Zookeeper wrote:

Something about this doesn't make sense.  People losing their home when they stop working isn't anything new. That isn't a symptom of "the mortgage crisis". 

If someone is still making enough to pay the mortgage they had when they first bought the house then they should be making enough to pay rent someplace after losing the house.  So why would people become homeless just because their mortgage went up? Did rents sky-rocket as well?

It's difficult to rent when you have no job and a pending foreclosure.   You won't pass a credit check.

Well, the reason the banks made the loans was because Uncle Sam said they had to. No "blackouts" of certain neighborhoods meant that if the bank DIDN'T make the loan, the govt would fine them. If they did, people couldn't pay it. Thanks Uncle Sam!

headkicker_girl wrote:

It's difficult to rent when you have no job and a pending foreclosure.   You won't pass a credit check.

It's difficult to rent when you have no job. Period. Blaming it on the "mortgage crisis" is bullshit. If you can't afford to rent the minimum dwelling to keep yourself off the street then you can't afford the most reasonable mortgage that was available BEFORE the "mortgage crisis" hit.

GooberMcNutly wrote:

Well, the reason the banks made the loans was because Uncle Sam said they had to. No "blackouts" of certain neighborhoods meant that if the bank DIDN'T make the loan, the govt would fine them. If they did, people couldn't pay it. Thanks Uncle Sam!

That's BS as a cause of the crisis Goober. Nor is it factually correct about the source of the defaulting loans. The problem is not that loans are made to those with lower credit, but the way the loans are structured and approved. No one forced the banks to offer such lousy risky loans. The banks have no one to blame but themselves.

Loans were offered with terms too liberal that could not be supported except by a rampant real estate bubble. Loan valuation was determined by values that could not be supported. One example: people were offered loan amounts for such a large percentage of assesed values far above what had been considered sane and financially sound before. The banks justified their future risk and return to the markets by charging adjustable rates that would go up if credit tightened.

But of course the equation could not be supported in a stalled market with rising credit. It was a house of cards. But lenders did not care in the short term. Regulation and the finance markets had become too loose. Allowing new types of financial institutions to speculate in loans that in previouse eras would not have pasted the smell test. Lenders and secondary speculaters were not held accountable in the marketplace for the risky loans they were writing or trading. Because in the current climate they knew they could sell the mortgages off to someone else before they became due or the risk exposed.

The problem is not writing loans to low income, lower cedit or lesser valued neigborhoods. It lies in structuring those loans so they are sane financially. And that the financial markets are not allowed to get away with not applying real risk valuations to  speculative mortgage trading between institutions.  Since the 1960s and creation of the modern mortgage industry it has been shown succesfully how to offer loans to those with modest income and credit. Nothing in Government programs to support loans in "blackout neighborhoods" prevents sound terms.

Before all this started my ex the accountant worked with our friend the mortagage broker to obtain loans in gentrifying neighborhoods. We were all shocked by the outrageous terms that began to be offered 5 years ago. And how fast these loans would be traded. Heck the lenders would send contract assesors and we would state some outrageous inflated value we wanted the property assesed at. Making sure to point out  the listing of some local expensively rehabbed property that some fool had payed too much for. And we inevitably would get the assesment we wanted from them.

2 years ago we made a point to go around to all our lower credit friends and clients to make sure that they got new loans with more traditional terms and fixed rates.

Last edited by Johnny_Rotten (2008-03-14 18:37:33)

Fled wrote:

A question for the wizards of High-Street - if a the distress market value of a property has declined below the mortgage balance, and a foreclosure occurs, does the mortgagor sue the mortgagee for the shortfall?  I would assume they have a right to do so, although I don't know what they do in practice.

In California a purchase money lender (as opposed to a lender of a second mtg.) takes the property as collateral and cannot pursue a deficiency judgment if the buyer defaults and the lender forecloses.

It really isn't the banks and mortgage companies who are eating these loans.  It's our own retirement accounts that are getting hit.  Mutual funds and retirement fund managers invest heavily in mortgages.  The banks and mortgage companies sell the loans almost as soon as they write them.  They make money from fees and back end servicing of the loans.  You may be sending your mortgage payment to Bank of America or Countrywide, but odds are the owner is a little old lady clipping her coupons.

sofie wrote:

Yay for us.

what she said....

oh, and we're fukt.

One word,  subrogation....