. The builders, developers, mortgage brokers and real estate sales forces will keep their profits and move on and we will pay the bill."
Well-put answer -- but only the First Half of it.
Second Half of answer:
When the American masses are taxed out the wazoo, so the government can use their money to bail out the shiftless borrowers and protect the profits of the improvident corporate lenders, then said masses will be greatly vexed. And in a fit of righteous wrath 40% of them will state, as always, that we must elect D's to get us out of this fix; and 40% of them will state, as always, that we must elect R's to get us out of this fix; and 20% of them will state, as always, "Huh? Could you repeat the question?"
And either the D's or the R's will get elected, and the corporate lenders will make off with billions in taxpayer-funded profits, and the shiftless borrowers will celebrate their escape from any consequences by heading for the shopping malls, credit cards in hand. And the taxpayers, according to their preferences, will insist -- as always -- that if only we'd elect MORE D's (or R's) THAT would surely clean up this mess once and for all.
And the grinning billionaire fatcats, behind the gated-and-guarded walls of their multimillion-dollar mansions, will grin from ear to ear and say "That's right, yokels: just elect more D's (or R's) and your problems will all be over!"
Don't blame the buyers? so don't blame the drinker when he wrecks and kills his family? it's the alcohol's fault.... people are stupid, they will sign any piece of paper to get anything they want, there could have been fine print that stated 'beginning year 3 we will selectively remove your organs for sale' and people would still sign because they don't care - they want to keep up with the jones', now reality is kicking in the door on that McMansion and people are hiding under their beds.... also financed.
I have been saying it all along, this day would come... you can't buy what you can't afford, eventually you will get burned.
The buyer should bear sole responsibility - all terms are disclosed, they agreed to the terms. Don't make it sound like subprime lenders hunted for people with 400 FICO's with IQ's of 12 and forced them to sign documents. The system made it possible for people to display their extreme lack of responsibility, it didn't cause it.
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I keep seeing that ad on tv in which that sleazy local MB dealer tells me if have 600 dollars cash I can come down and pick up a new Mercedes. Awesome idea. How stupid are people? Furthermore, why would this loser want customers like that? He may own a couple dealerships, but he's just as ratty as probably some of his buyers. Why encourage people who don't have money to spend money on things they can't afford? Greed and stupidity go along famously.
Don't blame the buyers? so don't blame the drinker when he wrecks and kills his family? Carbonics
Your right I was being too nice. I never liked the idea of an ARM just to much to go wrong and jack the rate up. Even with caps I never got into an ARM. My last few mortgages were for investment properties (rentals) and there you don't get ARMs offered to you. Now interest only is an neat idea for properties that are going to go up in value, in a few years do a cash out and convert it to a rental.
Your right I was being too nice. I never liked the idea of an ARM just to much to go wrong and jack the rate up. Even with caps I never got into an ARM. My last few mortgages were for investment properties (rentals) and there you don't get ARMs offered to you. Now interest only is an neat idea for properties that are going to go up in value, in a few years do a cash out and convert it to a rental.
JHZR2
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People are idiots... They try way too hard to "keep up with the Joneses", so that Mr. Brooks Brothers and Ms. Prada Handbag can feel that they are superior to everyone else, while secretly are racking up debt like there is no tomorrow.
There are still ads on the radio claiming "if you're paying more than 1.25% interest on your mortgage, then you're paying too much", while then claiming in the fast talking at the end that it will result in deferred interest.
Is the system messed up that it allows people to take loans that are semi-falsely advertised, and mislead the population that has sub-par intelligence? Yep! However, people should have some responsibility... To take such loans in the interest of showing off (which is what it really is, as youre buying WAY more than you can really afford, despite being "approved"), while allowing one'sself to be overextended by such an amount that they would reach the verge of forclosure is also disgusting on them.
In the end all, it is definitely the companies' fault that they are misleading the people... However it is also peoples' fault for not doing their due dilligence, or for lack of better words, for being self-centered idiots with no analytical abilities.
JMH
There are still ads on the radio claiming "if you're paying more than 1.25% interest on your mortgage, then you're paying too much", while then claiming in the fast talking at the end that it will result in deferred interest.
Is the system messed up that it allows people to take loans that are semi-falsely advertised, and mislead the population that has sub-par intelligence? Yep! However, people should have some responsibility... To take such loans in the interest of showing off (which is what it really is, as youre buying WAY more than you can really afford, despite being "approved"), while allowing one'sself to be overextended by such an amount that they would reach the verge of forclosure is also disgusting on them.
In the end all, it is definitely the companies' fault that they are misleading the people... However it is also peoples' fault for not doing their due dilligence, or for lack of better words, for being self-centered idiots with no analytical abilities.
JMH
All day on TV now all I see is lending tree ads making fun of the guy that has a new house, car and is a member of the golf club saying he's 'up to my eyeballs in debt'
then quickly followed by quicken with their "does a $300,000 mortgage for $800 a month sound good to you?"
there they go again getting people in on interest only loans, adding to the problem we have now.
then quickly followed by quicken with their "does a $300,000 mortgage for $800 a month sound good to you?"
there they go again getting people in on interest only loans, adding to the problem we have now.
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