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Very true, the reasons will always be up for a debate, but mortgages, or more precisely homes are not investments even though many mistakingly believe they are.
Investments bring in income, homes bring in debt and liabilities. They are opposite on the an economic spreadsheet.
I do agree with you on that, but the frenzy that went on with "flip this and flip that" did drive prices sky high for property nowhere near it's true value as a home and only later did the truth get uncovered about the sham in the mortgage lending..."Are you breathing ? Ok, you qualify for $500K."
There were hundreds of different mortgage programs that were written during the lower interest rate period, not just subprime ARMS. I know what you are trying to say, that the subprime ARMS defaulted because of the interest rate rise, but these default rates werent any higher than other mortgage programs written. I showed you how AltA mortgage default rates were also much higher.
It was too late because housing prices dropped and avenues to refinance dried up. Had money been available and property values remained stable, there would have been adaquate equity to justify refinancing.
Do I think ARMS are good, hell no, only a fool would take out one of these mortgages, but to blame them on a world wide crisis is just not accurate.
Property values began to drop because of the many foreclosures suddenly on the market. The market was flooded with foreclosures everywhere, which caused regular sellers to drop prices to compete with the foreclosures. It became an ongoing downward snowball, which grew and grew.
Quote:
Originally Posted by pghquest
Which shows you dont care about the truth. The Buck does not stop HERE for banks defaulting in UK, Canada, Great Britain, and world wide..
The simularities between now and the Great Depression isnt even close. The Great Depression involved banks collapsing and depositors not being insured, thereby rushing to cash out their deposits (there were nearly 10,000 banks which collapsed). How many banks have collapsed and how many depositors have lost their deposits? ($0). We also created tarrifs which backfired causing exports to drop, and of course the stock market crash.
The great depression did not happen due to dropped property values or "tricky" banking mortgages..
And you don't remember the "run on banks" back in October and November 2008? Or all the many banks that collapsed in late 2008, early 2009?
It's true, there are a number of similarities in the events leading up to this point in history. But this article is not meant to cause fear for what the future will bring, only to illustrate how irresponsible lending standards, investors' lack of risk-control, and consumer over-spending could bring us to a point where many now worry that history may repeat itself. Our current crisis hasn't been resolved yet, but even though there are some similarities in the past and present, there are substantial differences in how Washington's policy-makers are dealing with the situation at hand. Let's hope that they have learned from the past, so that we will never again experience a Great Depression.
I do agree with you on that, but the frenzy that went on with "flip this and flip that" did drive prices sky high for property nowhere near it's true value as a home and only later did the truth get uncovered about the sham in the mortgage lending..."Are you breathing ? Ok, you qualify for $500K."
Now you are getting back to my original claim, which was that mortgages were written by banks because they didnt care about the ability to pay them back.
To understand this, you then have to ask, ok, why wouldnt banks care if a borrower could pay back the mortgage or even qualify for them? Thats because the government guaranteed these loans, and because of these guarantees, banks could move them off of their spreadsheets onto 3rd party investors or often times the government.
If the government doesnt care if the buyer of the property can truly "qualify" they only cared about a point system, why would a bank, who wasnt going to hold onto that mortgage, but only manage it, care because they made their money on the front end?
This goes far beyond party lines, the fact is the government should never have gotten into the "banking" industry and the problem compounded when they began to buyup mortgages. When you have one individual buying up all and any mortgages, the only possible outcome is an increase in property values and an endless circle being created until the bubble burst.
Property values began to drop because of the many foreclosures suddenly on the market. The market was flooded with lots of cheap housing, which causing regular sellers to drop prices to compete with the foreclosures.
Property values dropped not because of the number of foreclosures, but because people couldnt obtain loans, regardless of their ability to pay them back. I watched a video earlier today of a borrower who owes 30% of a properties value and cant get it refinanced. I myself bought a new home last year, it took 25% down, + money escrowed for needed repairs, + FOUR appraisals, nearly six months to close, and the LTV was 50%... The industry went from one extreme, fast, free, capital to all, to the other extreme, unable to obtain a loan, even with large sums down and excellent credit. If people cant borrow money, they cant buy homes, which pushed the values down even more as the foreclosures pile up. Its not the foreclosures pushing the values down, its the inability to move these foreclosures off the market even at huge discounts.
Quote:
Originally Posted by RD5050
And you don't remember the "run on banks" back in October and November 2008? Or all the many banks that collapsed in late 2008, early 2009?
I dont at all remember the run on the banks, where banks had to close their doors due to not having money available to pay depositors, maybe you can provide me a link to banks with their doors closed. There were a few taken over, but not massive numbers anywhere near to the great depression.
As for the number of banks collapsing in 2008/2009, this comparison still isnt fair. During the great depression, when a bank collapsed, doors closed and depositers lost their deposits. Nearly 10,000 banks closed up with lord knows how many depositors losing their savings.
During the 2008/2009, I believe there were a few hundred banks "collapsing" but in reality many of these banks were not closed, they were taken over by stronger banks and no depositers lost a dime. There is a HUGE difference between banking issues now and the depression periods.
And now the Fed is the mortgage market. Juggling debt from one hand to the other.
The Fed says they want to get out of this..but who will buy in their place ?
And now the Fed is the mortgage market. Juggling debt from one hand to the other.
The Fed says they want to get out of this..but who will buy in their place ?
Its worse than that, now they want to get into the landlording business.
They want homeowners who want a way to get out, to turn their deed over and have their debt forgiven, and in exchange they will rent the propeties back to the homeowners.
Many of these properties need massive renovations (at the taxpayers expense), and have past deliquent and liens filed against them, and the added number of employees and/or costs to manage such a system until the economy turns around will cost the taxpayers a fortune.
Anyone watching these things going on cant possibly think a recovery is in sight anytime soon.
. I watched a video earlier today of a borrower who owes 30% of a properties value and cant get it refinanced. I myself bought a new home last year, it took 25% down, + money escrowed for needed repairs, + FOUR appraisals, nearly six months to close, and the LTV was 50%... The industry went from one extreme, fast, free, capital to all, to the other extreme, unable to obtain a loan, even with large sums down and excellent credit.
I don't know where you bank, but in Sept I bought a 2nd home and was offered a 5% 30year fixed conventional loan with 3% down.
I don't know where you bank, but in Sept I bought a 2nd home and was offered a 5% 30year fixed conventional loan with 3% down.
I ended up going to Wells Fargo. Interest rate was fabulous, under 5 for 15 years, but they wanted a huge amount down because the home is "unproperly sized" for the neighborhood.
Its a 6,000 sf home sitting in a neighborhood of 1,500 sf homes. Each bank I talked to wanted to make sure that if they repo'd the home, that they'd have enough of a cushion to sit on it until they could resell it without taking a bath. Their attitude was, who the hell would buy a home with that much sq where its located?
We kept adding more and more down to do the deal but in the end the banks just didnt believe the appraisal because of the LTV and kept ordering new ones.
Given the industry and the price per sf issue, I couldnt say I blamed them at the time, it just drove me bonkers..
Its worse than that, now they want to get into the landlording business.
They want homeowners who want a way to get out, to turn their deed over and have their debt forgiven, and in exchange they will rent the propeties back to the homeowners.
Many of these properties need massive renovations (at the taxpayers expense), and have past deliquent and liens filed against them, and the added number of employees and/or costs to manage such a system until the economy turns around will cost the taxpayers a fortune.
Anyone watching these things going on cant possibly think a recovery is in sight anytime soon.
I just read this and thought...massive HUD, Section 8 housing all over the US
Property values dropped not because of the number of foreclosures, but because people couldnt obtain loans, regardless of their ability to pay them back. I watched a video earlier today of a borrower who owes 30% of a properties value and cant get it refinanced. I myself bought a new home last year, it took 25% down, + money escrowed for needed repairs, + FOUR appraisals, nearly six months to close, and the LTV was 50%... The industry went from one extreme, fast, free, capital to all, to the other extreme, unable to obtain a loan, even with large sums down and excellent credit. If people cant borrow money, they cant buy homes, which pushed the values down even more as the foreclosures pile up. Its not the foreclosures pushing the values down, its the inability to move these foreclosures off the market even at huge discounts.
I dont at all remember the run on the banks, where banks had to close their doors due to not having money available to pay depositors, maybe you can provide me a link to banks with their doors closed. There were a few taken over, but not massive numbers anywhere near to the great depression.
As for the number of banks collapsing in 2008/2009, this comparison still isnt fair. During the great depression, when a bank collapsed, doors closed and depositers lost their deposits. Nearly 10,000 banks closed up with lord knows how many depositors losing their savings.
During the 2008/2009, I believe there were a few hundred banks "collapsing" but in reality many of these banks were not closed, they were taken over by stronger banks and no depositers lost a dime. There is a HUGE difference between banking issues now and the depression periods.
People were EXTREMELY concerned about their banks accounts in Fall 2008.
The events of the past 10 years have an eerie similarity to the period leading up to the Great Depression. Total mortgage debt outstanding increased from $9.35 billion in 1920 to $29.44 billion in 1929. In 1920, residential mortgage debt was 10.2% of household wealth; by 1929, it was 27.2% of household wealth.
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