Housing #'s down 3.9%%%% 848,000 didnt get the 7% jump

Just another take:

The real inconvenient truth is that the consumer is running out of money. Mortgage payments aren’t being made
by millions of people because they were ‘tricked’ into bad mortgages. They’re not being paid because the
owners can’t afford them. They also can’t afford SUV’s and all the other offerings of General Motors and the
Big Three. The real estate market hasn’t bottomed because speculators are trapped in excess inventory and the
baby boomer demographics have moved on. As the baby boomer generation retires, they will have one house
they live in, another as a vacation home, and a third they are inheriting from their parents as they die. This will
create an endless supply of housing for sale in the future years at a time when interest rates will be rising and
inflation reaching double digits. Remember the math behind housing. A $1 million house at 5% requires
$50,000 a year in interest payments not considering principle payments. If a person only had that $4,200
monthly payment budget, then when rates rise to 7% that same $50,000 a year budget can only support a
$714,285 house (714,285 x 7%=$50,000). That’s a real estate price drop of 28.57% if rates rise 2%. If you
factor in the excess inventory liquidation you can easily imagine a real estate drop of 40% and a long term flat
stabilization at that level due to our ‘advanced’ civilization replacement birth rate of only 1.5. We can let in the
25 million Mexicans to fix the birth rate decline, but they aren’t going to be buying million dollar homes. Many
of you may be wondering why I would think rates could go up 2% which would kill real estate, slow the
economy and create massive inflation as wages would be forced higher to pay for those higher rates. The
answer is the other inconvenient truth. It’s the liquidation of the multi-Trillion Dollar Social Security Trust
Fund. Currently we only have 1.9 Trillion Dollars in bonds to liquidate and we are about $5 trillion short of
what we need to fulfill obligations. Without getting too far into math and requiring a calculator with thirty or
forty output places, one trillion is a thousand billion dollars. To raise cash for the social security checks of two
trillion to seven trillion (7 thousand billion), how many bonds will have to be sold every single week for the
next 40 years? If you guessed ‘one hell of a lot’ you’d be right. That’s why rates will rise. Combine that with a
slowing economy driving the value of the Dollar lower and by definition, if the Dollar drops 20% you get 20%
inflation.

MJ
 
Quote from infolode:

Mortgage payments aren't being made by millions of people because they were tricked into bad mortgages.
More...
Regardless of what the ends are, this means is easily the most ridiculous I've heard repeated over and over. At the House hearings, they had a 70+ year old grandmother complaining how she was tricked into taking a mortgage she couldn't afford.

Do we now need laws to require people to compute their own monthly income and expenses? Just because someone will approve you for a loan doesn't mean you can afford it. Detrimental effects for the economy aside, I won't shed a tear for the idiot declaring bankruptcy who thought he could afford a $1M home because his payment was only $1000/month.

He got greedy--he thought he could simply flip his house in a few months for $1.5M and wouldn't need to recast his mortgage. I weep for this guy about as much as I weep for the guy who went long at the top of a market swing.

If the economy collapses due to the idiocy of the American consumer, I'll end up paying for their stupidity. If only there was hope that Americans would learn something from this experience.
 
Quote from FullyArticulate:

Regardless of what the ends are, this means is easily the most ridiculous I've heard repeated over and over. At the House hearings, they had a 70+ year old grandmother complaining how she was tricked into taking a mortgage she couldn't afford.

Do we now need laws to require people to compute their own monthly income and expenses? Just because someone will approve you for a loan doesn't mean you can afford it.
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While I agree that people need to take more personal responsibility and read the fine print, if a slick mortgage salesperson told Grandma that her monthly payment would be A and neglected to mention that in 2 years it was going to reset to A times 2 then it is not simply the case of taking out more mortgage then she could afford (e.g. she was told she could afford it, at least in the beginning)

That's the problem with these new types of mortgages (teaser rates, negative amortization, etc) - they allowed people who had no business taking on that much debt qualify nonetheless. The lenders who allowed those loans to be written have to accept at least some of the blame.
 
Another question?

Who the FUCK wants to LIVE in Bakersfield and Sacramento?

The funny thing is that people used to move to those places to get cheaper housing! That was the only reason they moved there...there was no burgeoning economy! Then the RE boom made more people move there to get in on it.

I'd guess they'll be back to being great places to have safehouses and meth-labs again soon...just like 5 years ago...question is, what happens to those homes? Lenders and MBS buyers get to hang on to them?
 
Quote from FullyArticulate:

Regardless of what the ends are, this means is easily the most ridiculous I've heard repeated over and over. At the House hearings, they had a 70+ year old grandmother complaining how she was tricked into taking a mortgage she couldn't afford.

Do we now need laws to require people to compute their own monthly income and expenses? Just because someone will approve you for a loan doesn't mean you can afford it. Detrimental effects for the economy aside, I won't shed a tear for the idiot declaring bankruptcy who thought he could afford a $1M home because his payment was only $1000/month.

He got greedy--he thought he could simply flip his house in a few months for $1.5M and wouldn't need to recast his mortgage. I weep for this guy about as much as I weep for the guy who went long at the top of a market swing.

If the economy collapses due to the idiocy of the American consumer, I'll end up paying for their stupidity. If only there was hope that Americans would learn something from this experience.
More...

Human nature:"It won't happen to me."

Same thing happened in Japan;over leveraged-stuck.
 
Quote from GTS:

(e.g. she was told she could afford it, at least in the beginning)

The lenders who allowed those loans to be written have to accept at least some of the blame.
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I guess these are my two biggest problems with this argument. No one tells me I can afford something. This country has been capitalist for far too long for someone to not look at anything a salesman says with a jaded eye. Anyone who has purchased a car (new or used) has learned this lesson.

That aside, I'd bet *really* good money that the contracts any of these "tricked" customers signed stated clearly that there was a balloon payment, a rate readjustment, or something similar. If you don't read your own legal agreements, you get what you deserve.

Finally, how can you possible blame the *lender* for offering credit? It wasn't a requirement that the customer accept! Shouldn't we feel badly for the lender that a large number of subprime loans are "liar loans"? I can't find the link, but a study I saw quoted had something like 65% of all subprime loans had major misrepresentations as to income or assets on the part of the borrower.

You're proposing:
1) Lenders assume their customers are lying and verify everything
2) They do not lend unless they fully understand every aspect of the customer's financial personality and decisions. Are they compulsive? Are they buying the house to flip when the market may not be there?
3) Lenders assume the customer does not read the contract and are required to walk them through it and get them to sign every point.

This utopia you propose sounds wonderful. I'll appreciate the spare time the 3 week waiting period as private investigators look into every aspect of my background to find out whether I'm truthful on my application gives me. I can't wait to fill out psychiatric profiles in an attempt to prove I understand the risks I'm taking on by borrowing money, that I don't have an addictive personality, and that my assessment of the future of the housing market is well grounded in economic fact. I'm really looking forward to the required meeting with the lender to have him carefully explain what every single line in their contract means.

Personal responsibility!
 
Fully,

The very last people to feel sorry for are the lenders. They went way off course from responsible(to borrowers I guess, but also to shareholders) by easing lending standards to ridiculous ends. They catered to Wall St. and insider selling in a number of these companies shows their happiness with their stock prices.

Lenders qualifying at "teaser" rates. A lot of people have said that brokers from the lending companies were the ones who changed their income.

I think the lenders deserve to go bust for this with no bailout...they were absolutely the ones who were not checking about piggybacked loans and didn't really research their borrowers like they should have.

The industry CLEARLY played the wild cards by turning to hybrid loans en masse, last year especially, to satiate their profit expectations. I find their actions egregious.
 
Quote from blast19:

They went way off course from responsible(to borrowers I guess, but also to shareholders) by easing lending standards to ridiculous ends.
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Completely agree (on the shareholder part).

Still, I don't feel sorry for the borrower either. I mostly feel sorry for me because I (and most other Americans, at least) are probably about to pay for it.
 
Quote from FullyArticulate:

I guess these are my two biggest problems with this argument. No one tells me I can afford something.
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I'm sure that's true for you. There are many in this country that are not financially sophisticated. Especially because they may be under the false assumption that lenders wouldnt give someone a mortgage if they couldnt afford it (which used to be true until recently)

Quote from FullyArticulate:
That aside, I'd bet *really* good money that the contracts any of these "tricked" customers signed stated clearly that there was a balloon payment, a rate readjustment, or something similar. If you don't read your own legal agreements, you get what you deserve.
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No doubt it was in the contract but I'm sure that a good salesperson can just gloss over that fine print and tell the unsuspecting person what they want to hear.

Quote from FullyArticulate:
Finally, how can you possible blame the *lender* for offering credit?
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If the lender has access to the consumers financial picture (income, other monthly payments) and can clearly see that while they can afford the teaser rate that they will not be able to afford the mortgage once the rate resets then I don't see how you can claim that the lender does not share any responsibility. It isnt a matter of just pleading ignorant, I bet in many cases they know a lot of the borrowers simply will default.

Quote from FullyArticulate:
You're proposing:
1) Lenders assume their customers are lying and verify everything
2) They do not lend unless they fully understand every aspect of the customer's financial personality and decisions. Are they compulsive? Are they buying the house to flip when the market may not be there?
3) Lenders assume the customer does not read the contract and are required to walk them through it and get them to sign every point.
More...
No I'm not proposing any of those things. It doesnt make for a very good discussion when you throw out strawmen like this and then use it as a basis for tearing down my argument.

Lenders should have a financial incentive not to write bad loans. I'm not sure what happened in the last couple of years that made them think it was a great idea to lend to anyone who could sign on the dotted line but I still believe that the have to take a share of the blame.
 
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