Real cause of the subprime mortgage crisis
Irish Mike
three things you need to understand:
First, the problem was caused by politicians (primarily Democrats) pushing
their "entitlement" agenda in to the free market. It started with "The
Community Reinvestment Act" (CRA) which required banks to make high risk
loans to minorities and others who could not have qualified for a home loan
or business loan under normal circumstances.
Second, Bill Clinton further liberalized the CRA and signed a bill to repeal
the Glass-Stengal Act. This Act was put in place in the 1930s following the
bank failures during the Great Depression. It was designed to keep banks
out of the speculation business.
Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003
that would have tightened requirements for these business loans and subprime
home mortgages. The vote went along party lines, the Democrats won and the
proposed changes were defeated.
The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat.
1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires
banks and savings and loan associations to offer credit throughout their
entire market area and prohibits them from targeting only wealthier
neighborhoods with their services, a practice known as "redlining." The
purpose of the CRA is to provide credit, including home ownership
opportunities to underserved populations and commercial loans to small
businesses. It has been subjected to important regulatory revisions.
Original Act
The CRA was passed into law by the 95th United States Congress in 1977 as a
result of national grassroots pressure for affordable housing, and despite
considerable opposition from the mainstream banking community.[1] Only one
banker, Ron Grzywinski from ShoreBank in Chicago, testified in favor of the
act.[2] The CRA mandates that each banking institution be evaluated to
determine if it has met the credit needs of its entire community. That
record is taken into account when the federal government considers an
institution's application for deposit facilities, including mergers and
acquisitions. The CRA is enforced by the financial regulators (FDIC, OCC,
OTS, and FRB).
The bill encouraged the Federal National Mortgage Association, commonly
known as Fannie Mae, to enable mortgage companies, savings and loans,
commercial banks, credit unions, and state and local housing finance
agencies to lend to home buyers. It also encouraged the Federal Home Loan
Mortgage Corporation, commonly known as Freddie Mac, to buy mortgages on the
secondary market and sell them as mortgage-backed securities on the open
market.[3] Due to massive financial losses, on September 7, 2008 the Federal
Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac under the
conservatorship of the FHFA.[4]
[edit] Clinton Administration Changes of 1995
In 1995, as a result of interest from President Bill Clinton's
administration, the implementing regulations for the CRA were strengthened
by focusing the financial regulators' attention on institutions' performance
in helping to meet community credit needs.
These revisions[5] with an effective starting date of January 31, 1995 were
credited with substantially increasing the number and aggregate amount of
loans to small businesses and to low- and moderate-income borrowers for home
loans. These changes were very controversial and as a result, the regulators
agreed to revisit the rule after it had been fully implemented for seven
years. Thus in 2002, the regulators opened up the regulation for review and
potential revision.[citation needed]
Part of the increase in home loans was due to increased efficiency and the
genesis of lenders, like Countrywide, that do not mitigate loan risk with
savings deposits as do traditional banks using the new subprime
authorization. This is known as the secondary market for mortgage loans. The
revisions allowed the securitization of CRA loans containing subprime
mortgages. The first public securitization of CRA loans started in 1997 by
Bear Stearns. [6] The number of CRA mortgage loans increased by 39 percent
between 1993 and 1998, while other loans increased by only 17 percent. [7]
[8]
Other rule changes gave Fannie and Freddie extraordinary leverage, allowing
them to hold just 2.5% of capital to back their investments, vs. 10% for
banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the
$12 trillion U.S. mortgage market. [9]
George W. Bush Administration Proposed Changes of 2003
In 2003, the Bush Administration recommended what the NY Times called "the
most significant regulatory overhaul in the housing finance industry since
the savings and loan crisis a decade ago." [10] This change was to move
governmental supervision of two of the primary agents guaranteeing subprime
loans, Fannie Mae and Freddie Mac under a new agency created within the
Department of the Treasury. However, it did not alter the implicit guarantee
that Washington will bail the companies out if they run into financial
difficulty; that perception enabled them to issue debt at significantly
lower rates than their competitors. The changes were generally opposed along
Party lines and eventually failed to happen. Representative Barney Frank
(D-MA) claimed of the thrifts "These two entities-Fannie Mae and Freddie
Mac-are not facing any kind of financial crisis, the more people exaggerate
these problems, the more pressure there is on these companies, the less we
will see in terms of affordable housing." Representative Mel Watt (D-NC)
added "I don't see much other than a shell game going on here, moving
something from one agency to another and in the process weakening the
bargaining power of poorer families and their ability to get affordable
housing."[11]
Criticism
Some economists have claimed that the CRA encouraged risky lending[12][13]
and contributed to the development of the subprime mortgage crisis.
According to the Wall Street Journal, the law forced banks to make loans to
borrowers who often could not repay them.[14] Federal Reserve chairman Ben
Bernanke admitted that an underlying assumption of the CRA - that more
lending is always better for local communities - is questionable.[15]
However, this is disputed by Robert Gordon who has pointed out that
approximately half of the loans were made by independent mortgage companies
that were not regulated by the CRA, and thus had no government obligation to
offer credit to minorities. In the later part of the crisis, these mortgage
companies made subprime loans at twice the rate of CRA banks. Another third
of the major subprime lenders were regulated, but had very little CRA
involvement.[16][17] Gordon also makes the argument that the weakening of
the CRA in 2004 was followed by intensified subprime lending.[16] Austrian
economist Thomas DiLorenzo counters Gordon's statistic by arguing that even
if half of the subprime loans were made by non-CRA companies, the CRA had
still caused tens of billions in defaults on mortgages by unqualified
borrowers. He also argues against Gordon's three main propositions stating
that Gordon's first two propositions flatly contradict each other, whereas
the third is unequivocally false.[18]
Congressman and 2008 Republican presidential candidate Ron Paul has
partially attributed the ongoing subprime mortgage crisis to legislation
such as the CRA.[19] Economist Stan Liebowitz has also expressed his opinion
that banks were forced to loan to un-credit worthy consumers with "no
verification of income or assets; little consideration of the applicant's
ability to make payments; no down payment." However, the chief executive of
Countrywide Financial, the nation's largest mortgage lender, is said to have
"bragged" that to approve minority applications "lenders have had to stretch
the rules a bit", suggesting that Countrywide was responsible for relaxing
its standards rather than the other way around.[20]
Irish Mike
Clave
news:8lFDk.1119$fD...@flpi145.ffdc.sbc.com...
"WAAAAH!!! BUT CLINTON!!! WAAAAAAH!!!
ruylopez
> ( The democrats did it. )
>
> Irish Mike
Why, what a surprise, Mike. We are always excited when you decide to
share a new opinion with us. It's like biting into a Klondike bar. You
already know what's in there, but it's still so goddamned delicious!
-------
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winemo
snip factual inaccucacies (as told to IM)
check phil gramm (as in glp act - Gramm-Leach-Bliley Act)
yeah, it was the dems, lol
-------
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K9way
> If you want to know the root cause of the current subprime crisis, there are
> three things you need to understand:
> First, the problem was caused by politicians (primarily Democrats) pushing
> their "entitlement" agenda in to the free market. It started with "The
> Community Reinvestment Act" (CRA) which required banks to make high risk
> loans to minorities and others who could not have qualified for a home loan
> or business loan under normal circumstances.
>
> Second, Bill Clinton further liberalized the CRA and signed a bill to repeal
> the Glass-Stengal Act. This Act was put in place in the 1930s following the
> bank failures during the Great Depression. It was designed to keep banks
> out of the speculation business.
>
> Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003
> that would have tightened requirements for these business loans and subprime
> home mortgages. The vote went along party lines, the Democrats won and the
> proposed changes were defeated.
GOP controlled house and senate in 2003 . This line is untrue !! if it
went along party lines , it would have flown thru
Thank you Lord for the TV Scooter Morons we are about to deceive
________________________________________________________________________
* kill-files, watch-lists, favorites, and more.. www.recgroups.com
Bob T.
Wow, Mike! I am impressed. Very nice writing, but you forgot to
include your footnotes.
- Bob T.
igotskillz com
Typical response from a typical runny nosed democrat
Robert Ladd
> Second, Bill Clinton further liberalized the CRA and signed a bill to
> repeal the Glass-Stengal Act. This Act was put in place in the 1930s
> following the bank failures during the Great Depression. It was designed
> to keep banks out of the speculation business.
>
<Snip>
Damn it Mike. This is about the 5000th post that you've blamed the
Glass-Stengal Act. I'm sure Henry Steagall and Casey Stengel both are
rolling over in their graves. If you can't get the spelling of the act
correct, how the fuck do you expect anyone to listen to or believe anything
that you say?
Robert Ladd
da pickle
> Damn it Mike. This is about the 5000th post that you've blamed the
> Glass-Stengal Act. I'm sure Henry Steagall and Casey Stengel both are
> rolling over in their graves. If you can't get the spelling of the act
> correct, how the fuck do you expect anyone to listen to or believe
> anything that you say?
This is really for Paul, but I could not help myself:
Jerry Sturdivant
It was the republicans who wrote section 8 of the original three-page
outline. Section 8 calling for NO ACCOUNTABILITY, AND CARTE BLANCHE
SPENDING.
It is democrats who demand OVERSIGHT/ACCOUNTABILITY, PROTECTION FOR
TAXPAYERS (Obama believes that should the government make a profit off these
deliquent debts, taxpayers should share in those profits), NO MILLION $
SEVERANCE PACKAGES FOR EXECUTIVES and RULES AS TO HOW THE MONEY IS SPENT.
Jerry 'n Vegas
ramashiva
He also forgot to include his source --
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
William Coleman (ramashiva)
Paul Popinjay
news:o-CdnTfw8PA...@giganews.com...
Thanks, Da Pickle.
-PP
Paul Popinjay
news:oANDk.810$aV4...@newsfe10.iad...
>
>
> It is democrats who demand OVERSIGHT/ACCOUNTABILITY, PROTECTION FOR
> TAXPAYERS (Obama believes that should the government make a profit off
> these
> deliquent debts, taxpayers should share in those profits), NO MILLION $
> SEVERANCE PACKAGES FOR EXECUTIVES and RULES AS TO HOW THE MONEY IS SPENT.
>
>
> Jerry 'n Vegas
>
Here's the deal, Jerry, you stupid mutherfucker. You don't just read
through to the end of the thread and then hit the reply button to the very
last post you had highlighted. You pick a post that catches your interest,
then you hit the reply to THAT post, including in your reply some of the
text that you intend to address. I know someone else who does this very
same thing and he has been posting here supposedly since the mid-90s. And
guess what, he is ALSO a dumb fuck, just like you, Jerry. And correct me if
I'm wrong, but didn't you mention that you also are Irish? What a
coinkidinky!
Learn how to post, you dumb fuck, or stick to something you as an ex-cop
know how to do, like beating up some vagrants.
-PP
risky biz
Why couldn't you just let him continue revealing his ignorance?
---
risky biz
> If you want to know the root cause of the current subprime crisis, there are
> three things you need to understand:
> Irish Mike
The village idiot speaks.
Irish Mike
"Robert Ladd" <rla...@cox.net> wrote in message
news:eaNDk.594$A05...@newsfe08.iad...
Maybe they aren't as big a knit as you are.
Irish Mike
>
>
Jerry Sturdivant
The idiot "Paul Popinjay" went off topic to splatter:
>> It is democrats who demand OVERSIGHT/ACCOUNTABILITY, PROTECTION FOR
>> TAXPAYERS (Obama believes that should the government make a profit off
>> these
>> deliquent debts, taxpayers should share in those profits), NO MILLION $
>> SEVERANCE PACKAGES FOR EXECUTIVES and RULES AS TO HOW THE MONEY IS SPENT.
>>
>>
>> Jerry 'n Vegas
> Here's the deal, Jerry, you stupid mutherfucker.
It’s obvious you're too stupid to even correctly spell your inane profanity,
much less know how to use it. (Or do you type phonetically in Ebonics?) Turn
the light on in that closet of yours, sharpen your crayons and correct the
words on the wall next to you. Address the theme (which is obviously over
your head) or go look at the comics. You’re in with the adults.
> And correct me if I'm wrong
We usually do.
Jerry ‘n Vegas
Clave
news:mid4r5x...@recgroups.com...
> On Sep 28 2008 3:33 AM, Clave wrote:
>
>> "Irish Mike" <mjo...@ameritech.net> wrote in message
>> news:8lFDk.1119$fD...@flpi145.ffdc.sbc.com...
>>
>> "WAAAAH!!! BUT CLINTON!!! WAAAAAAH!!!
>
> Typical response from a typical runny nosed democrat
It was more than Mike deserved, really.
Jim
Porsche_Dan
Why can't you just say: Because people are bad at math, that's the
bottom line. Of course you can blame the US government for allowing
people to be bad at math and not regulating our every move. Or the
financial institutions who put short term gains over long term losses
because they too are bad at math.
I own rental properties and one of my late paying renters bought a
house using my rental property as collateral. I found out after that
fact when the guy from Countrywide finally did a background check
after the loan was approved. The guy told me that they were
"backlogged" do to the surge in business. I'm sure my late paying
renter is back renting again but really, who's fault is this financial
mess again?
Good thing we can go Bankrupt and re-boot every seven years, makes it
easier to keep blaming other people for our bad math skills and breed
yet another generation of drones. Main Entry: drone 1: the male of a
bee (as the honeybee) that has no sting and gathers no honey
Bush-Clinton-Bush-???? Who's next to blame? Help us out Mike, we need
someone other than ourselves to blame here.
Clearly our thought processes are different on this, which explains
why you are there and I am here.
Irish Mike
"Porsche_Dan" <Porsc...@gmail.com> wrote in message
news:a047355c-7b3e-4f7d...@v39g2000pro.googlegroups.com...
Well bucko, it doesn't have fuck all to do with math skills. It's has to do
with work ethic and good money management. If a person buys a house they
can't afford with a mortgage they are too lazy and/or stupid to read, that's
their problem. If you think I defend these people, then you know nothing
about me. My point is that this entire subprime disaster started when
Democrats injected their "entitlement" agenda in to the free market. If the
free market was left to operate on it's own, none of these NINJA loans for
minorities and low income people would have been made in the first place.
NINJA = No Job No Income No Assets. The sad thing is that the tax payers
who worked, saved and rented until they could buy a house they could afford
are going to be stuck with the tab for this mess.
Irish Mike
Irish Mike
Lynx
It just never stops, does it? He's more predictable than a trained parrot.
______________________________________________________________________
Jason Pawloski
> If you want to know the root cause of the current subprime crisis, there are
> three things you need to understand:
> First, the problem was caused by politicians (primarily Democrats) pushing
> their "entitlement" agenda in to the free market. It started with "The
> Community Reinvestment Act" (CRA) which required banks to make high risk
> loans to minorities and others who could not have qualified for a home loan
> or business loan under normal circumstances.
>
> Second, Bill Clinton further liberalized the CRA and signed a bill to repeal
> the Glass-Stengal Act. This Act was put in place in the 1930s following the
> bank failures during the Great Depression. It was designed to keep banks
> out of the speculation business.
>
> Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003
> that would have tightened requirements for these business loans and subprime
> home mortgages. The vote went along party lines, the Democrats won and the
> proposed changes were defeated.
Err, what? The vote went along party lines?
<snip>
--
"Actually, I will read Jason's posts too. He's smart also." - Paul
Popinjay, 10/21/2007 (http://tinyurl.com/4bggyp)
------
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Kyle T. Jones
4:44 PM, or thereabouts, when you let the following craziness loose on
Usenet:
> Well bucko, it doesn't have fuck all to do with math skills. It's has to do
> with work ethic and good money management. If a person buys a house they
> can't afford with a mortgage they are too lazy and/or stupid to read, that's
> their problem.
Yer major disconnect is that you can't see that when a lender decides to
lend such folks money, and then predictably are left holding the bag,
that lender is responsible for the failed model they pursued.
You use this crisis to reaffirm yer previous prejudices, without
spotting the obvious: there is blame to go around, and the bankers
should take it on the chin as well.
Robert Ladd
Or maybe they've already stopped reading you.
Robert Ladd
Joe Long
>> "WAAAAH!!! BUT CLINTON!!! WAAAAAAH!!!
>
> It just never stops, does it? He's more predictable than a trained parrot.
His hero worship of Clinton is so strong that he starts bawling if he
even imagines criticism of Clinton. In his world-view Clinton cannot be
at fault about anything, in any way.
--
Joe Long aka ChipRider
Somewhere on the Range
Clave
news:UMWdnVyo2ts2un3V...@giganews.com...
> Lynx wrote:
>>> "WAAAAH!!! BUT CLINTON!!! WAAAAAAH!!!
>>
>> It just never stops, does it? He's more predictable than a trained
>> parrot.
>
> His hero worship of Clinton is so strong that he starts bawling if he
> even imagines criticism of Clinton. In his world-view Clinton cannot be
> at fault about anything, in any way.
Your clueshield is indeed strong, Joe, as is your ignorance of my opinion of
Clinton.
Don't you people ever get embarrassed at blaming every single god-damned
thing on him, or do you really lack that degree of conscience?
Jim
MrBookworm
> with work ethic and good money management. If a person buys a house they
> can't afford with a mortgage they are too lazy and/or stupid to read, that's
> their problem. If you think I defend these people, then you know nothing
> about me. My point is that this entire subprime disaster started when
> Democrats injected their "entitlement" agenda in to the free market. If the
> free market was left to operate on it's own, none of these NINJA loans for
> minorities and low income people would have been made in the first place.
> NINJA = No Job No Income No Assets. The sad thing is that the tax payers
> who worked, saved and rented until they could buy a house they could afford
> are going to be stuck with the tab for this mess.
What about these folks: People that bought or upgraded to a house within
their means. They can make the payments, put 20% down, etc. However,
because of the inflated market caused by liar loans, poor underwriting,
etc. they are now out the 20% down plus another 5-10%. On a $600K house
that is now worth $400K they are out $80K in paper losses. Why shouldn't
they quit paying their mortgage to force a workout plan with the lender
(principal reduction) or simply give the lender the house and let the
lender eat the $80K loss? A few years bad credit in exchange for not
waiting 10 years to get their equity back makes sense for some people.
Dean
____________________________________________________________________
Pepe Papon
<mjo...@ameritech.net> wrote:
>> Damn it Mike. This is about the 5000th post that you've blamed the
>> Glass-Stengal Act. I'm sure Henry Steagall and Casey Stengel both are
>> rolling over in their graves. If you can't get the spelling of the act
>> correct, how the fuck do you expect anyone to listen to or believe
>> anything that you say?
>>
>> Robert Ladd
>
>Maybe they aren't as big a knit as you are.
That was sew clever.
chandler
> "Robert Ladd" <rla...@cox.net> wrote in message
> news:eaNDk.594$A05...@newsfe08.iad...
> >
> > Damn it Mike. This is about the 5000th post that you've blamed the
> > Glass-Stengal Act. I'm sure Henry Steagall and Casey Stengel both are
> > rolling over in their graves. If you can't get the spelling of the act
> > correct, how the fuck do you expect anyone to listen to or believe
> > anything that you say?
> >
> > Robert Ladd
>
> Maybe they aren't as big a knit as you are.
>
> Irish Mike
> >
Ummm, that would be "nit".
Chandler
> >
-------
da pickle
> What about these folks: People that bought or upgraded to a house within
> their means. They can make the payments, put 20% down, etc. However,
> because of the inflated market caused by liar loans, poor underwriting,
> etc. they are now out the 20% down plus another 5-10%. On a $600K house
> that is now worth $400K they are out $80K in paper losses. Why shouldn't
> they quit paying their mortgage to force a workout plan with the lender
> (principal reduction) or simply give the lender the house and let the
> lender eat the $80K loss? A few years bad credit in exchange for not
> waiting 10 years to get their equity back makes sense for some people.
Do you think that "these folks" can "simply give the lender the house and
let the lender eat the $80K loss"?
Apparently, you do. We have discovered another difficulty in the
discussion.
funky cold medina
> "Robert Ladd" <rla...@cox.net> wrote in message
> > If you can't get the spelling of the act
> > correct, how the fuck do you expect anyone to listen to or believe
> > anything that you say?
>
> > Robert Ladd
>
> Maybe they aren't as big a knit as you are.
>
> Irish Mike
>
Robert, you're into knitting too? I'm working on my 2cd sweater for
Christmas. I'm thinking about putting together some leg-warmers for
Irish Mike. I bet he would look *sassy*.
Joe Long
> "Joe Long" <nos...@spam.com> wrote in message
> news:UMWdnVyo2ts2un3V...@giganews.com...
>> Lynx wrote:
>>>> "WAAAAH!!! BUT CLINTON!!! WAAAAAAH!!!
>>> It just never stops, does it? He's more predictable than a trained
>>> parrot.
>> His hero worship of Clinton is so strong that he starts bawling if he
>> even imagines criticism of Clinton. In his world-view Clinton cannot be
>> at fault about anything, in any way.
>
> Your clueshield is indeed strong, Joe, as is your ignorance of my opinion of
> Clinton.
Here's a clue for you: I was making fun of your knee-jerk response to
any claim that Clinton had any responsibility for any problems following
his terms.
> Don't you people ever get embarrassed at blaming every single god-damned
> thing on him, or do you really lack that degree of conscience?
If I blamed "every god-damned thing on him," yes I would be embarrassed.
I only blame him for things that he actually had something to do with.
Actions of his contributed to the current problem, along with actions
by other Presidents, both Republican and Democrat, going back to at
least Johnson.
John_Brian_K
> share a new opinion with us. It's like biting into a Klondike bar. You
> already know what's in there, but it's still so goddamned delicious!
Klondike bars as soo goddamed outrageously good. WTF are they putting in
them things? It is like catnip for chocolate loving humans.
TIGERS World Series- 35, 45, 68, 84
RED WINGS Stanley Cups- 36, 37, 43, 50, 52, 54, 55, 97, 98, 02, 08
PISTONS Championships- 44, 45, 89, 90, 05
LIONS Superbowls- lol
BOOM byae
John
-------
John_Brian_K
Don't hold back PeePee. Tell us how you REALLY feel about this guy.
TIGERS World Series- 35, 45, 68, 84
RED WINGS Stanley Cups- 36, 37, 43, 50, 52, 54, 55, 97, 98, 02, 08
PISTONS Championships- 44, 45, 89, 90, 05
LIONS Superbowls- lol
BOOM byae
John
--------
John_Brian_K
> their means. They can make the payments, put 20% down, etc. However,
> because of the inflated market caused by liar loans, poor underwriting,
> etc. they are now out the 20% down plus another 5-10%. On a $600K house
> that is now worth $400K they are out $80K in paper losses. Why shouldn't
> they quit paying their mortgage to force a workout plan with the lender
> (principal reduction) or simply give the lender the house and let the
> lender eat the $80K loss? A few years bad credit in exchange for not
> waiting 10 years to get their equity back makes sense for some people.
>
> Dean
Wow! Really Dean? How are the people out the 20%? Plus what 5-10%? I
doubt the 600K house is now worth 400k. How exactly are they out 80k?
'most' people live in a home for 10 years or more. I am sorry, but for
the most part I am with Mike on this.
If YOU cannot afford a house DONOT buy the fucking house.
I could 'afford' more house than I bought, but you know why I didn't go
for that extra 50K or so in home value? Because it would have stretched
me too thin. I take that extra 50K jump about 500.00 more a month and all
of a sudden i have some emergencies and cannot afford my mortgage for a
month and the next month something else happens and before you know it you
are behind the 8 ball and lose your home.
Fuck that! I am not losing my home to anyone because I can afford some of
those emergencies.
TIGERS World Series- 35, 45, 68, 84
RED WINGS Stanley Cups- 36, 37, 43, 50, 52, 54, 55, 97, 98, 02, 08
PISTONS Championships- 44, 45, 89, 90, 05
LIONS Superbowls- lol
BOOM byae
John
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Irish Mike
"funky cold medina" <kelly...@yahoo.com> wrote in message
news:24774aed-49ad-42e5...@v39g2000pro.googlegroups.com...
Hey ass wipe, I don't wear no fucking leg-warmers. However, a blue neck
scarf that matches my eyes would be ever so nice.
Irish Mike
Irish Mike
MrBookworm
> doubt the 600K house is now worth 400k. How exactly are they out 80k?
Basic math; if you bought a house for $600K with 20% down in 2006 then you
put down $120K. If that house is now worth only $400K you have a paper
loss of $200K. $80K of that is negative equity.
The homeowner has a couple of options. 1. Stay in the house and wait X
number of years for the value to increase. 2. Quit paying the mortgage and
eventually let the bank have it. This results in a loss of the $120K.
Some people may feel that it is better financially to give up the house
and start over than wait for the house to rise $200K in value (which may
take 10+ years) to get back to even.
> I could 'afford' more house than I bought, but you know why I didn't go
> for that extra 50K or so in home value? Because it would have stretched
> me too thin. I take that extra 50K jump about 500.00 more a month and all
> of a sudden i have some emergencies and cannot afford my mortgage for a
> month and the next month something else happens and before you know it you
> are behind the 8 ball and lose your home.
>
> Fuck that! I am not losing my home to anyone because I can afford some of
> those emergencies.
My scenario is not one of losing a house to hardship. It is one where it
may actually make financial sense for a homeowner that can make the
payment to still quit paying their mortgage. Think of it in extremes. If
you borrowed $1,000,000 and purchased an asset that is now worth $100,000,
does it make sense to pay back the loan or default and take the hit to
your credit?
Dean
____________________________________________________________________
charrison100
> you borrowed $1,000,000 and purchased an asset that is now worth $100,000,
> does it make sense to pay back the loan or default and take the hit to
> your credit?
>
> Dean
I know in the usual world that default will effect your credit but in this
strange scenario that is happening is there going to strikes against their
personal financial record? Are these people really going to have to file
bankruptcy to default or will there be a bad lending clause so it just
shows as an Astrix on a credit report?
Chris
A Man Beaten by Jacks
<a11...@webnntp.invalid> wrote:
>> Think of it in extremes. If
>> you borrowed $1,000,000 and purchased an asset that is now worth $100,000,
>> does it make sense to pay back the loan or default and take the hit to
>> your credit?
>I know in the usual world that default will effect your credit but in this
>strange scenario that is happening is there going to strikes against their
>personal financial record? Are these people really going to have to file
>bankruptcy to default or will there be a bad lending clause so it just
>shows as an Astrix on a credit report?
With a secured loan, foreclosure on the collateral asset extinguishes
the debt, at least in some cases. (In some others, the creditor can
pursue the shortfall if the sale of the collateral property is
insufficient to cover the loan.) And yes, it's certainly going to be
a big black mark on their credit rating, and in a very bad credit
market, the damage from that can be substantial, but could easily be
less than the damage of paying off a mortgage on property worth
nowhere near the amount of the loan.
At least in the short term. In the long term, it's likely the
property will come up to value again, but the person could have likely
purchased a home that would be worth even more, had he not been tied
to a bad mortgage.
Of course, in the long term, we're all dead.
Academic Zodiac
investors".
We will wage a war and lose. In a decade still no prosperity.
The precise start is Aug 18th 2007 when 2007 AW197 and Venus entered
Hydra.