Scary Story

[12voltman59]

I just listened to this report on NPR about a pooled investment fund--consisting of a group of Florida school districts and many other governemnt and institutional investors had invested their operational budgets. The fund had lost $8 billion USD in a matter of days, making those school districts involved essentially broke overnight.

Government agencies such school districts, city, state and county governments and public retirement funds, often do this since they have so much money--far too large for bank accounts and the funds do pay, usually, interest rates higher than those paid out by banks and in the past---were safe since the fund managers invested the money in reputable, mainline busineses that over time, tend to provide a favorable return on investiment. The fund managers were supposed to make wise and conservative investiment decisions.

This particular fund had invested heavily in the "subprime" lending market--this whole damn deal--all based on some people wanting to make a fast buck--is gonna screw us all in so many ways and the many shoes yet to fall from this have yet to do so---

Hold on to your hats ya'all--this ride is gonna get rough and it's not gonna be much fun at all.

[HighEnergy]

The subprime market? OMG, I do broker price opinions on those homes that folks took the adjustable rate mortgages on them, and now that their house payments have doubled, the houses sit empty and the values are dropping. The banks have subprime loans on houses that are now worth maybe 60% of the loan amount. We are so screwed.

CHECK YOUR MORTGAGE NOW! SEE IF IT'S ADJUSTABLE, AND HOW HIGH YOUR RATE CAN INCREASE AND WHAT THAT MEANS IN DOLLARS TO YOU! REFINANCE NOW IF YOU CAN!!! :2cents:

[jem_is_bi]

It is the same people that gave us the “Savings & Loan Crisis”.
1. These greedy unethical people get control of a financial institution.
2. They do unethical activity that greatly enriches them and undermines financial stability of the institution.
3. They bailout WITH THE MONEY and leave the institution begging for a bailout from the government and the country possibly headed into hard times.
4. Lawyers and political connections keep them out of hard time jail.
5. Hard working people repair the damage to the economy.
6. Go to step 1.

JEM

[DiamondDog]

People shouldn't take out mortgages and funds on houses/property/land that they can't afford and can't pay for and then expect the federal and state government to bail them out when they can't pay.

[Lisa (va)]

Though I do agree some folks tend to live beyond their means, I don't believe in a blanket statement saying folks shouldn't buy houses they can't afford. I live a pretty simple life, but even this simple girl realizes that the cost of living is rising quicker than most incomes. Not that I think government should have to bail folks out though, unless circunstances warrant it. According to my husband, most lenders would rather work with folks than foreclose in most instances, they want money, not property they may have to get rid of at a loss.

Lisa
hugs n kisses

[wolfcamp]

People shouldn't take out mortgages and funds on houses/property/land that they can't afford and can't pay for and then expect the federal and state government to bail them out when they can't pay.

This statement is basically true, but many honest people were blatantly duped by unscrupulous mortgage lending agents. Many borrowers were either lied to, or the details of their loans were purposely hidden. There were very few regulations on the mortgage industry. As I write this the President is on TV announcing new regulations in the mortgage industry, so they are acknowledging the problem, but it's too bad that they are closing the barn door after the horse is long gone.

[the mage]

Unfortunately for the average U.S. citizen there are a few realities at play here.
The administration has in fact bankrupted your country. The real time war has destroyed your countries reputation and doubled your national debt with no end in sight. In every financial respect the US is debt loaded.

There is a second war gong on. There are several countries working very hard in waging war on your economy. The removal of the US dollar as the basis for oil trading on world markets will devastate your dollar and your life.

There is a third war it is being waged on you the middle class American and the sad part is that this too, is from within. The Hyper wealthy wall street types are working hard to steal every dollar you have. World wide corporation run by these men send the jobs offshore where the cost of maintaining the "middle class" is 3 bucks a day leaving you jobless, mortgage laden, and soon quite likely hungry.

[DiamondDog]

Unfortunately for the average U.S. citizen there are a few realities at play here.
The administration has in fact bankrupted your country. The real time war has destroyed your countries reputation and doubled your national debt with no end in sight. In every financial respect the US is debt loaded.

There is a second war gong on. There are several countries working very hard in waging war on your economy. The removal of the US dollar as the basis for oil trading on world markets will devastate your dollar and your life.

There is a third war it is being waged on you the middle class American and the sad part is that this too, is from within. The Hyper wealthy wall street types are working hard to steal every dollar you have. World wide corporation run by these men send the jobs offshore where the cost of maintaining the "middle class" is 3 bucks a day leaving you jobless, mortgage laden, and soon quite likely hungry.

If you actually study American history you'll see that nothing much has changed.

We've pretty much always had a debt and war based economy, and been dependant on oil and other natural resources.

The idea of "middle class" is just a myth and many people are wealthy or poor and both hide it very well.

These aren't good things but it's definatley not a new thing and it's always been like this.

[Bluebiyou]

While there is reality to the question of how far the dollar drops and US$ as oil price basis, how much of the 'bubble' is nothing due to profiteering, a large amount also depends on popular opinion. Bank runs, perceived stock values, can be very influenced by mass hysteria of 'the sky is falling'. However, if the sky DOES fall (and today is August, 1929), then it would be a good time to cash out. I think that... POOF!

[the mage]

Case in point....even the friggin newspapers.....





'Sacramento Bee' To Outsource Ad Work To India

Published: December 06, 2007 3:40 PM ET

SACRAMENTO The Sacramento Bee is outsourcing some of its advertising production work to India.

The newspaper plans to eliminate half its artist jobs by next summer and give the business to Express KCS, a San Jose company with offices in New Delhi and nearby Gurgaon.

Ed Canale, the Bee's vice president of business development, said the company has already done similar work for The Fresno Bee. Both papers are owned by Sacramento-based McClatchy Co., the third-largest newspaper publisher in the country by circulation.

In August, McClatchy outsourced circulation customer service to an Illinois company that also operates out of the Philippines.

[the mage]

If you actually study American history you'll see that nothing much has changed.

We've pretty much always had a debt and war based economy, and been dependant on oil and other natural resources.

The idea of "middle class" is just a myth and many people are wealthy or poor and both hide it very well.

These aren't good things but it's definatley not a new thing and it's always been like this.


Well, I agree on 3 of 4 points.... not bad for you and me.;)

There really is a middle class, its existence is the defining factor of capitalism.. Being middle class is not in your debt load, it is in the power you wield.
As a middle class American you have control of your immediate environment, shelter, food, a job all are assumed things. Expensive things.
That is the part that will not last.
Capitalism assumes constant growth is the norm and a good thing.
It is not.
Planet earth is a closed system.

[chulainn2]

It is the same people that gave us the “Savings & Loan Crisis”.

It was our congress that wanted to open the doors to more potential homebuyers and HUD lowered the standards and once again allowed risky lending practises. Now they point fingers down stream and act like they are here to protect the lil man. I fart in their general direction.
BTW, I have gone thru more than one of these crashes and it is not the US Gvt. role to get involve. Sure many will lose a house but they can rent and they did not have the economic qualifications to own that home in the first place.Also, I have been a mortgage loan officer for over 5 yrs, I think that qualifies my opinion.

[jem_is_bi]

It is the same people that gave us the “Savings & Loan Crisis”.

It was our congress that wanted to open the doors to more potential homebuyers and HUD lowered the standards and once again allowed risky lending practises. Now they point fingers down stream and act like they are here to protect the lil man. I fart in their general direction.
BTW, I have gone thru more than one of these crashes and it is not the US Gvt. role to get involve. Sure many will lose a house but they can rent and they did not have the economic qualifications to own that home in the first place.Also, I have been a mortgage loan officer for over 5 yrs, I think that qualifies my opinion.

Loan officers are not the caused this problem. They do not set the rules. Rather, it is those with the political connections that run the financial organization primarily for their own benefit.
Blame the little guy? The little guy is trying his best to provide for the family and often does not have the will power to turn down an offer that is too good to be true.
So, is disaster his just rewards for big dreams and lack of judgment?
What difference does my opinion make, the little guy ALWAYS looses.
Rather, I want the unethical, don’t care, multimillionaire people to join in the suffering with the little guy or even better change their ways.

JEM

[guycurious]

My:2cents:....

You are looking to buy a house. You take the purchase price of the house, minus your down payment, to a lender and they determine your monthly payment based on the loan amount and your credit score. Simple enough. At this point you determine if your current income can support this payment.

Now, you see another house that is more expensive. Once again you go to a lender and they determine your monthly payment based on your loan amount and your credit score. If you cannot afford the house you CANNOT buy the house. Period.

Just because a lender offered you a 3/1 or a 5/1 ARM so that you could afford the more expensive house is not the lenders problem. It's your greed that's the problem. You knew damn well at the end of the ARM your rate would adjust. You gambled and LOST !! There is no evil lender here. Your greed put you in this situation.

You should have bought the less expensive house that you could AFFORD.

Now, sometimes financial situations change (death, loss of job, etc.) Such an occurance could put you out of your house. There is no fault here, no one to blame. This is life. Changes happen.

When my wife and I were shopping for a house we limited ourselves to a house we could afford based on my salary alone. We knew we would be having children and our plan was for my wife to stay home. Our lender pre-approved us for a lot more money than we wanted to spend. We could have bought a larger house but we didn't because we knew our financial limitations.

So to all of the people crying about how evil the lending industry is just shut up. People today are lacking basic financial sense. It's their own fault, their own problem.

[elian]

That's the peculiar part - they DO generally have rules that say if your debt/income ratio is too high we aren't giving you the loan. I mean yeah, you should know if you can afford a $500K house or not - but the only reason I can figure that mortgage officers would grant loans to people well over their means is "greed".

I mean, did they actually really expect these people to be able to pay the full term of the mortgage?

Did the investors abusing the real estate market, riding it like it was the stock market actually expect it to react in the same way? Yeah, OK except now instead of losing stock people are actually losing their homes.

So now they all come running to the government .. "Oh geeze Mr. Government we made millions of dollars but we're in trouble now.. cut us a break..."

And let's not forget our friends at the home equity loan companies - unless you flat out didn't have a choice why would you choose to sell out your mortgage and start all over again from scratch with a new loan? 30% credit card interest I guess..

Shakes head..

[12voltman59]

The problem with much of the loans falling under the rubic of "subprime" from the stories I hear, see and read about--many of these companies did a great many things that were at best foolish and at best down right fradulent in order to "sell loans" to those who were questionable.

Many of the people who took out such loans were spurred on by news reports and many other things that "you are a good American if you buy a home--come buy a home now." They wanted their piece of "the American Dream."

They may not have been so well informed on the whole process and according to this one guy I listed to on an NPR program who had worked for a now defunct subprime lender---said they did not make it clear to many of their "clients" that they had balloon rates, which after a few years would make their payments go from something they could afford to something they could no way afford.

It was the policy of this and like companies to mis-inform these people and that company often engaged in falsifying client income and tax return info in order to get the loan "sold"---so it is kind of hard to say that many of these people who wanted a home, but were marginal in terms of income and credit, are responsible for their pickle--they got took by unscrupulous lenders.

The thing with this whole deal--it goes way beyond just the home loan market--and beyond America--the crisis is sending ripples throughout the global economy and one thing is for sure---a problem like this now has ramifications that can upset many apple carts--all around the world.

[elian]

Yeah well it's technically true that you can buy a $200K house for $269 a month.

With a balloon (err.."Jumbo") you're basically paying "interest only" for the life of the loan .. and then on day 29 years and 365 days you are expected to fork over the entire principal in one lump sum payment. Perhaps home buyers could do a little more research before they sign - and perhaps loan officers could be a little more forthcoming with highlighting ALL the terms of the loan..not just the good parts.

If something sounds too good to be true, it is - everybody knows that - I guess in this case nobody wanted to believe it.

[macman885]

It is the responsibility of every home-buyer ( or anyone that signs a contract) to read and understand the contract you are getting ready to sign. If you don't understand it then find someone other than the other party to the contract to explain it to you. If you sign a bad contract you have only yourself to blame even if the other party was fraudulent. Never sign anything until you read and UNDERSTAND it.

When my wife and I decided to buy a home we educated ourselves about the process, researched lenders, researched the house market in our area and when we were ready to buy we paid a lawyer to read and explain the contract to us. The cost to pay a lawyer to do this was about $100. Well worth the expense. Bottom line is, never trust anyone who is trying to make a sale to tell you the whole truth.

BTW, the government should stay out of this and let the unscrupulous lenders go bankrupt. The borrowers who bought a house they could not afford should face the consequences of their bad decision. The market will be much better and stronger for everyone once this is over.

[guycurious]

It is the responsibility of every home-buyer ( or anyone that signs a contract) to read and understand the contract you are getting ready to sign. If you don't understand it then find someone other than the other party to the contract to explain it to you. If you sign a bad contract you have only yourself to blame even if the other party was fraudulent. Never sign anything until you read and UNDERSTAND it.

When my wife and I decided to buy a home we educated ourselves about the process, researched lenders, researched the house market in our area and when we were ready to buy we paid a lawyer to read and explain the contract to us. The cost to pay a lawyer to do this was about $100. Well worth the expense. Bottom line is, never trust anyone who is trying to make a sale to tell you the whole truth.

BTW, the government should stay out of this and let the unscrupulous lenders go bankrupt. The borrowers who bought a house they could not afford should face the consequences of their bad decision. The market will be much better and stronger for everyone once this is over.


You and I could be twins........

[Doggie_Wood]

Anyone want to buy a house in Saginaw Texas? 7 years old - and a good investment. Under mkt.

[12voltman59]

It is the responsibility of every home-buyer ( or anyone that signs a contract) to read and understand the contract you are getting ready to sign. If you don't understand it then find someone other than the other party to the contract to explain it to you. If you sign a bad contract you have only yourself to blame even if the other party was fraudulent. Never sign anything until you read and UNDERSTAND it.

When my wife and I decided to buy a home we educated ourselves about the process, researched lenders, researched the house market in our area and when we were ready to buy we paid a lawyer to read and explain the contract to us. The cost to pay a lawyer to do this was about $100. Well worth the expense. Bottom line is, never trust anyone who is trying to make a sale to tell you the whole truth.

BTW, the government should stay out of this and let the unscrupulous lenders go bankrupt. The borrowers who bought a house they could not afford should face the consequences of their bad decision. The market will be much better and stronger for everyone once this is over.

This sounds all well and good--as in the story that I had heard--many of these companies specifically targeted populations who were not so financially savy--and their entire business model was based on falsehoods---

As far as government intervention is concerned--as many central banks have already done--they have taken steps to help the credit markets because since these loans are apparently such a large percentage of the mortgage loan pools--if governments via monetary, fiscal and credit policies don't (or didn't--most central banks did take steps to keep credit going) step in and do something-- those in the know on this say that credit markets might have already dried up--bringing down just about every economy on the planet since this situation is sort of like a giant squid with its tentacles reaching into every corner of the global economy.

I do agree though--those profiteering companies that were set up to make a fast buck in subprime lending deserve to go under and don't deserve a bailout.

[macman885]

This sounds all well and good--as in the story that I had heard--many of these companies specifically targeted populations who were not so financially savy--and their entire business model was based on falsehoods---

As far as government intervention is concerned--as many central banks have already done--they have taken steps to help the credit markets because since these loans are apparently such a large percentage of the mortgage loan pools--if governments via monetary, fiscal and credit policies don't (or didn't--most central banks did take steps to keep credit going) step in and do something-- those in the know on this say that credit markets might have already dried up--bringing down just about every economy on the planet since this situation is sort of like a giant squid with its tentacles reaching into every corner of the global economy.

I do agree though--those profiteering companies that were set up to make a fast buck in subprime lending deserve to go under and don't deserve a bailout.



The danger here is that the government will try to do too much to fix the problem and thereby causing the crisis to last longer and be even worse as FDR did with the depression. Yes this is a problem that needs to be dealt with but all that is needed is some minor regulation of mortgage brokers and allow the consequences of stupid decisions made by banks, mortgage companies and consumers play out. We will see a couple of years of tight credit but not the devastation to world markets being predicted by the so called experts. The problems that will be created by a huge government bailout such as larger deficit spending and the propping up of bad business models will be much more devastating to this country and others that do business with us.

And just a word about the falling dollar which was mentioned earlier in this thread. The falling value of the US Dollar is more a function of the trade deficit than it is of the credit market or the budget deficit which, by the way is not as large as some seem to think it is when looked at as a percentage of the Gross Domestic Product. The budget deficit as a percentage of the GDP was much higher in the 70's.

[12voltman59]

More statistics relating to the subprime mortgage market meltdown I found:

The US Conference of Mayors had an economic study done on this subject--according to the report, the subprime meltdown is going to depress the US GDP (Gross Domestic Product) by $166 billion in 2008; there will be 524,000 fewer jobs created in 2008; property values nationwide will decrease by $1.2 trillion; there will be an estimated 1.4 million in foreclosures in the coming year for a total market value of $316 billion of foreclosed property.

Due to job loss, the foreclosures and other related economic activity lost--local, county, state and federal tax receipts will decrease dramatically.

Also-for those who don't face possible foreclosure--the fall in property values will also be felt by everyone.

Other impacted areas: car sales will fall and be the lowest in many years and overall consumer spending will also fall.

To see the full report: http://usmayors.org/uscm/news/press_releases/documents/mortgagereport_112707.pdf

The report is not all doom and gloom though--that job growth in 2008 will still increase, albeit at a lesser rate as will GDP growth and those trends will continue in 2009.