The mortgage problem started years ago

[RustySocket]

http://query.nytimes.com/gst/fullpag...prod=permalink


To make matters worse the seconds were most likely used to finance some spinners for the Escalade.

[wishin]

Originally Posted by RustySocket

http://query.nytimes.com/gst/fullpag...prod=permalink


To make matters worse the seconds were most likely used to finance some spinners for the Escalade.

Or, bras for the Porsche. Good article, and even better post RustySocket. Should be required reading, or as always history will repeat itself.

[Bloom]

It started even earlier than that. Whn I was in the banking business in the '60's, we used a number of criteria for determining eligibility, verified employment data, direct credit checks with the various creditors and the credit bureau, neighborhood checks and we used a little common sense when looking at the person's debt ratio.

That all went out the window when some idiot came up with the bright idea of using "credit scores". Our losses mounted over time, not due to mass lay-offs or plagues wiping out our customer base, but due to a revised way in which we made loans. This practice became universal and was, in my humble opinion, the beginning of the end of responsible lending practices and the new dawn of unprecedented bankruptcies.

In a nutshell, you just don't ask a guy to pay back a $400K loan at ANY rate of interest when he's pulling in $40K and his wife works a part-time job at the dog groomer palace.

[Old Coot]

I'm passingly familiar with the mortgage biz, having been in it in one capacity or another across 30 years and 4 decades. Allow me to interject just a little seasoning into the Fannie-roast here.

One, the reference to the "secondary market" in the cited article isn't talking about second mortgages. The secondary market is where the beneficial interest in the loans receivable is purchased and sold. The article wasn't talking about second mortgages and the loans referenced had nothing to do with financing hubcaps.

Two, if the rest of the mortgage industry invested like FannieMae, today's looting of the public purse (By BOTH parties - see Mods, I'm being even-handed here.) wouldn't have happened. Per the national Mortgage Banker's Association numbers published earlier this week, 6.4% of mortgages nationwide are in default, and 18.7% of subprime mortgages nationwide are in default. (Remember, subprime loans are a subset of the whole.)

According to the 10/1/8 Washington Post, FannieMae's default rate is 1.45%. (FreddieMac is at 1.1%) "Default" does not mean foreclosure. It means that the payments are 30 days or more past due.

Don't listen to blathering politicians and their appointees and assume they are reporting the news.

Or fact.

Or truth.

[Silver Hilton]

Coot, where do you get off introducing facts and rationality into this discussion? Don't you know that this is the Internet?

[Paid4]

Now, those same politicians that forced Fannie and Freddie into making risky loans are patting themselves on the back and telling us they've done this to "save the American people and to restore confidence in the market". I say elect 535 fresh new people to Washington and fire ALL the current residents. If it wasn't for the government intervening, we wouldn't be in this mess to begin with. If you really want to screw things up, let the gov't "fix" it or "regulate" it. It's guaranteed to be worse than before it started.

[lingslayer]

Originally Posted by Silver Hilton

Coot, where do you get off introducing facts and rationality into this discussion? Don't you know that this is the Internet?

Precisely SH. Of course we don't know how much the "cooked books" affect these facts.
Also, what about the fact that "Mortgage Backed Securities" are supposed to be (by definition) secure?
Found an interesting article, written in July, about where we are now, and how it got started.

http://www.economist.com/finance/dis...ry_id=11751139

The capital to debt ratios are staggering. $83.2 billion to secure 5.2 trillion in debt?

Thats NOT secure!
Meanwhile, shortly afterward, the chairman of the finance commitee tells us that "going forward, Fannie and Freddie look solid."
If where we are now is "solid" I'd hate to see what "shakey" looks like!

We need to be looking at the pressure applied by the government (and special interest groups) on banks to make loans to unqualified borrowers.
Money policy that was designed to prop up the economy instead of letting relatively minor recession(s) cool it off naturally.
And the crooks, both in the Gov't and it's GSEs that were busy getting rich while putting the industry and the taxpayer at risk.
The crooks on the mortgage insurance and banking side that were out peddling this worthless paper.

As stated earlier in this thread, the industry had the necessary checks and balances in place to prevent this, and then the government came along and told them they weren't being "fair."
This perfect storm has been brewing for years. And the people, both in the gov't and the money industry, who have warned us about it have been ignored by the press and demonized by political opponents as insensitive and greedy and elitist.

My 3.1 cents

[Dave G]

I just want to get out of this mess. Let's get America back on track.