On 60 Minutes...the foreclosure market

Parent Cafe
41

<p>“If it were as easy as Mini and other socialists think everyone would be doing it. It’s not and I don’t begrudge them their success and 10,000 sf homes.”</p>

<p>Neither do I; I just don’t see a particular need for me to subsidize them - they could just go out and make a little more. (or get a 9,950 sf house ;))</p>

<p>(I know plenty of spoiled brats in their 30’s & 40’s who have been living in an interest-only mini-mansion (often on the water), driving fancy cars & taking wonderful vacations.) - and they got to write off that interest at our expense. :rolleyes:</p>

42

<p>You are free to attempt to take advantage of all those “subsidies” you see out there–go for it.</p>

43

<p>At last we agree on something - that, through government policy, the poorer subsidize the wealthy.</p>

<p>Our disagreement is simply whether that is a good thing.</p>

44

<p>I do not agree with that. The sytem is there for everyone. Make of it what you will. What you might call subsidy I call an airport or highway or the tax code. Some use it to their advantage-others sit and complain while being paid by the taxpayers.</p>

45

<p>I like Kelsmom post #40.</p>

<p>The one thing I misses when reading about risk takers is it works both ways. Risk takers get the reward. They pay for the failures.</p>

46

<p>My 7th grade D watched the 60 minutes with me and was very interested in understanding what happened. I explained that this is what happens to people who don’t learn to excel in math and have to trust others. People can always derive a more complicated scheme to legally (or otherwise) rip you off while you think you’re getting a good deal. That’s why you need to always “own the numbers”. We then worked out the math scenarios on a $500,000 house with 0% down, 5% down and 20% down and what happens when the value drops to $450,000. </p>

<p>I think there needs to be serious investigations and civil penalties to those who committed outright fraud. For most of it though, stupidity is not illegal.</p>

47

<p>The FBI announced today that they are going to investigate over 14 companies (doesn’t sound like a lot to me). The SEC is investigating many companies.</p>

<p>[ABC</a> News: FBI Wades Into Subprime Mortgage Mess](<a href=“FBI Wades Into Subprime Mortgage Mess - ABC News”>FBI Wades Into Subprime Mortgage Mess - ABC News)</p>

<p>The FBI is investigating 14 companies for accounting fraud relating to subprime mortgage loans, a bureau official confirmed Tuesday. </p>

<p>“There are some irregularities we are looking at… [this is] good old-fashioned greed,” Neil Power, chief of the FBI’s Economic Crimes Unit, told reporters. </p>

<p>FBI officials declined to name the companies facing scrutiny, citing the ongoing investigation. </p>

<p>Power indicated that some people knew about the subprime crisis well ahead of time."</p>

<p>ClassicRockerDad, looks like your daughter is in great shape.</p>

48

<p>dstark–I think many of the recent failures are paying dearly. Several of the major firms IB have fired their CEO and many workers in the lending areas. I recently talk to someone at Lehman Bros. and when I said I was glad she was still in lending she said many of her friends are out of work at similar companies. Homebuilders are going belly-up or cutting back to core people and laying off the rest, obviously most of the speculators have lost their investments, realtors are looking for new work, the mortgage brokers who placed the loans are on the streets.</p>

49

<p>barrons, you’re right many are paying the price.</p>

50

<p>I used to be in the mortgage business years ago, and it was full of sleazebags even then. There is plenty of blame to go around:</p>

<p>1) People who are too lazy or ignorant to try to understand financing they are being offered. When someone told you that if your adjustable rate goes up too much “you can just refinance,” did you think about the fact that if your rate goes up ALL mortgage rates are going up and no one is going to refinance your loan for a lower rate?</p>

<p>2) Real estate agents who insist on selling people on more house than they can afford. My friend got out of the real estate business because she refused to show people houses that were out of their price range, so she didn’t make any money and the agency she worked for hated her. </p>

<p>3) Mortgage companies with no conscience and no concern about the loan being paid back, since they are selling it and moving on. I was a mortgage underwriter, and we’d have brokers ask us, “How much income does Mr Y have to show to get this house?” My response, “He has to show us how much income HE ACTUALLY EARNS.” We had a broker who actually told someone how to make a convincing fake W-2. They typed it using carbon paper, then smeared cigarette ashes on it to make it look like it came from an old computer (this was a few years ago).</p>

<p>4) Banks that sell their loans and once again don’t care if you really pay it back; they get their fee up front and their servicing fees. I worked for a bank that switched from full appraisals to “drive by” appraisals, the thinking being that the main factor in a home’s value was the neighborhood. </p>

<p>5) Group-think that prices are always going to continue to rise. Pushed by supposed real-estate “experts” who are only making money if people keep buying houses.</p>

<p>6) Wall Street’s eagerness to make fees by packaging and selling securities, and their willingness to mislead people to make a buck.</p>

<p>Lets see, did I leave anyone out?</p>

51

<p>Don’t forget that those who purchased the more expensive home and spent all their extra cash and credit on consumer goods pay more in property taxes and sales taxes, which benefits (subsidizes) everyone.</p>

52

<p>“Lets see, did I leave anyone out?”</p>

<p>Unscrupulous appraisers.</p>

53

<p>If future income is spent on current goods and services, then eventually there’s not the same level income to spend on future goods and services. Play now, pay later.</p>

<p>Inflating asset prices (houses, stocks) through artificially low prices keeps the game going only so much longer.</p>

54

<p>More importantly, with too many spenders and not enough of us cautious savers (and that goes for American corporations too!) we are selling our country to foreign interests right and left. I have a Chinese neighbor (educated here in the US for high school and college) who is very quick to tell how she knows China is going to take over the US. Her husband works for a Chinese company and does very well. That just galls me. Global markets are fine with me as long as American companies don’t throw in the towel to make a buck when the going gets tough. Where is our American pride?</p>

55

<p>momneedsadvice, that’s not a pretty picture.</p>

<p>“Where is our American pride?”
It looks like it is for sale.</p>

56

<p>For every company that sells to a foreign firm we create 10 new ones that do new things. 10 years ago there was no Google. 20 years ago Microsoft was still a small software company. You get the picture. The US is still creating great wealth with new ideas.</p>

57

<p>Barrons, do you get Bill Gross’s letter?</p>

58

<p>No but I looked at his recent notes. I think Like many he overestimates the possible spending on Chinese imports. Earlier I posted the percentage of our total retail trade that goes to China and it’s significant but way below 20%. I forget the exact numbers now but he’s just engaging in the same kind of newsbite cliches that so many are. It’s simply not true. Heck, people in most parts of the urban US don’t even have a Wal-Mart nearby. Seen them in NYC? Boston?. I think Chicago has one or two. One in Seattle and it’s actually in Renton. The rest are way out.</p>

<p>I doubt we go back to 1%. I think we stop sooner than later at around 2.5%
Now if everyone says we are in a slowdown why do they think inflation will go way up? Seems just the opposite as oil seems to have leveled trending down and we are getting better at conserving it every day–see bus ridership way up etc. I think the Fed got a little jumpy went overboard a bit. Hopefully we have learned from the mortgage mess and cheap money will not be easy money. I have noticed my lenders are asking lots more questions than they used to. That’s good.</p>

59

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<p>And not all of them are human. There was a big article in our local newspaper today about all the pets that are being surrendered to the animal shelter by people who had to move out of foreclosed houses and their pets are too big to be accepted by apartments.</p>

60

<p>[Herb</a> Greenberg » Blog Archive » Housing: It’s Affordability, Stupid!](<a href=“Opinion and Commentary - MarketWatch”>http://blogs.marketwatch.com/greenberg/2008/01/housing-its-affordability-stupid/)</p>

<p>"Housing: It’s Affordability, Stupid
As the mortgage mess gets worked through, and interest rates fall, there’s one more piece of the puzzle that still often gets lost in the noise: Affordability. In many parts of this country, houses are still out of reach of most Americans, especially in markets that shot up the highest.</p>

<p>The San Diego Union-Trib this morning has a lead article that shows that despite sliding home prices in America’s Finest City, the median-priced home of $440,000 is still out of reach for most city residents. Kick that up a notch to newly built homes and resales in many parts of this country, driven by loose money, where prices range anywhere from $600,000 to $1.5 million and even higher: At the higher end , there is simply a limitation to affordability — especially as credit standards tighten, commodity prices edge higher and salaries barely budge. Credit standards are an important part of that equation. Doesn’t matter whether you live in San Diego, Minneapolis or Atlanta.</p>

<p>At some point, all of this has to revert to the pre-housing boom mean — whatever that is! — before the dust settles. </p>

<p>To yours truly, it’s not really more complicated at that"</p>

<p>One of the replies…</p>

<p>Well stated. For many years, median home price was in the neighborhood of 2.8 times median household income. Then, in the late 1990s, the disconnect began and despite the correction, prices are still at odds with reality. As Herb stated,</p>

<p>“At some point, all of this has to revert to the pre-housing boom mean — whatever that is! — before the dust settles.”</p>

<p>The pre-boom mean is 2.8 times household income. And with real incomes stagnant, and no more free money, you can bet that prices will have to overshoot on the downside to clear out all the excess."</p>