This is criminal

Login or register to post comments Last Post 943 reads   24 posts
Viewing 10 posts - 11 through 20 (of 24 total)
  • Tue, Jan 06, 2009 - 02:25pm

    #11

    Dogs_In_A_Pile

    Status Platinum Member (Offline)

    Joined: Jan 04 2009

    Posts: 824

    count placeholder0

    Re: This is criminal

daleasberry –

 Fair enough – let me take a step back and ask this.

How do we separate those who were victims of bad luck or circumstances beyond their control (job loss, sickness, death of primary wage earner) from those who lack fiscal responsibility demonstrated by their own (continuous) poor choices and disregard for consequence?  Perhaps some or most of the fault for the latter group being in the middle of this mess lies with the lenders who willingly accepted no-paper mortgages either because they had misguided good intentions or were just flat out unscrupulous – but how do we figure that out?  Somewhere along the line someone needed to do what was right and say "No I can’t get this mortgage" or "No you can’t have this mortgage"

The roots of the problem are much deeper – the insidious level of class warfare Bageant addresses in DHWJ most certainly exists, but part of the problem is a growing sickness in that modern society is all to quick to forgive and explain away problems as someone/something else’s fault rather than hold people accountable for their actions and choices – the US is turning into a country of enablers.  And I don’t mean enabling through provision of opportunity.

If you haven’t already read "The Fourth Turning" by William Strauss and Neil Howe, please consider it.  

Thanks for making me step back and think – Sifu Bruce would be pleased.

  • Tue, Jan 06, 2009 - 03:00pm

    #12
    daleasberry

    daleasberry

    Status Member (Offline)

    Joined: Oct 29 2008

    Posts: 24

    count placeholder0

    Re: This is criminal

I would say that we are too slow to forgive. I would agree that we live in a culture of blame – only pointing out that you choose to blame the poor and the people on the losing side of the class war.

I can’t change people’s behaviors or attitudes, I can only offer alternatives to those willing to listen and have a soft heart for those that refuse. So… I spend most of my time enabling in the positive sense since so few are willing to listen 🙂

The Fourth Turning is on my reading list.  I’m vaguely familiar with what he has to say. John Michael Greer recently criticized  "cyclic history" although he doesn’t mention Fourth Turning in particular. I have to say that I agree mostly with Greer and less so with the cyclic historicists. Greer (The Long Descent), and Jared Diamond (Collapse: How Societies Choose To Fail Or Succeed), are probably the two most knowledgable men about civilizational collapse.

  • Tue, Jan 06, 2009 - 03:33pm

    #13
    Farmer Brown

    Farmer Brown

    Status Silver Member (Offline)

    Joined: Nov 23 2008

    Posts: 159

    count placeholder0

    Re: This is criminal

[quote]

Be very careful with this opinion… most subprime mortgages were thrust
on minority borrowers that could afford standard mortgages. For
evidence, prometheus6.org has dozens of articles spelling it out.  Also
remember that mortgages were affordable at the beginning rates of an
ARM but became unaffordable as the rates rose. In addition, take into
consideration that lots of people have been, and are, losing their
jobs. Finally, as simple as this may seem to us, most people didn’t
have the financial savvy to understand all the options or consequences
of what they were given with their mortgages and didn’t have the
resources to find out.

I, for one, do not welcome draconian opinions on this complex issue.[/quote]

 

Please see this article from the NY Times, published in 1999: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=all   and NOTE PARAGRAPH 8, quite a prediction from 10 YEARS AGO!!

Fannie Mae Eases Credit To Aid Mortgage Lending

Published: September 30, 1999

In a move that could help increase home
ownership rates among minorities and low-income consumers, the Fannie
Mae Corporation is easing the credit requirements on loans that it will
purchase from banks and other lenders.

The action, which will
begin as a pilot program involving 24 banks in 15 markets — including
the New York metropolitan region — will encourage those banks to
extend home mortgages to individuals whose credit is generally not good
enough to qualify for conventional loans. Fannie Mae officials say they
hope to make it a nationwide program by next spring.

Fannie
Mae, the nation’s biggest underwriter of home mortgages, has been under
increasing pressure from the Clinton Administration to expand mortgage
loans among low and moderate income people and felt pressure from stock
holders to maintain its phenomenal growth in profits.

In
addition, banks, thrift institutions and mortgage companies have been
pressing Fannie Mae to help them make more loans to so-called subprime
borrowers. These borrowers whose incomes, credit ratings and savings
are not good enough to qualify for conventional loans, can only get
loans from finance companies that charge much higher interest rates —
anywhere from three to four percentage points higher than conventional
loans.

”Fannie Mae has expanded home ownership for millions of
families in the 1990’s by reducing down payment requirements,” said
Franklin D. Raines, Fannie Mae’s chairman and chief executive officer.
”Yet there remain too many borrowers whose credit is just a notch
below what our underwriting has required who have been relegated to
paying significantly higher mortgage rates in the so-called subprime
market.”

Demographic information on these borrowers is
sketchy. But at least one study indicates that 18 percent of the loans
in the subprime market went to black borrowers, compared to 5 per cent
of loans in the conventional loan market.

In moving, even
tentatively, into this new area of lending, Fannie Mae is taking on
significantly more risk, which may not pose any difficulties during
flush economic times. But the government-subsidized corporation may run
into trouble in an economic downturn, prompting a government rescue
similar to that of the savings and loan industry in the 1980’s.

”From
the perspective of many people, including me, this is another thrift
industry growing up around us,” said Peter Wallison a resident fellow
at the American Enterprise Institute. ”If they fail, the government
will have to step up and bail them out the way it stepped up and bailed
out the thrift industry.”

Under Fannie Mae’s pilot program,
consumers who qualify can secure a mortgage with an interest rate one
percentage point above that of a conventional, 30-year fixed rate
mortgage of less than $240,000 — a rate that currently averages about
7.76 per cent. If the borrower makes his or her monthly payments on
time for two years, the one percentage point premium is dropped.

Fannie
Mae, the nation’s biggest underwriter of home mortgages, does not lend
money directly to consumers. Instead, it purchases loans that banks
make on what is called the secondary market. By expanding the type of
loans that it will buy, Fannie Mae is hoping to spur banks to make more
loans to people with less-than-stellar credit ratings.

Fannie
Mae officials stress that the new mortgages will be extended to all
potential borrowers who can qualify for a mortgage. But they add that
the move is intended in part to increase the number of minority and low
income home owners who tend to have worse credit ratings than
non-Hispanic whites.

Home ownership has, in fact, exploded
among minorities during the economic boom of the 1990’s. The number of
mortgages extended to Hispanic applicants jumped by 87.2 per cent from
1993 to 1998, according to Harvard University’s Joint Center for
Housing Studies. During that same period the number of African
Americans who got mortgages to buy a home increased by 71.9 per cent
and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite
these gains, home ownership rates for minorities continue to lag behind
non-Hispanic whites, in part because blacks and Hispanics in particular
tend to have on average worse credit ratings.

In July, the
Department of Housing and Urban Development proposed that by the year
2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up
of loans to low and moderate-income borrowers. Last year, 44 percent of
the loans Fannie Mae purchased were from these groups.

The
change in policy also comes at the same time that HUD is investigating
allegations of racial discrimination in the automated underwriting
systems used by Fannie Mae and Freddie Mac to determine the
credit-worthiness of credit applicants.

 

END OF ARTICLE

 

In my opinion, this mess has two parties:  an artificially-created (that is, government-created) mortgage-buying supply of money in the form of Fannie Mae and Freddie Mac (as so well presented in the above article), and an irresponsible, uneducated supply of mortgage-buyers, created by a culture that does not believe in savings, does not understand basic credit principals, and has become acustomed to government hand-outs. 

This is not a draconian opinion, it is just reality.  I beleive the best thing that could happen right now is for banks to foreclose on delinquent borrowers.  That would help all parties.  Banks get their collateral back, which will alleviate the strain on their balance sheets, which is one of the strains keeping them from lending anymore money.  The delinquent borrowers will get out of a house they cannot afford and switch to renting, which is what they should have been doing in the first place.  They will have more money left over for food and other necessities.  

For those who worry about people "losing" their home, please think about it:  what are they really losing?  They didn’t put any money down!  In most mortgages, the first five years of payments amount to almost nothing in equity.  If they stay in the home, with their current loan, that’s basically an enormous liability on their personal balance sheet and credit worthiness, and a liability they will have to live with for decades.  Apparently, it’s also less than the actual value of the home in many cases!  If I were in this situation, I’d be begging for them to foreclose on me!  Let me out!

Some want government to bail out these "home-owners".  What is that other than a devaluation of our currency, and a slap in the face to the rest of us who have not made these mistakes?  What incentive will there be in the future for making conservative, responsible decisions about home purchasing?  What signal will this send to future home-buyers when they consider the risks of default (answer: don’t worry, someone will bail you out)?  What signal will this send to banks when they consider future loans? (answer: don’t worry, make the loan anyway – someone else will pick up the tab).  

Picking up the tab and holding none accountable is only a recipe for repetition of expensive mistakes.   

I know it’s easy to feel sorry for people, but in my opinion, the road to hell is paved with good intentions.

Patrick

 

  • Tue, Jan 06, 2009 - 04:05pm

    #14
    Susan

    Susan

    Status Member (Offline)

    Joined: Jun 22 2008

    Posts: 8

    count placeholder0

    Re: This is criminal

Just adding my voice to the ‘hold the phone’ sentiment.  I live in this county of Michigan.  We have all kinds of foreclosures happening daily (the last foreclosure section of the paper was as large as a Wall Street Jounal) and as many stories to match them.  Not enough detail is given here to make a determination. 

In this neighborhood alone there have been three "jingle mails" in recent months.  Two by currently employed, highly paid physicians who happened to have taken loans with little down (so they could make multiple or other investments) and now have decided that values have decreased so substantially it is to their advantage to "stick the bank with it" and consider payments to date as rent.  They are not always families that can’t afford housing.  The latest fad is to hire an atty to short sell.  It is happening more and more frequently.

  • Tue, Jan 06, 2009 - 05:03pm

    #15

    Dogs_In_A_Pile

    Status Platinum Member (Offline)

    Joined: Jan 04 2009

    Posts: 824

    count placeholder0

    Re: This is criminal

Dale –

We are probably arguing in the margins now, but I need to stress that I am not "blaming the poor" (although I can understand why it might be implied from my post).

I blame the irresponsible.  Susan’s post above is a perfect example of the type of person I would find fault with.

I blame those who choose to remain ignorant – who are surrounded by numerous resources to educate themselves and enact positive change in their lives.

I blame those who go to bed each night wishing and hoping that thier lives were ‘different’ or ‘better’, yet wake up in the morning and do the exact same things they did the day before and expect their lives to change.

And I blame a society that fosters the sense that somehow, all of this is okay.

Now for the half-full side.

I appreciate well-reasoned debate and thought provoking challenges like yours.  I also appreciate the efforts of you and many others in here who are trying to educate people and offer alternatives.  That is why I have not gven up.  I am hoping that through this site and the efforts of the people in here, we can start making the positive changes in society and we can achieve the kind of enabling you alluded to.

Sincere thanks for this conversation – perhaps we should team up and try the "Good cop, bad cop" approach.  I look forward to further exchanges.

Peace my friend.

  • Tue, Jan 06, 2009 - 05:32pm

    #16

    Erik T.

    Status Silver Member (Offline)

    Joined: Aug 05 2008

    Posts: 213

    count placeholder0

    Re: This is criminal

[quote=Susan]

In this neighborhood alone there have been three "jingle mails" in recent months.  Two by currently employed, highly paid physicians who happened to have taken loans with little down (so they could make multiple or other investments) and now have decided that values have decreased so substantially it is to their advantage to "stick the bank with it" and consider payments to date as rent.  They are not always families that can’t afford housing.  The latest fad is to hire an atty to short sell.  It is happening more and more frequently.

[/quote]

[quote=Dogs_in_a_Pile]

I blame the irresponsible.  Susan’s post above is a perfect example of the type of person I would find fault with. 

[/quote]

Ok, I should probably know better than to enter this conversation, but I’m curious why you would think this.

I see why there is a grey area with the poor people. On one hand, they were living way past their means and never should have been in those homes in the first place. But on the other hand, they may have lacked the sophistication to understand the deal they were getting themselves into. Everyone is entitled to their own opinion as to whether these people were really exploited, or if they should have known enough to seek to understand the loan contract fully. It’s a subjective argument for sure.

But the bankers who financed the doctors in question were not poor people, and were not ignorant as to the facts. They made non-recourse loans secured by property. That’s a business deal, and it sounds like all parties understood the terms clearly. When the values declined, the doctors made the prudent move and asserted their lawful right to default on the contract and forfeit the property. I can’t fathom why anyone would find fault with that. The doctors are exploiting the bankers’ stupidity. Serves ’em right if you ask me, and one could even argue that the banks are paying a little extra penalty for the ills they caused those borrowers who really didn’t understand what they were getting themselves into.

Why would anyone fault the doctors? They asserted their legal right to default within the terms of the contract, and have done nothing illegal or unethical so far as I can tell. If they are really smart, they’ll allow their homes to go through the foreclosure process, then attend their own foreclosure auction and buy back their own homes at a steep discount to the amount previously owed. Yes, that’s perfectly legal, and I would argue entirely ethical as well.

Erik

 

  • Tue, Jan 06, 2009 - 06:24pm

    #17
    Susan

    Susan

    Status Member (Offline)

    Joined: Jun 22 2008

    Posts: 8

    count placeholder0

    Re: This is criminal

To add to my above post:

Expect the foreclosure rate to increase massively due to this behavior in addition to the usual suspects of unemployment and impoverishment as we go forward in 2009.  The (grapevine) is as follows (I have not personally looked into this):Should you be gainfully employed able to pay and decide to short sell (leave the house with the bank taking nothing away from the transaction) apparently the only negative is a credit hit which does not have either the stigma attached to it that it once did or preclude future borrowing though, most are going and buying the next living quarters on a 30 fixed before ceasing to pay on the present and sending it into pre-foreclosure. As Alt-A and prime start to show up more this year, I think a good percentage will be people looking just to get out their situations.  These actions just exacerbate the decline of course causing the next decline and so on.  I suspect that restrictions (on assets/income) that might have prevented the ability to hire an atty to negotiate a short sale with the mortgage company have been removed or lifted and that is why this phenomenon is starting to show up.  It isn’t helping the situation.

I’m one of those (idiots) who saved for years before buying and put 30% down on a 30 year fixed.  Area homes are down 36% already and I expect the pace of even "prime" borrowers essentially abandoning loan committments to pick up in an attempt to cut losses even if they put down substantial amounts originally.

Erik-No, the neighbors haven’t done anything wrong legally as far as I know.  The banks allowed those loans.  The law (apparenly) allows them to leave that contract with the help of an attorney to negotiate the short sale without regard to assets and/or income.  (Short selling typically means you must convince the bank you can’t pay or it is in the best interest of the bank to allow it).  The bank gets stuck with the house and sells it cheap driving down the values of residents who were not as prescient in terms of taking a zero down low interest ARM and using it to their advantage, more residents decide to abandon ship driving down values further etc etc until we hit zero I guess.  I was really just pointing to some of what is occuring here that is not due to unemployment/poverty and it’s picking up speed.

The bank, saddled with the mounting losses, goes to the Fed and passes the loss on to the taxpayer?

 

  • Tue, Jan 06, 2009 - 06:33pm

    #18

    Dogs_In_A_Pile

    Status Platinum Member (Offline)

    Joined: Jan 04 2009

    Posts: 824

    count placeholder0

    Re: This is criminal

Erik – Great post, interesting questions and observation.  Glad you jumped in the conversation again.

I’m less inclined to indict those who function within the existing system and legally take advantage of the rules to turn things to their advantage – if that’s what the doctors Susan referred to were doing.

I should have been clearer – it’s the folks who just toss the keys on the counter and walk out the front door that I have an issue with.  Those who have the means and employment and revenue streams to make the payments – if they didn’t live so far beyond their means just because they can.

This raises additional points to ponder.  Apparently, the doctors in Susan’s post educated themselves in how to work within the system to their advantage.  What do they have that others don’t – beyond the discipline and will to go out and get themselves smarter and improve their lives?  That is a topic for an entirely new conversation.  What can be done to ensure that everyone has access to the information to educate themselves?  Or is that the old lead a horse to water cliche?  Is it worth it to try and educate 10 (100? 1000?) people if only 1 is willing to listen.  I would say yes – because after lots of effort you can achieve a self-sustaining critical mass of educated people who can begin to make a positive difference.  For those who listen but refuse to hear and change – I’ll let Darwin sort that out.

Wonder what the next spiral conversation is going to be…………

  • Tue, Jan 06, 2009 - 08:57pm

    #19
    Susan

    Susan

    Status Member (Offline)

    Joined: Jun 22 2008

    Posts: 8

    count placeholder0

    Re: This is criminal

Dogs In A Pile

They ARE taking advantage in that the banks in question obviously felt the borrower had the income and assets to fulfill the loan and, indeed they did.  It just isn’t illegal to take advantage.

The law changed via The Mortgage Debt Relief Act of 2007 which "generally allows taxpayers to
exclude income from the discharge of debt on their principal residence.
Debt reduced through mortgage restructuring, as well as mortgage debt
forgiven in connection with a foreclosure, qualifies for the relief." So no tax hit.  http://www.irs.gov/individuals/article/0,,id=179414,00.html 

The banks in question are (ignoring?) ability to pay and other assets when opting to allow the short sale.  How or why I do not know. 

 

  • Tue, Jan 06, 2009 - 09:13pm

    #20

    Dogs_In_A_Pile

    Status Platinum Member (Offline)

    Joined: Jan 04 2009

    Posts: 824

    count placeholder0

    Re: This is criminal

Susan – thanks for the link and another thought provoking post.

So now we get into the gray area between what is legal, what is moral and what is ethical.  Sheesh – sounds like quantum entanglement to me.

At first pass, one could say that it’s black and white because it’s legal.  We can’t legislate what the banks ‘should’ do, only what they have to do  – ‘should’ is subjective depending on which side of the issue you are on.  Part of me thinks that the banks ‘should’ be asking and if you can pay, you should pay.  Another part of me says that until the law changes then you don’t have to disclose income and assets so if you can take advantage of the system, good on ya.  It gets real ugly if those taking advantage of the legality of a system are doing it at the expense of others – but how is that quantified?

I’m curious as to what you think.

 

Viewing 10 posts - 11 through 20 (of 24 total)

Login or Register to post comments