President Bush bails out the billionaires at Bear Stearns, but Republicans won’t lift a finger to help out the hundreds of thousands of homeowners facing foreclosure on their homes.

RICK you hit the nail right on the head !!!!

One other note- You are correct stating that the gatekeeper’s were enablers to the “easy money”, that is why there is now corrective action being put in place in order to save people from their own ignorance. That is not a legitimate excuse for people making poor business choices. Remember, 1 + 1 must always equal 2. Those are facts, the rest is fluff, ignorance, and frustration due to the declining real estate market. Why were’nt complaining about the terms of their loan while the market was booming??? Let’s see, the same reason that people weren’t taking profits off the table when they were up over 300% in their stock portfolios in 1999: PURE GREED! LOOK IN THE MIRROR!!!!

Lookinthemirror, sorry for not getting back earlier. I had no idea Moe had pulled my response out as a highlight. I only found it while coming to get an article he did on Penny Pritzker back in March.

So, let me get this straight, lookinthemirror thinks that a borrower is at fault under these circumstances;

a) He and his wife go to the Realtor and say “we want to buy a house.” The Realtor, naturally, asks them what price range would they be interested in, to which their reply is, “We are not sure what we can afford”.

The Realtor then explains there are all kinds of new loan programs, many with no money down, and that people have been getting much more house than they ever thought they could afford.

The couple probably explains to the Realtor that they really cannot afford more than they are paying in rent. The Realtor says “Let me have you to talk to a Mortgage Pro, a broker. They will know exactly what monthly payment you’ll be able to afford, in fact, they have helped my last ten customers, and all of them thought they could not afford the beautiful house they are now in”.

b) The couple sits down with the Mortgage Pro. He does not explain to them that he has only been in the mortgage business for 3 years, and has never seen a down market. He believes that housing prices always go up, how could it be any different, he makes thousands per loan, and surely he could not do that as long as smarter people than he think it will work. He is also confident that should a job loss or sickness befall the couple, they will make a profit selling their house, because housing prices always go up, and tells the couple exactly that. Never mind that he has never taken an economics course, nor a finance course, nor even a business course. He sold phones for 6 months before getting the job at the mortgage broker. That, in his mind, makes him eminently qualified to advise people about the biggest financial decision of their lives, because surely, people smarter than he wouldn’t let the system work any other way.

The Mortgage Pro then explains to the couple that almost all of his clients have used this program to buy their houses. Little does the eminently qualified Mortgage Pro know, but his boss has directed all of the Mortgage Pros in the office to that program because they get more money for it. He tells the couple not to worry, even though he has not used a calculator to try and determine if they can afford the reset rate in two years. The Mortgage Pro doesn’t care about them in two years anyway, all he wants is that $3000 commission now.

When the couple express some concern about the rate being higher in two years, the Mortgage Pro tells them that by then, their house will be worth a lot more, and they will be making more money because everyone gets raises at least every so often. And if they really are in a squeeze in two years, they can always refinance to a lower rate, and get extra money from their new loan because, of course, their house will be worth more.

Until the closing of the loan, the couple never hear any different sentiment, either from the Mortgage Pro or Realtor. Every time the couple expresses some concern, the Mortgage Pro and Realtor tell them all the things they have previously heard, that it will be great because their house will only go up in value.

Lookinthemirror, this scenario may not be exact, but something very close to it is what most people experienced. To say the couple are at fault is like saying the patient is at fault when the doctor removes the liver, when he was supposed to remove the kidney. The patient trusts the doctor not to make any mistakes, because he is the pro, he does this for a living. Well, so did the Mortgage Pro. The Mortgage Pro looked people in the eye and gave them advise on the biggest financial decision they will ever make. He is the first line of defense to protect the money for the lender AND protect the people that trusted him to get them a loan that would not financially kill them.

Do you see how that worked? The Mortgage Pro is actually, and ethically, responsible both ways. I am not sure how you don’t see, but at this point, I’m sure an awful lot of people wish you would.

RICK

you have a good set on you !!!! GO RICK

that sounds like a very good & extremely close to the reality of what we were dealing with here in Miami, FL.
& commissions sometimes were about 3000 to 6000 on any given file.

I hope look in the mirror & others can see past that fogged up mirror she has been looking at to see a clearer picture of the truth & BS that most have been dealing with over the past 4+ years.

Rick-

One more follow-up comment to your analysis. You keep trying to make a connection between a doctor giving advice, and a loan officer or realtor giving advice. Sorry, if a doctor gave me advice that seemed pretty significant, I think I would talk to a few more doctors and receive a 2nd, 3rd or 4th opinion…….wouldn’t you????

Rick-

Just a little FYI:

1. I owe nothing on my home. I took a 5-1ARM, Interest Only loan 3 years’ ago, and paid it as if it was a fully amortized loan. Now it is paid in full.

2. I have been buying “puts” on financials and made a hefty profit the past year and a half.

3. I hate to bet against our country, however, I believe we are in similar times as the Romans were when they reached their downfall. Too many military conflicts, an uninformed/uneducated citizenry, a large federal deficit, and corrupt politicians. This all smells like a great big disaster to me. It sounds like you have the right idea in selling your stock, however, remember, in an inflationary time, you may want to put your money into precious metals, or commodities rather than in a CD or T-Bill. Good luck!

I am very fortunate to be in the position I am in, and I have made poor financial decisions in my life. However, I have never tried to put the blame on others for my misfortunes…..at the end of the day, we all have to LOOK IN THE MIRROR!

Carrie-

How can I respond to you. I feel sorry for your situation (and Ed McMahon’s), that doesn’t mean you made the right decision. I hope you are spending time on trying to fix the mistake, instead of constantly feeling sorry for yourself. I know plenty of good financial planner’s and tax attorney’s that can provide you with solid advice on how to improve your situation. It is a terrible situation we are in right now. However, blaming other’s won’t solve your problem.

My answers:

1. As much as it is required to give a loan.
2. I would. But then, I’ve seen scams before. Not everyone has
3. When the Pros who were trained and have told me they were looking out for my best interest said it was the BEST thing I could do, and that EVERYBODY is doing it, why should I question that.
4. Yes, but all I see is everyone around me having a big party, and I want to have a party, too.
5. If you are licensed by the State to know such things…..

I’ve read the book, and it is more than a treatise on how to gain wealth. At its core, it abhors the conduct similar to what almost every Real Estate Agent in America engaged in over the last 6 years. Stop using a good book to defend immoral practices.

I used the word “sold” once. Real Estate Agents and Loan Officers use the “Advisor” to describe themselves, but you feel it is inappropriate for me to call them that. Whatever.

I find it interesting that you try to use transference so often, as in “you may have participated in that scenario” and “hopefully that will mitigate your losses”, as if you would know. It is curious that most of the mortgage originators I have talked to over the years, such as yourself, and I have talked to thousands, really don’t know their business. Let me give you a little more transference, only a deceptive heart uses such tactics

To prove my point, you state “all the lender has to do is pull the recorded document out and ask the buyer if that is their signature”. Substitute the word Nazi for lender, and the same tactic was used to inform the Jewish people at Auschwitz they had signed a document stating they were Jewish, which under the new Nazi rules, meant they were enemies of the state, and were to be executed as such. So, as the Nazis pointed out, the Jews knew they must be executed. Lookinthemirror, is that really the idea you were trying to get across?

Trust me, my house is free and clear.

Lastly, none of what I explained before have I personally experienced, though I know many who have, and currently are, experiencing it. As for facts, it has been nothing but, yours is the only conjecture. As for rhetoric, ok, the Nazi comparison, I’ll give you that one. Nonsense, only on your part.

Rick,

That hypothetical couple in your scenario seems like they nothing close to zero down payment and so quite honestly I don’t really see what exactly they are losing, they had not equity in the asset and they should not be expecting anything.

I’m absolutely against bailing out folks like that. They had nothing in the transaction to begin with then they shall get nothing. As far mortgage payments made, that’s the cost
of margin for these guys.

BTW, numerous statistic and studies show that the most important predictor of delinquency is amount of negative equity. Suffice it to say that perhaps majority of foreclosures are of 0-5% down variety and they deserve NO bailout. If any one wants help they should demonstrate they had a stake to begin with.

Alan, You are correct. All I can add is who deserves the blame more under that scenario, the borrower, the RE Agent, the LO or the Lender?

My point, who allowed the borrowers in that transaction to acquire a piece of property with “no skin” in the game? To me, the borrowers are at the bottom of the list when trying to appoint blame.

It seems only fair that the bank, who gave a loan, under loose underwriting standards, to someone with questionable ability to repay, reassume the property.

Problem is, the borrower, in many cases, not all, would never had enetered into that transaction had the perception of financial gain not been painted by the RE Agent and LO. You know as well as I, if you were part of the industry over the last 6 years, as I have been, this was the norm. Many people were convinced, by the availabilty of loose guidelines, overly optimistic RE agents and aggressive LO’s, that they would never lose out. The idea, after Wall Street, the RE agent, the LO and the lender all get their profit, that the borrower gets put into debt enslavement by declining property values, is something other than ethical.

For the lenders and Wall Street, fiscally speaking, it is also not a smart move. In this new paradigm, foreclosures are at record levels. Bad news considering our economy over the last 7 years has been nothing but spending the increased equity of ones home. Over the last 7 years, the US created the largest capital investment ever into its economy, to the tune of over $11 Trillion. Was it in something that we could sell overseas? Was it something that advanced society to the next century? No, it was in trading houses with one another. The gain was so great, the US economy has shifted so that taking money out of ones increased home equity and spending it became 70% of GDP.

The smart thing is to stop the flood of foreclosures by keeping people in their homes. The only way to do that is give them a payment they can afford, and reduce the amount it will take to own that property and have incentive to work towards ownership. Yes, Banks will lose money, but is it better to lose $50k or $150k? For Wall Street holders of MBS, RMBS and the like, is it better to lose 20% or 80%. Considering the whole mess could not have happened without quite a few breakdowns along the chain, the borrower is the last in the line to receive blame.

To do otherwise will definitely produce an economic outcome no one wants. But, at this point, that may be unavoidable anyway. It will only get worse if more homeowners cannot get some formula to keep them in their homes. To simply state “They must pay back what they borrowed” is shortsighted, naive, and downright stupid. I am not saying all loans should be viewed this way. In normal circumstances, you are more than legally obliged to pay a loan back, you are also morally obliged. The scenario with the last 6 years blew morals out of the window, and the borrowers, again, are the last to receive blame for that.

I could be wrong, but I have yet to hear how scientists are now getting blood out of turnips.

Rick-

Again back to the early post, please describe your answers, since you couldn’t answer the questions with a simple “yes” or “no”

1. Is it required that person purchase a home in the United States? your answer: “as much as it is required to give a loan”……can you explain that??? MOST INFORMED PEOPLE WOULD ANSWER NO TO THIS QUESTION

2. If a person decides to purchase a home, do you think it would be in their best interest to review the Purchase Contract, Note and Deed of Trust with someone other than their realtor or mortgage broker? your answer: “I would. But then I’ve seen scams before. Not everyone has.” I FIND IT HARD TO BELIEVE THAT THEIR ARE PEOPLE OUT THERE THAT HAVE NOT SEEN SCAMS BEFORE, UNLESS THEY ARE HERMITS. MOST INFORMED PEOPLE WOULD ANSWER YES TO THIS QUESTION.

3. Are you familiar with the saying “If it sounds too good to be true, it probably is? your answer: : “When the PROS who were trained and have told me they were looking out for my best interest and it was the BEST thing I could do, and that EVERYBODY is doing it, why should I question that. IT SOUNDS LIKE THE “SHEEP” MENTALITY HERE…..MY FRIEND JOE JUST BOUGHT A NEW HUMMER, AND THE HUMMER DEALER TOLD ME THEY ARE A GREAT BUY RIGHT NOW, THAN I SHOULD BUY IT. WOW, I HOPE THAT THERE ARE NOT TOO MANY PEOPLE OUT THERE THAT ACTUALLY THINK LIKE THAT. IF THAT IS TRUE, THAN THIS COUNTRY IS IN WORSE SHAPE THAN I THOUGHT. LET’S FOLLOW THAT LINE OF REASONING: A PROFESSIONAL TOLD ME IT IS IN MY BEST INTEREST TO BUY A HOUSE, AND EVERYONE ELSE IS DOING IT, SO I SHOULD DO IT. LET’S SEE THIS IS THE BIGGEST PURCHASE I WILL MAKE IN MY LIFE, MAYBE, I SHOULD REVIEW THINGS PRIOR TO MAKING THIS CHOICE.

4. Are you familiar with the saying: if it sounds to be good to be true, it probably is? your response: “Yes, but all I see is everyone around me having a big party, and I want to have a party, too.” AS YOUR MOM AND DAD PROBABLY TOLD YOU WHEN YOU WERE A TEENAGER…..THERE ARE CONSEQUENCES TO HAVING A “PARTY”, AND JUST BECAUSE “EVERYONE” ELSE IS DOING IT, DOESN’T MEAN THAT YOU NEED TO. THIS TIES IN TO THE “SHEEP MENTALITY”, AND NOT TAKING PERSONAL RESPONSIBILITY FOR YOUR FINANCIAL DECISIONS.

5. If I told you that I thought real estate values would go up year after year, would you believe me? your response: “If you are licensed by the State to know such things…..” AGAIN, BECAUSE SOMEONE HAS A “STATE” OR “FEDERAL” LICENSE, YOU ARE GOING TO BELIEVE THEM WHEN THEY MAKE A STATEMENT LIKE THE ONE ABOVE???? THAT IS REALLY HARD TO BELIEVE. YOU MUST HAVE THOUGHT STOCK PRICES ALWAYS GO UP AS WELL??? YOU WANT TO BLAME OTHERS FOR YOUR OWN BUSINESS MISTAKES. IT SOUNDS LIKE YOU ARE A FOLLOWER, AND DON’T USE TOOLS TOO ANALYZE THINGS WHEN YOU MAKE A BIG DECISION???

Please assume that you are an objective, rational person, and answer the above questions with a “YES” or a “NO”……then LOOK IN THE MIRROR, and try to correct the mistakes you have made. You want to blame the system, instead of taking any personal responsibility for your financial decisions. It is always….”They did it to me”….”It’s their fault”……you can blame anyone you want, at the end of the day, YOU signed the paperwork, and drank the koolaid.

Gatorbait – pls relax Rick was just using an example – an analogy if you will (probably a bad choice, but he wanted a way to prove a point).
Rick has a great sense of humor and makes a lot of sense if you read his other posts. Just a different view of how to look at something instead of stairing at yourself in the same mirror ( unless of course you are that vain that all you want to do is stare at yourself) take off some of the blinders so you can see the whole world, differnet colors, different experiences & different views….

Rick,

I’m more interested in determining who actually deserves bail out, there were quite a few parties with their hands in cookie jar, now my understanding issue is how to sort this mess out. BTW, folks like Carrie (who put sizable down payments and didn’t participate in cash out orgy) are actually collateral damage of the debt train wreck of last few years. I bet REOs and foreclosures that are pulling down comps for Carrie are of 0% down variety purchases or 100% cash outs and she is trapped not only because crooked/incompetent LO took advantage of her but most and foremost because large number of folks decided to jump into game w/o any skin in it. Now they all are jumping ship and Carrie(s) are left to dry. I stated last year that criteria for help should be not that are made stupid choice and want out but that you made a reasonable choice but hordes of stupid people around you made it non-viable option. In short in order to get help these should be the criteria:
- no stated income and/or option arm crap
- no cash outs (with few exceptions like medical debt due to life threating illness). Absolutely no consumption cash outs, I don’t give a flying f.ck why any one just couldn’t live w/o brand new fridge, stove, carpet, hardwood floors, whatever.
- more than 15% down payment at the inception, no DPA program bull shit either. One needs to demonstrate that he/she was serious about actually owning rather speculating on real estate.

My guess, above criteria are actually disqualify about 80-95% of current delinquencies, so pool of those who actually deserve help is rather small, problem is fishing them out of the stinky pool of speculators and yes those who 0-5% down are exactly that, speculators just like Wall Street pimps.

i apologize alan-

pist-

I understood he was attempting an analogy\’e2\’80\’a6and some sort of humor, however his point was lapsed and almost completely diluted by his bludgeoned attempt of an analogy. I have read many of his other posts and many seem to be of the same tone and rhetoric if anyone seems to counter his particular point of view.

He and lookinthemirror seem to have some personal issue.

Proving a point with humor and analogies are fine with me but if one is not capable of a coherent analogy and cognitive humor then one should probably stick to simpleton rhetoric and not abusive humor and personal attacks. I did not get the impression lookinthemirror was being nasty in any of the replies\’e2\’80\’a6just using some actual analogies that fit the point he was making.

A rational discussion with humor and analogies usually does not result in the nazi or race card being pulled\’e2\’80\’a6.to do so typically, as i said, disqualifies that person from any rational discussion on a subject.

An analogy is typically not brutally metaphoric as rick\’e2\’80\’99s attempt,
more an abstract close relationship or concept to the subject at hand. Had it been in response to an off color attack it might have made sense but rick clearly was in the equation for shock value alone and, in my opinion, it diluted his attept to prove any point he amy have been making\’e2\’80\’a6.

Rick-

You still haven’t responded to my questions. Again, you want to blame the “fat cat” banks, etc. At least you have done a little research regarding Level 3 Assets, and understand that they are a dumping ground for loans that should never have been made by banks, or taken by consumers. You just seem to want to blame the banks for allowing easy credit without understanding that several of them have been hammered in their stock prices, and many will (and) should go bankrupt. Again, the term that best describes the situation is “Creative Destruction”. It happens every day in the business world.

As far as a solution to the foreclosure problem, here is how I see it:

1. Banks need to set a specific timetable with homeowner’s on when to either a) modify the note b)start foreclosure proceedings or c) write down part of the principal of the homeowner’s loan and restructure the note.

2. The only problem with option c is that it is very difficult to “cherry pick” which loans should be paid down by the bank and restructured. The owner will have to prove that they have no other alternate source to repay the bank, and that they are willing to walk away…..that is very difficult to prove. In most cases, banks are currently willing to foreclose, and take the hit on the open market. This will change as more and more people “walk” from their properties.

3. The marketplace is efficient and will determine when prices have reached bottom. This may take 2 years, and it may take 10 years, that is why banks should be proactive with all homeowner’s facing foreclosure and attempt to “work” through options with them in order to keep them in the loan.

This is a huge mess and their are many contributors to it. Unfortunately, many homeowner’s (for WHATEVER reason) purchased properties that they should not have. That is the only fact that is important. Therefore, pain is being inflicted across the board to the following parties: 1) the homeowner who incurred too much debt 2) the bank for allowing loose credit guidelines 3) Wall Street banks for buying the paper without proper due diligence 4) Ratings Agencies for giving AAA security ratings to subprime loan pools, and ALT-A pools 5) Secondary Market Investors (domestic and foreign) for buying these pools, and marketing them to consumer’s as safe, high-yielding investments 6) Regulators for allowing banks to loosen their credit guidelines. 7) Politicians for not having the courage to understand the magnitude of the problem, and turning a blind eye to the excesses.

This is a catastrophe that could have been stopped if anyone of the above mentioned parties made responsible decisions. A few did, and unfortunately, the taxpayer is going to have to bail out the rest. That is the travesty of the whole system we have in place. The creative destruction that is occuring (and will continue to occur) is going to be monumental. Hopefully, some serious lessons will be learned through this process. I go back to my earlier statements: AS A CONSUMER, YOU SHOULD ALWAYS GET ADVICE FROM SEVERAL PEOPLE PRIOR TO MAKING THE LARGEST FINANCIAL DECISION OF YOUR LIFE! NO ONE FORCED YOU TO TAKE A SUBPRIME, OR ALT-A LOAN. YOU MADE THE TERRIBLE DECISION DUE TO SEVERAL FACTORS, AND YOU HAVE TO FIGURE OUT THE BEST DECISION FOR YOURSELF! Blaming others does not solve the problem for poor financial decision making. LOOK IN THE MIRROR!!!!

Gator, I agree with you to a certain extent. I am not sure you really read my post, or maybe you misunderstood the points. This whole thing started when I read a few people blaming borrowers for this mess. These people posted responses to Moe’s story implicating that borrowers were malevolent and/or stupid. All I was trying to say is this – Stop acting as though the borrower went to the LO and the bank and wrote the terms of their loan.

The banks have the money to loan, and ultimately it was they who decided who got the money. The RE Agents and LO’s failed in their fiduciary responsibility to both the bank and their clients (the borrowers) by continuously painting a picture that housing prices ALWAYS go up. Because of this belief, most LO’s and RE Agents ignored or neglected to pass on vital information needed by the banks on the ability to repay. Yes, speculators jumped in, but again, they could not have gotten the money if the banks, and those giving the banks the information on borrowers, cared about the repercussions that may occur if a short term blip should happened.

I am not sure you really understand how the accounting practices work, but the only companies, so far, that have been forced to liquidate level 3 holdings are those that could not raise sufficient capital to meet margin calls on their level 3 holdings. Now, with that being said, the FASB has removed support for QSEP’s (which most derivatives are classified as), and you will see, starting at the beginning of August, many level 3 holdings being moved to level 2 and level 1. Which corporations will begin to do that, and when, will be determined by when their fiscal year ends. Suffice it to say, by the end of the 2nd Quarter, 2009, the process will be complete.

I don’t believe the economy and markets can wait that long.

Here is my answer to those that feel the homeowner should get no bailout:

There is no need to determine who, at this point, “deserves” a renegotiation of their loan. Stop acting as though the borrower went to the LO and the bank and wrote the terms of their loan. Either they all get it, or we face global systemic financial meltdown. Get out of your fantasy of trying to control everyone and be realistic.

The marketplace is barely efficient at this point in history. It is rigged by a very small group of very powerful, very determined men. This is not conjecture, many very smart people know this to be true.

Woodrow Wilson, who signed the Federal Reserve Act into law, regretted it three years later by saying “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world — no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”

To understand the implications, you must understand history. Between 1929 and 1935, JPMorgan increased its net ownership of the American economy by threefold. Sure, everything was 50% of the value it had been before 1929, but they were able to triple their ownership of American business by getting entities at fire-sale prices. They may not be so concerned that the economy tanks, because it only means they get more businesses on the cheap. What do you think the Bear Stearns deal was? Is history repeating itself? I don’t have a crystal ball, but it is hard to dispute facts, and I know hindsight is 20/20 vision. They did it once before. There are many parallels between our investment world now and in 1929 – the bad thing is the exposure to potentially volatile speculative bonds built on risky real estate transactions is about a thousand times greater than in 1929, and that is exactly what started the ball rolling then. The real problem began, not because of the drop in value of stocks, but when the big investors who buy bonds said enough of this BS, and pulled their money out of the bond market. It was Bond Market dislocation that caused the Great Depression.

This is the reason I believe the best thing the banks can do, for this country, is at least get something from the people in the homes, instead of nothing. If the investors in bonds who buy FNMA and FHLMC and GNMA bonds believe they will lose all of their money, we are screwed. They may be able to tolerate a 20%, or even maybe a 40% loss, before pulling out. What they will not tolerate for very long is being misled. The Bond Investors will not put money into something if they believe they are being lied to, and we are very close to that right now.

To get through this mess, there is only one way;
A) Level 3 accounting must be eliminated, and all current losses brought into the light of day and be reconciled immediately. Yes, many of the biggest names you know will cease to exist, but that is their fate anyway, because they made bad financial decisions. By exposing losses immediately, you stop the ability of these corporations to increase their losses, which is what is happening now.

B) Since the American economy has been 70% consumer spending over the last 7 years, and the money for that spending came from the rise in housing prices/equity, the only way to keep the bond investors in the market is to keep everyone in a house, paying something every month. At the very least, it will give Bond Investors assurance they may get a return of their principal. Many investors right now know the chances of getting a return on principal are diminished, but they haven’t panicked yet. These are the big money people, and they are well aware of their role in the system.

C) Confidence amongst Bond Investors must be restored. Only when they are sure their return of principal is guaranteed, will they put new money into bonds, which is the lifeblood and foundation of American business.

The only way to guarantee we avert a catastrophe is to do this. and many good things will come:

1) Companies that placed themselves, and thus, their investors into precarious financial positions will be cleansed from the system.

2) This country will bring back, at least to some level, the manufacturing base that made the United States of America the great power it is.

3) That new manufacturing activity will go into the economy for goods and services, and create a positive, sustainable economic loop where true growth can occur. Those that believe our economic growth over the last 40 years was good or sustainable are in for a rude awakening very soon.

4) We lessen the ability of the emerging economies to rule over us. Sad fact is we gave those emerging economies the power, through our debt, to now tell us what to do. Remember I have written this, sometime in the very near future, this country will regret we ever gave China one dollar. I can’t tell you if that will be 6 months from now, or ten years from now, but we will regret it soon.

I can only hope more and more people will agree. There are many who do, and many are much smarter than I. Yet, the number is too small to make a difference where it will matter, at the ballot box. The only way more people can agree is if more people are informed.

But, back to the topic of this blog – Keeping people in houses paying something is the only chance we have of averting a downturn nobody wants to see.

Help as many as you can Moe, every little bit helps, and maybe it will catch on.

Rick-

Finally, a somewhat coherent post from you. You have taken some of my posts and added your spin on them. Remember, Creative Destruction is an important ingredient in a capitalistic society. I agree with you about the Level 3 asset issue, and the fact that banks are “hiding” their losses under that platform.

However, one thing that you are unaware of is the fact that the FED “saved” Bear Stearns not due to their implicit concern of Bear Stearn’s failing, they were more concerned with JP Morgan’s counter-party risk WITH Bear Stearn’s. If the FED allowed Bear Stearn’s to fail, it would have had a severe cascading effect to all bank’s that hold unregulated third party contracts with Bear and JP Morgan. JP Morgan had the most contracts with Bear, therefore, had Bear failed, than JP Morgan may have fallen with it (and many others). This, in turn, would have had an immediate effect on all counter-parties, and therefore could have created a cascading effect, and a systemic meltdown to our financial system. Unfortunately, this situation has to be unwound delicately, and slowly for our system (as we know it) to survive.

“Easy money” and loose underwriting guidelines are a thing of the past. Unfortunately, these changes come at the worst possible time. The damage has already been done, and homeowner’s don’t have any way to get out from under. I have stated in my earlier posts that banks should work with borrower’s to keep them in their homes to try and keep our system from completely melting down. However, this creates a “moral hazard” for the future, in that the FED, and the banks are allowed to essentially change the rules. There may be no other alternatives.

Again, back to your point about LO’s and Realtors breaking a “fiduciary” duty to buyer’s: I think that is completely nonsense. The banks created the programs to meet Wall Street’s need for yield, and the other’s sold the product that was given to them. As I mentioned, a person/company/country must take personal responsibility for their financial decisions. By changing the rules, the FED has created a problem for future generations (although, they may have had no choice); banks have done the same thing by knowingly loaning money to people that did not show ability to repay; and the consumer did not pay attention to their own financial situation by signing loan documents hoping that their incomes and property values would increase. This last statement is the main reason we are in the situation we are currently in.

There was not a mention about any of these “problem” loans over the last few years’ because people could make their payments, their property values were increasing, and they felt somewhat secure about their future. All of this has changed. You want to blame the “system” for the problem, however, as in the Dot Com Boom and Bust, these cycles have been going on for a long time. This is due to the basic human nature of GREED and FEAR. This is another cycle, albeit worse than anything we have seen in our lifetime.

The only exit strategy right now is for the government to keep printing money. The problem with that tactic is that it creates inflation (which is a “hidden tax” caused by a less powerful dollar), and invariably will cause more bank failures (which may be a good thing), and more bankruptcies (both corporate and personal)

In conclusion, this country is in dire straits for a variety of reasons, however to blame “rich” greedy business people is disengenuous. For every seller, there must be a buyer. On these posts, we don’t here about the home buyer that made a wise decision and purchased a home they could afford. All we here are the stories of people that “didn’t know”, or “were sold something they didn’t understand”…..which in my book is known as financial incompetence. You can point fingers all day long at the enablers, however, they were not the buyers. One has to take responsibility for their financial household. Now, all of the responsible homeowner’s are going to be burdened for years’ to come by those who made irresponsible choices.

When the music stops, the buyer who is leveraged is in the unenviable position of having very little alternatives. Here they are:

1) Sell your depreciating asset NOW (if you can)
2) Keep making payments (if you can), and hope that the market turns around in the short-term (doubtful)
3) Call your lender, and try to get them to modify or “work out” the terms of the loan with you.
4) Allow the lender to foreclose, and move on knowing you learned a difficult lesson when buying the most expensive item in your lifetime.
5) Stop blaming others for your poor financial decisions.

At the end of the day, we all have to Look in the Mirror! That mirror may be cracked, fogged up, destroyed, but, in the end it is OUR mirror! Good luck to everyone.

Rick- Do you have a response to my posts? I would be interested in hearing your take on the questions I asked, and your responses??? I have noticed that you have chosen to ignore those posts since they don’t “fit in” with your view of the world?? Please feel free to comment, or ask me any questions, and I will oblige you with a cogent, direct, and real world response.

Look forward to hearing from you……

P.S. Please try to be specific with your questions and answers. It makes for a much better discussion of the issues. I did notice you are following my lead by using “numbers” when stating facts……it is a nice way to clarify a point

Oh, and iliketolookatmyselfinthemirror, which Countrywide office do you work at?

Rick-

I guess when you can not respond coherently to a post, you resort to personal attacks (i.e., Nazi Germany, passive-aggressive, medication, I work for C’wide, etc). Sorry, I don’t subscribe to that approach. You still have never responded to my post asking you specific questions about personal responsibility? Why don’t you read my post on June 10th at 11:21AM which specifically addresses your answers to my questions. Please read your own answers to see how silly they are. I believe if you really try to address the underlying issues that caused this problem, the largest is lack of personal financial responsibility.

FYI I don’t work for Countrywide and never have

Carrie-

Did you read Rick’s responses to my posts. I would be interested to hear your responses to the questions I asked? Actually, you are in a tough financial situation, so it is probably difficult to think clearly. Comparing making a poor financial decision and assisting a granny crossing the road is quite a stretch. I hope you are in the process of working out your financial predicament with your bank. I wish you luck, and I hope you have learned a valuable lesson about financial decision making.

PRECISELY lookinthemirror people/corporations/banks/etc need to take ownership of their mistakes…
the only problem is you think it is only the persons fault, when in reality it is everyone who was involved at fault…
so with that said, I do not want to keep blaming everyone…
I am standing up to my situation and am trying to find solutions for me & also on a larger scale!

the only solution i have heard you repeat over & over is for everyone to abandon their house, walk away – I just don’t feel that is the best solution.

lookinthemirror

I have never read in any of your posts where you have told the borrower 1 or 2. but i commend you for atleast trying to find a good solution. you usually blame the borrower for everything.
I personally am on option 2, and will keep trying until all my options have been exhausted. I recommend any homeowner or borrower who truly is in hardship and wants to keep their home – try try try !!!

lookinthemirror you usually go for option 3 & 4 in your posts.

Thanks for the other options & good luck to you with your investments.

rick, rick, rick-

i am not clear on your reply…”Stop pretending, please. You never know who may run into, or where”

What does this even mean? Is that some type of a threat? or your attempt at humor again?

maybe i misunderstood and pist can translate for me on this one.

Is this only an open forum for those who agree with you and tell you… “you rock” and “you get it”

If someone presents a much broader perception and vision of what is really going on and challenges some of your “opinions” you reply with vitriol??

i was under the impression this was a blog to help, discuss issues and educate those who are looking for help….

I now have to agree with lookinthemirror…no coherent responses…just apparent insecure threats.

Rick, Rick, Rick…..

I will now pretend for one moment that you may know what you are talking about and that you overlooked statement 157, regarding fair value methodology and that this would establish a framework for measuring fair value in GAAP going forward. This change in approach would have far reaching ripple effects that will be felt for at least 2 fiscal years, mainly for the investment banks.

Also please explain your acryonym QSEP’s for those of us pretending. Because I always understood this as quantitative studies in economics and population.

Yes Bear stearns was over leveraged but most investament banks run a similar leveraged model that reaped the huge returns the last 5 years. Other hedge funds blew out as well. Bear did not run into a liquidy issue until this year….so i am not clear what last June has to do with the collapse of bear this year. My point was that bear was warned last year to shape up their operation or they would suffer the wrath of the Fed. You do not find it at all suspect that the discount window was then opened that very week after the deal to hand over Bear to JP during the weekover the weekend was completed?

One last thing ricky, you are right about one thing..

“you never know who you may run into, or where”

It does look like someone is pretending….what exactly did you used to do at countrywide?

Not answer a question?? I have better things to do than respond to people who’s only ambition is to argue.

Disappear? What, you spend all day looking for someone to validate your life by responding to something you wrote on a blog?

To say my posts are not coherent is just childish. Is it perhaps because Moe decided to high light one of my posts, and has yet to consider one of yours? Me thinks you doth protest too much.

I only wrote to express my opinion against mean spirited people who are expressing their opinions armed with only 1/3 of the information. Oh, was that not coherent enough for you????

I mean, it is painfully obvious you did not read and reflect, even just for a moment, on any thing or idea that I proffered.
Honest discourse is the last thing you seem to want.

So, before you respond to this, because you like to argue and believe everybody should see the world your way, even though there is a 1 in 6 billion chance you are right, read the whole post and digest it. I know that is like, really, really hard for you to do, and most likely you won’t succeed. Just remember, if at first you don’t succeed, try, try again.

And Gator, if you would stop and read, instead of trying to be the one who is most right, you just might realize we agree on much more than we disagree.

I can’t say that for iliketolookatmyselfinthemirror. She’s just a spoiled, mean trust fund baby. I’m just guessing with that, but the one thing I know is this – I have met many people with her attitude, and they all have one thing in common, they did not earn the money they have. It was somehow given to them. And for some reason, they always like to tell people to live the way they do.

BTW – My vindication is looking at how long the response page is to MY posting. Question is, why are you still here?

Rick,

I’m sorry but dead beat’s desire to keep the house is not the best allocation of resources, because at the end of the day he/she is still a dead beat. You, see, due to all the stupidity, resources were grossly mis allocated and now it’s time to re adjust it back. You can’t keep people in the houses if they can’t afford them. The fact is that by preferentially treating dead beats you mightily induce those who are not to adopt the same behavior because after all we are somewhat rational: if someone’s zero down neighbor got principal slashed two times why the reasonable one can’t get the same treatment ? Perhaps by turning into dead beat he will ? The point is that stupid behavior MUST NOT be rewarded because if you do you get more of it.

Too much finger pointing gets us nowhere and this “look in the mirror” garb is annoying at best. Bottom line is that banks have a fiduciary duty to ensure they are accurately lending amounts on secured notes. Even folks who used their homes as ATMs did so because a bank valued/appraised their home at a higher, albeit ficticious, amount. Just deserts for all my friends, I’ll just be happy when the Fed quits the banking system welfare program, shores up our dollar, and lets some of the big firms and banks with the most involvement go belly up. I am regretful of the large amount of collateral damage that will result though to innocent third parties.

Individuals getting one loan in a pool of trillions of dollars worth of fraudulent collaterized debt obligations didn’t create this fiasco, they only minorly contributed at best.

Tom, you are right on. It was the securitization of mortgages and then packaging to sell as bets that has put our whole financial system in trouble.

I cannot agree more that the Fed needs to stop the ’swap-o-rama’. If they don’t, a depression cannot be avoided.

The collateral damage is the most unfortunate circumstance. Many innocent people are feeling the pressures, and it will probably only get worse.

Tom-

Same question I asked of Rick earlier: “If someone told you that you could borrower a million dollars, and the payment was fixed for 2 yrs. at $5,000, and then adjusted to approximately $8,500 per month, would you not take a closer look at what you were signing on to? Especially, if it was the largest financial decision of your life???

Come on, wake up and smell the coffee……banks enabled borrower’s to buy homes they could not afford, however, ultimately, we have freedom of choice in this country, and we can decide not to purchase a product……even if “everyone” else is doing it! I don’t get it????? Please explain how making poor business decisions is a reason that banks should forgive debt or restructure someone’s loan???

The ONLY reason they are doing this is that it is the best BUSINESS decision right now for the institution based on their limited alternatives. The consumer is in the driver’s seat so to speak, however, the drivers seat is that of a beat-up Gremlin with its gas light on, not the brand-new Ferrari that they thought they had purchased. SELL YOUR DEPRECIATING ASSET NOW, OR CONTACT THE BANK AND TRY TO WORK OUT A PAYMENT PLAN. It is really that simple.

I just have one question. I hear you all talking. The only thing is nothing is getting done. Yes you all have put ideas out there but what are they really? We can sit here and put the blame on everyone and for what they have done. I thought this site was about solutions not pollution. I am saying the common man has no idea what the hell half of you are talking about. They are looking for what they can do. thanks for letting me read the post there were a lot of good points.

Tom & Rick —
I am totally on the same page with both of you.
I truly hope that we can start trying to fix this mess before it gets worse because if we go beyond rock bottom here I don’t know what the fate of our dollar or our way of living will be..

Elaine..

the point many are making is that it is the banks…not the broker or RE agent who really are deserving of the attacks.

The banks allowed the broker to charge what was charged and the bank is also the one who offered the very product to a highly qualified borrower who was deserving of better terms.

What I would like to see is a test given to the deal submitted to the bank by the broker…if a deal is submitted to a bank for UW they should verify why a qualified borrower going full doc with 700+ scores is getting a rate anywhere above a general market range. In most cases their is a YSP test and if you are going conventional then it would be quite difficult to get a rate 2% higher than market.

this is where the issue develops….it seems there is really no economic benefit test given in the above dynamic when the file is submitted to a non-prime lender or division. I am all for some type of financial test on qualified borrowers who somehow are submitted to non-prime.

The part that mystifies me is when I hear of a event that the borrower was solid but was delivered a non-prime loan. It seems to me that if the borrower was really solid the work involved to send the file to a prime outlet is actually less and more competitive in rate/fees.

As far as your situation now…If I recall the adjustable programs in the 80’s really did not have caps and that issue is what prompted the caps on adjustable rate mortgages of today.

I am not clear who sold you the current mortgage.. a broker or countrywide?

Also I have to ask why you did not use the same bank you had done business with on your previous home financing?

Also if what you are saying is that you executed documents with one rate and when you received the loan docs the rate was higher?

This is clearly not legal and I suggest you call the state regulator to review and if this did happen then they will be able to apply some heat to make corrective action.

Your story is not quite the example of what litm is referring.

best of luck and do call your state agency.

I do not know of any legit broker who would object to a rate test similar to the one I propose. If the bo

Elaine, you are completely on the right track here !!!!

Gatorbait although you do make some good points, please understand that Banks had their own Brokers/Loan officers in house making & going beyond to make the loan go from UW to Clearing Conditions in a day. they wanted to close close close loans without any ethics or morals. so yes the banks are just as responsible as the outside brokers & loan officers, the banks did not have to fund the loan that is why they have Quality Control & UnderWriters …

The blame for this entire “MERS Mortgage Meltdown” can be laid upon the shoulders of all the greedy mortgage loan industry executives and the investment bankers who designed a scheme calculated to make themselves rich. Under the guise of “helping people” to realize the American dream of owning a home, these white collar fraudsters were really only concerned with creating feigned profits by quickly churning mortgage loans into securitized investments which they in turn sold to investors.

Based upon these feigned profits these executives and their crroked cronies were able to extract hundred of millions if not billions from salaries, bonuses and stock options. While invesotrs from Minneapolis to Moscow got stuck holding the proverbial empty bag. Many of these investors were large U.S. national and foreign banks. Ironically these same banks would have never loan money to the borrowers who\’e2\’80\’99s notes they were now holding indirectly through their investments in these “mortgage backed securities”. It is now estimated that the losses incurred by these banks may well surpass five hundred billion dollars.

There can be no argument these losses were the result of fraud from top to bottom of the mortgage industry. From mortgage lenders such as Countrywide, Washington Mutual, Fieldstone and Option One to secondary mortgage market makers, such as Fannie Mae, Freddie Mac, Bear Stearns, Citicorp, Goldman Sachs, Lehman Brothers etc. On the street level Realtors, Mortgage Brokers and Appraisers just followed the lead of these Wall Street fraudsters like lemmings

This mortgage fraud created a false demand for housing in the U.S. This false demand caused an increase in home building. Now with the Mortgage Meltdown the U.S. has an over supply of new and existing homes. This over supply of homes has caused serious economic effects through every facet of the U.S. economy. Recovery will take years. The U.S. dollar has also suffered against other currencies. In April of 2002 a Euro could be purchased for $.85. Six years later in April of 2008 it takes $1.60 to purchase a Euro.

Rather than throwing themselves out of their executive office windows when their financial scandal was discovered and the billions in losses started to mount, these white collar crooks simply took early retirement or quietly resigned, taking with them the hundreds of millions they had EARNED for their part in the Largest financial scandal in U.S. history.

In addition to the fact that James Johnson the high powered D.C. insider had been spreading Fannie Mae money around D.C. like it was his own, we now have earned that Countrywide and Fannie Mae have the keys to the back door control our U.S Capital by making V.I.P. accommodation loans to God knows how many U.S. Senators and Congressman. This may be the reason why neither the U.S. Senate or Congress has conducted any real investigations into what is now tagged the MERS Mortgage Meltdown. MERS being Mortgage Electronic Registration Systems Inc. a front corporation that was formed ten years ago by Fannie Mae, Countrywide, Bear Stearns, Lehman Brothers, Goldman Sachs, and other investment banks. MERS allowed them to launch this huge global financial fraud and do so with out complying with long established financial safeguards and laws of commerce.

The F.B.I. has recently shifted its manpower to investigating and prosecuting mortgage fraud. However the mortgage fraud they are investigating is the fraud perpetrated at the street level by mortgage brokers, Realtors and borrowers. This is akin to directing highly trained F.B.I. agents to investigating and prosecuting thousands of street corner drug dealers and users in place of investigating a drug cartel who manufactures and distributed drugs out of New York and Washington D.C. Once again the little crooks and criminals got to jail while the Wall Street and Beltway king pins get away with billions in loot unscathed. White collar crooks/business executives lining their pockets with ill-gotten gain by fleecing everyone. Yet not a single Wall Street Investment Banker, Banker, Mortgage Loan Titan, has been taken to task for the financial ruin their mortgage loan scheme has left behind. . Americans should be outraged by what has been allowed to occur in this country over the last ten years. Is there one U.S. Senator or Congressman who will call for hearings on this blatant financial fraud?
Questions of comments to: kev_o_shanter@yahoo.com

Hey Rick,

what is your problem?

It is clear you are the one who bashes anyone who has a different point of view than yours and then claims the other “guy” is more concerned with “pride” and would rather go down in “flames” being right. Most of what has been posted to your replies has been to propose another perspective, to open up the thought process…. you on the other hand will paint the counter point as “these people don’t get it”. We get it rick…this is a blog to share and care not to bash and trash.

What i read is that you really have a great knack at knocking everyone who disagrees with your posts and seem very critical of them when anyone . What suggestions have you offered other than a depression like era and some other unrealistic outcomes… While abolishing the FED sounds good, the reality, as you know, this will not solve the current chaos. Deflection is a nice game but the facts are the facts. Facts are this environment is very bad indeed but the percentage of defaults are not at the historical proportions…the numbers are much greater due to the massive amount of people who jumped in to buy homes. The media really hyped it up as well..fortune, Money, Kilplingers and any other rag telling stories of “regular” folks getting into real estate and a “how to” on the approach. In addition to the print you had the rambling finance networks also promoting the “have you missed the real estate train” investment.

You have some valid points but not all your points are correct, just like the the rest of us mere mortals.

You mentioned most bank LO’s were able to also broker out…. your are, as you put it “almost there” in fact the bank would usually make the process to broker out a bit more painful and more cumbersome for the LO than it actually really was to deter the in-house LO from brokering out. Also there was usually less commission to the LO for doing so…. so I ask you, what in-house LO would go through the hassle of brokering out for less pay for the same work and in most cases not get credit towards their production goals? i tell you which one the LO we busted for kickbacks.

So it is good you point out the in house LO had the ability to broker…but they were less inclined to offer a better deal if it hit them in the wallet for doing so.

Add to your list Wells Fargo, A few branches were raided by the FBI in Florida recently… i guess it must be something to do with CW.

Kevin is on track with his perspective.

A professional Real Mortgage Broker is absolutely able to get a better deal and in fact do not typically charge or are even paid more than 3% in total compensation on a solid deal. The little snakes who jumped in, like what happens in many hot industries, were doing what you said but it is not at all typical of a real mortgage professional. I have dealt with and witnessed Professional Mortgage Brokers/LO’s who actually suggested not to refinance even though the rate was lower for the potential client. The broker indicated that the cost to do so outweighed the lower payment over the time left in the property.

As I have said before there are bad apples in almost every profession…like MD’s who will offer prescriptions online…or who will suggest one medication over another to get that free fishing trip to Jamaica. As a consumer you ask around do some research and find the professional you can trust.

Elaine mentions that “as a designer who worked with a manufacturer, if we made a bad product, we had to eat the cost of the return, and make it right.” ….I am sure even in her industry there were shady designers who would cut corners on the cheap and would not eat the cost to make it right….I imagine that is not the norm in that field either to stick it to the manufacturer. In fact i bet the market would weed those people out.

The mortgage market is weeding out the bad apples and in fact some lenders limit the amount of brokers they sign on and have stopped taking on brokers at this point. Some have a better vetting process. The crook will not want to go through the extra steps.

Carrie- you are on my point. I totally agree even the trusted bank had their share of deceptive practices…w
I am not clear where this idea idea I back the banks is coming from? is just the opposite..i place most of the blame on the big boys. The RE agent and Broker were the front line but the last line of defense was the Bank/investor.

Rick: Also you still mention the originators and lenders would pull a few tricks…it was also the builder, title company and big bank LO’s as well.

I personally witnessed where a borrower was refusing to sign at the table because the terms changed….the builder, RE agent and title agent were all scaring the person to sign or they would lose their deposit. Rick you know and are aware it is a bit more complex that just a few playing “tricks”. If you declined to sign at the table there were other parties who had the ability to have empathy and give some additional time to dump the scam artist broker…as you know builders would fine people as much as $500 a day for any delay if not out right take the deposit for any delay. You had sellers who were not “concerned” with your problems and felt you should have vetted the broker a bit better.

I was selling a property about 2 years ago and one of these scum balls I mentioned attempted to pull the above similar to what happened to Elaine on my buyers….I suggested the buyer not sign and contact who i typically used and we agreed to move the closing to take place a week later.

It is disingenuous to make some of the declarations you make since it is more complex and not as simplistic as you often propose.

I agree there were bad apples but I have to disagree with your broad stroke that the typical transaction was that of Elaine.

You do not hear of the smooth deals as much as the horror stories. How about a blog of some of the good examples and experiences many have had as well. Because there are quite a few great people still in the business and are professionals who actually follow the fiduciary responsibility to the client.

I feel very bad for the Elaine’s of this market and empathize with their plight. i know those such as Elaine will work through this issue. I wish everyone the best of luck. Take all the good information from all the posts and use it for your efforts. The more information you are armed with the more empowered you will be to fight.

Rick -

Gator & lookatherself in the mirror have blinders on they only see their view & cannot comprehend anyone elses point of view, maybe if they would stop looking at themselves in the mirror so much they could actually see the whole problem instead of the small piece they only focus on.

Elaine is dealing with CountryWide & as alot of us here are suffering in one way or another because of the excessive abuse that has happened in this market.

one other thing rick,

my point about the “in house LO” was that some were as guilty or more so than the mortgage broker you seem to have a bug for… I had the impression you were suggesting the bank LO was a better option that the mortgage broker…??? maybe i misunderstood your point.

I did not “demand” you acknowledged originators had little or no role…merely pointing out that not ever broker or LO was a demon seed out to get the public and make a commission at all costs.

This blurb you attribute to me-
“Everyone is responsible for their own actions, especially the borrowers, wasn\’e2\’80\’99t that your main point in your beginning responses?”

i never said the above or even suggested- especially the borrowers…..where do you come up with this???…i suggested we all have a role to help each other by discussion and ideas.

I am still puzzled by how I was “a bit harsh” to Elaine with asking some questions to understand her dynamic….please explain this one to me.

Putting forth ones input and thoughts are arguing?? You are the one who attacks and throws insensitive comments at will. When you are challenged to consider another perspective other than yours you bash and trash…and now apparently you either make up or mix up what was actually in my posts.

Rick, Elaine, et al…..let me simplify things for you.

1. No one forced you to buy a house. If you were “confused” by the terms of the loan you were offered, why did you not pull out of the deal. Sometimes the best financial decisions one makes in life are the one’s that are NOT made, even if you have to lose your deposit.

2. With regard to the mounds of paperwork that confuse people like you…..wouldn’t it be a good idea to get a 3rd parties advice before agreeing to the terms? Remember, this is a free society, and we have the freedom to accept something or decline it.

3. The excuse that the paperwork “was just too confusing” or “I was pressured by people to sign paperwork” just doesn’t wash with me. I can understand if you were buying expensive bubble gum, and you realized after you bought it, that you could have purchased 2 packs instead of one for the same price, that you might feel a little bit hurt. HOWEVER, WHEN YOU ARE MAKING THE MOST IMPORTANT FINANCIAL DECISION IN YOUR LIFE, WOULDN’T IT MAKE SENSE TO REVIEW WHAT YOU ARE SIGNING??? I have seen thousands of notes and deeds of trusts (THAT ARE RECORDED DOCUMENTS), and they are really pretty simple: a) you have a FIXED RATE, therefore the payments are fixed for the life of the loan….either you can afford them or you can not….pretty simple! b) You have a “hybrid” adjustable mortgage where the payments are fixed for a SPECIFIED period of time and then adjust to a “market rate” which is not determinable at the time you take the loan…..a little risky, maybe I shouldn’t take that loan???? or c) You have a Variable mortgage which changes monthly, or yearly based on market forces that you can not control….very risky, maybe I shouldn’t sign up for that one???
PRETTY SIMPLE….you made a poor financial decision, and now want to blame others!!!! Look in the mirror. If you don’t understand something, why would you sign the paperwork?????

As far as greedy/unscrupulous people in the mortgage business: please wake up, there are greedy, unscrupulous people in EVERY business. My advice is to avoid them. The lesson to be learned is NOT TO SIGN BINDING LOAN DOCUMENTS IF YOU a) DON’T UNDERSTAND THEM b) CAN’T AFFORD THE PAYMENT or c) ARE RISK AVERSE. You are much better off losing your deposit, and chalking it up to “experience” than signing on for something that will cost you hundreds of thousands of dollars (in some cases millions) over a LONG TERM.

All the blame in the world does not excuse poor business decisions! If you are a “follower”, try to learn from your mistakes and become a “leader.” It will serve you well in the future.

With regard to compassion, I have a lot of compassion for people that are ill, or in poverty, however, I do not have much compassion for those who CHOSE to sign loan documents that they didn’t review or understand. In my book, that equals stupidity.

QUIT BLAMING OTHERS FOR YOUR OWN MISTAKES!!!!

P.S. As a personal side-note, we decided to remodel our home a few years’ back and were given a name of a contractor that had been referred to us by some friends who were happy with his work. We interviewed him, and he seemed to be the right fit. After agreeing to work with him, we spent 10k in drawing up plans, and an initial deposit for the work he would perform for us. After a couple of weeks of dealing with him, I noticed that he was changing his bid, and adding on “extras” that I didn’t feel we needed. Based on the discourse, I have heard in many of these posts, most of these people would have continued with this contractor because he was the “professional.” If it doesn’t seem right, and doesn’t fit your budget, than change your direction. I called the contractor, and told him to stop working on the project, and it was work the 10k to me to find someone else. This is what intelligent, prudent decision makers do……they make adjustments based on the facts presented to them. I didn’t blame the contractor. I signed up for him to do the work, and the facts changed, therefore my decision process changed.

A quote that everyone should take to heart: “Sir, the facts have changed, and when facts change, I change” -Lord Keynes

I wish everyone that made poor financial decisions the best, and I hope that they won’t make the same decisions again. Remember, if it sounds too good to be true, than it probably is!!! Nobody ever complains about their decisions when the market is up, however, they all come out of the woodwork, when their asset depreciates…..why is that???? I wish someone could explain that to me!

P.S. I have a piece of property in the Everglades for sale….it is a huge development opportunit

Look in the mirror – you continue to miss the point !

it is not only borrowers fault !!!!!
Follow the greed & money…. the borrower is at the bottom of this pyramid….

if you want to blame anyone for the state of this mortgage crisis & economy start at the top, the borrower was just ‘casulaties of the greed war’ …

stop looking only at your mirror and look everywhere !

there are a lot of good honest borrowers who suffered by this

rick…

you are incorrect on a few things-

1. banks are not capped at 3%…they cap their LO’s at 3% so they still are able to make profit on the secondary side of the market. What do you think banks make selling the mortgages??

2. The broker does not have to “load up” the person with pre-payment penalties in order to get a better rate- this is absolutely false and to declare otherwise reveals your lack of
knowledge

3. In your silly example the small bank in Fargo would have a higher rate because it is a regional lender and does not sell to the secondary market.

What do you do and what is exactly your agenda? Because it is not to reveal the complete truth…just your version.

Most people work to make a decent living and usually obtain employment to accomplish this purpose. If they happen to be great at what they do then that person may end up being well compensated.

Now back to one of your snide comments- I guess you would have to understand clearly why brokers even exist. As you seem to not know, brokers are supposed to have access to many different outlets and a professional in any field will sit with that client, ask questions and advise of what makes sense for their goals. Period…. the profession was not developed to just “charge more money”. This is crazy speak.

This outlet was developed to offer the client more options (A broker was the original “lending tree” by shopping several lenders/banks and presenting the offers). Similar to how professional financial planners are set up to advise clients on investment/planning options.

A borrower with good credit is actually much better going with a broker if that broker is a professional. And rick…if another deal made better sense and cost less to the client then the upfront broker did in fact advise to take the other option. If you read my post I had said that I witnessed a broker advising a client not to refinance. Not lowering any rate….again you are making up events.

In fact some brokers are experts—again with your -all were money thirsty scum attacks.

Some banks specialize in adjustable rate mortgages so if you were a borrower with good credit and wanted a fixed rate program and called a bank that pushed 5/1 arms…guess what? if the borrower did not know that the bank they called spec in 5/1 arms do you think the bank was going to tell them? In most cases they would offer a 30 year fixed but because the bank primarily sells 5/1 arms on the secondary market the 30 rate was quite a bit higher than the average. Please explain how this borrower would have saved ” thousands” as you put it.

Major Banks and brokers both work off of yield spread, they just have different names for it and one of them actually has to disclose this on the HUD-(brokers). I would love to see the day when banks have to actually disclose on the HUD what they make as a SRP (same as YSP).

I know quite a few brokers and I am not aware that “most” were making 4 points or more. A broker could make 2 points from the bank, charge a small processing fee and still beat the bank on their own programs. The banks had something called overhead….you know, those big buildings with brand names on the side with a bunch of employees that may let you have access to your money during certain hours…

It is quite simple rick, brokers made money one of a few ways:

charge the client a fee or
the bank pays them a fee or
the client pays a portion of the fee and the bank pays a little of the fee.

If the broker happened to be a mortgage banker then they would get an SRP…that is were the money is and were banks make a truckload themselves.

So you are for the banks? Do you work for a bank?
You are for less competition and higher rate/fees??? You must work for a bank…..

I have never condoned less than ethical behaviour- Because I suggested that there were many in the industry who were ethical and doing their job the right way…you tag me as part of the problem???

No rick…..You are the problem…making accusations and broad stoke assumptions with no solutions offered and minimal and in some cases incorrect facts.

I noticed this site has a loss mitigation firm associated- is this a pro-bono service?

You really seem to be a bitter person rick. You know nothing about me or what I do but yet you take liberties to suggest otherwise and even make up what my motives are. In some cases you are abusive and even apparently put words in the mouth of those who shed a different light and perspective.

Talk about complete non-sense.

Gator you stated: ” 2. The broker does not have to \’e2\’80\’9cload up\’e2\’80\’9d the person with pre-payment penalties in order to get a better rate- this is absolutely false and to declare otherwise reveals your lack of knowledge”

but Gatorbait that is where you show your lack of knowledge – have you seen a rate sheet? you do get adjustments on the rate (&/or higher ysp) if you have a pre-payment penalty with most banks.

& by Florida law a broker can make up to 5% on any loan (this includes points, discount, cc, ysp etc) and lets not forget about the kickbacks you get from using a certain appraiser, title company, bank a/e)

rick…

I am not a broker for one…try your jedi mind trick on someone else..

Please don’t be nice on my account….

Banks capped what they paid to their lo employees to 3% (usually)- if you want I can send you the wells fargo in house rate sheets…… when they sold to fannie or some other investor they would then get an SRP (worth up to 5% in some cases)…this is standard for any bank who sold any portion of their portfolios. Trust me we bought them like candy.

most brokers did not charge more than 3% and send them to programs with return incentives…some did but not the all not even the majority….so again skew your facts to burn whomever you want.

The lenders who required pre-pays are the ones who had 6 month buyback agreements with the investors or hedge funds…again a fact not a some rick myth.

What does ohio savings have to with my contention that a broker did not have to find a far off lender to offer better rates? ohio savings is not some obscure lender/bank comparable to your example of a “fargo” bank.

ohio savings is your example….that explains a lot …they stink anyway…oh and not to argue the point but to simply illustrate how your facts are again skewed…Ohio Savings does have more than one bank location…Amtrust is located all over the place…no?? try to deflect a little better next time.

most pre-pays were tied to the option arm…and some programs offered by regionals (i.e. us bank) who wanted a guaranteed return for their shareholders.

Now rick….a Factoid about Pre-Pays-

Most pre-pays were optional and could be bought out…and in fact most pre-pays were introduced because the RE speculators were buying and flipping within a year of purchase…where you would see pre-pays was on the arms…(the option arm was the choice of RE investors).

Here is another Factoid about the rick myth regarding flipping for a lower rate (.25%)- If a broker was churning (our term for this activity) it would show up on their follow through reports. If the loan they originated closed out too soon then in most cases they would have to pay back the ysp. If a broker shop had too many fall outs–including foreclosures–then that shop would be cut off.

So rick if the broker who put someone in a home they could not afford and did it the majority of the time….they would be cut off from originating with that lender.

Rick myth about prime resets- Most arms were 5/1 or the option-arm…most of these arms sold with any pre-pay were sold with 3 or 5 year pre-pay periods…so the issue will not be the pre-pay penalties. Wells Fargo will have a day of reckoning in this category since they pushed 5/1 arms hard. They had wanted a portfolio of refis..now values have dropped.

Most legit banks had some form of the above policy. Now to be clear…

I don’t particularly like to argue I just like to make sure the facts are presented fairly and not some skewed version. I will debate the facts any day of the week. Isn’t this site about the truth and helping? I apologize if the truth and facts I provide does not fit into your tidy little brush you use to paint your world vision.

I agree there were some scum-balls making as much as possible but it was not all or the majority.

Carrie-

yes i am quite familiar with rate sheets…I am not sure who informed you or who you worked with. First nationwide was one of the few who used to tie a pre-pay to 30 year fixed mortgages….they did this so that one could get a lower rate (i.e. .5% for same ysp) for the same ysp. yes some brokers….not all did happen to stck this differential in their pocket…but this was not done by ethical brokers. just a small clarification-it is not a Florida law restricting brokers to 5%ysp…Florida law actually allows a much higher total commission.

A little factoid on YSP- it was used in many cases back when you would see 6-7% ysp on a rate sheet to cover the closing costs on refinances…the banks are the ones who placed this 5% cap on ysp.

You say “most banks” paid a higher ysp for a pre-pay-penalty are you speaking of 30 year or arms?

As far as the pre-pay for prime 30 year fixed rate programs that was pretty much cut out by 2003 by most big banks and conduits…i will even quantify for you-(wells fargo, citi, chase, indymac, WAMU, ABN-Amro, Flagstar, bank of america, wachovia).

if there was a pre-pay on an arm it would have a pre-pay of 1-3 years….it was to guarantee a rate of return on the loan….it could be bought out but most borrowers did not want to buy it down.

Now as far as sub-prime….that was a different story. Most did have a pre-pay and most lenders would not pay brokers more than 2%….so this is where a lot of the “questionable” brokers you all bash actually did work…because this was a wild west filled with low life all around. There really was only 1 or 2 legit lenders in this market.

Important news flash about rate sheets carrie…(conventional fannie mae)

Banks have and use the same darn thing..they have a list of rates and what is paid for each rate and their LO’s price off of this sheet just like independent brokers.

If you the bank is retail they want the LO to bring in at least 2% on each deal. If you are a top producer then you can use a nifty tool…different lenders had different name for the same tool, basically it was a income economics tool and it would calculate your income to the bank for that month…and it would let you know how low you could price a specific loan for that day. In very rare cases the top producer could take a loss on a good client if the tool was…get this green…yes they color coded for their lo’s. Yellow meant it was still possible with approval and red meant no way. Banks to survive need to bring in 4-5% on a deal.

So carrie I am quite familiar with the process for many reasons.

Also a word about the “kick backs” from title companies, appraisers and so forth…again this was not as rampant as you seem to feel and if you know of this going on…report it to the Florida Division of Finance and if you need help I will help you take down those dirt-bags who you know were doing what you say.

Carrie if you got swindled i really do feel for you and it is terrible you now have to deal with the aftermath. It sounds like you had the wrong broker/LO. How did you get referred to this person?

You mentioned you are in Florida..I know quite a few ethical brokers in Florida.

dog,

I doubt borrowers, as a group, will be looked at hard. Yes, there were organized individuals that committed multple fraudulent applications. But those compared against the total amount of loans will be small. That does not mean I believe someone who lied should not be held accountable. It is only realistic to understand, with any enforcement agency, their resources are limited.

Add to that, when the lawyers ramp up, which is very soon, they will divert attention to the deeper pockets. Banks, lenders, top originators with a lopsided default rate among clients, even RE Agents with a track record of more houses they sold than the average being foreclosed on, have the potential to be forced in front of a judge.

I think my point, though they are NOT the only ones to blame, is the first line of defense in a system designed to prevent fraud is the person asking the questions of the borrower.

Just as you signed a piece of paper stating you were not lying about your income, you almost always signed an adjoining piece of paper that allowed the lender to review public records for your tax information. More often than not, the originator and lender never bothered to confirm your income through your previous tax filings, which you had given them the right to do.
That will be enough to create “shadow of doubt” for many borrowers, because, again, the court will look upon ‘The Professional’ as an integral part of the system, and thus had duty to do all they could to protect it.

This is just logic. I am not arguing it is absolutely right. It is just the view the law will probably take.

What am I missing in all of this????

1. Buyer applies for a loan to purchase a home
2. LO/Mtg. Broker explains different options (3 types: Fixed, Hybrid ARM, Option ARM), and shows what happens to the payments if the loan is an ARM.
3. When buyer goes in to sign loan documents they should appear the same as the way it was explained. If it does not, buyer has the CHOICE to: a) pull out of the deal (and maybe lose deposit…not necessarily a bad thing if the loan is not the right fit, or doesn’t meet their expectations). b) Sign the note, realizing that they are now OBLIGATED to make the payments.
or c) if they are “confused” by the terms of the note, ask for a 3rd party to review with them PRIOR to signing them.
4. The note and deed of trust are signed in front of a notary and then RECORDED with the buyer’s signature on them.
5. The buyer either a) makes the payments on time or b) does not make the payments on time and incurs late payments, and is subject to the lender issuing a NOTICE OF DEFAULT.

This is not that complicated. The reason it is now complicated is because the American consumer took on more debt than they could handle, and now all of the responsible consumer’s will have to pay for their poor decisions. One can blame the enabler all they want….the enabler (in this case the banks) have been punished by: a) bankruptcy/forced merger b) spiraling stock price c) massive layoffs.

In a market-based society, the strong will survive, and the weak will fail. Unless we would like to become a socialistic society, that is the way our system works. It is really that simple. Those are the facts.

Carrie- That’s good that you have a fixed rate, however it sounds like you purchased a home that you could not afford. If outside forces (loss of job, illness) caused you to fall into default, then I do feel sorry for you. I do not feel sorry for those that SIGNED up for loans they didn’t “understand” and now are stuck because their payments are going up. In your case, you need to speak with your loan servicer, and try to get them to work with you, or walk from the property. Don’t waste your time and energy blaming others for whatever bad situation has come your way…..it won’t solve your problem (I prefer the word “challenge”). Good luck to you, and you may want to spend less time on this blog, and more time putting your financial situation back together.

Carrie-

Again I feel sorry for your situation. Look back to the early 90’s and we had a similar situation: a housing boom, loose underwriting guidelines to assist people in buying a home they should not have. What was the end result: BILLIONS of taxpayer money through a government bailout called the RTC. Now, we have a MUCH bigger problem, however, after the election, there will be ANOTHER government bailout with a new name. This time however, the average American has a NET ZERO savings rate, so the medicine may not cure the problem. The main problem (maybe not in your SPECIFIC instance) is that Americans spend way above their means, and they assume that it is a right not a privilege to own a home. I am following the money…..and guess where it leads: right back to the person that accepted a loan they could not afford, and now can not pay it back! This is where it all began. The banks enabled it, and they are paying the price. However, the consumer wins the “big prize” in this mess by accepting terms they COULD NOT AFFORD. Please tell me specifically where I am wrong in this analysis. Also, try to make a strong argument.

thanks Elaine for clearing up some things,

I am glad you did feel i was insensitive and your are correct, i was simply trying to understand your dynamic to possibly suggest a course of action to help you recover any damages that you might be entitled.

It is frustrating to see the unethical clowns that stepped into this industry and felt the desire to make only a commission and not actually help people choose a proper program. However there are many in this field who are very ethical and do want to simply help people and do offer the proper options to purchase a home. I am just as frustrated to see the ethical brokers/LO’s being lumped under one umbrella. The old adage- if you help enough people reach their goals then you will achieve your goals- is a mantra that many brokers do follow.

This blog is a good site to vent and learn from different perspectives..it is just unfortunate that you do have some on both sides of the issue who would rather bash and trash instead of have a rational discussion or debate on possible solutions. In some cases people will actually inject misguided information/statements for some strange reason, however I do believe that even these posts have the intention, in their own way, of really trying to help the battered homeowner even if the tactic is a bit questionable.

I do think it is good to hear the opinions on all sides because it does reflect the divide and sheds light on how each side of the debate feel they are being sacked by the other and their view on the governments role.

You may have heard the FBI finished up a 4 month investigation across the country and did nail about 300-350 of the type of unethical and crooked brokers that many were abused by on this site. Certain states have more of an on-going investigation than others and it is more geared towards the fraud aspect. Unethical behavior alone is unfortunately not a crime..so if someone was charged high fees and not put in the proper program then the broker involved may not have committed a crime. If that broker forged documents and changed terms without consent then there is some potential issue to investigate.

South Florida is a heavy focal point for the fraud that went on, specifically in 05/06, and you will hear and see much more activity from that region in the near future. It may be muted comfort but hopefully many of the bad apples will find a special basket. I urge those who may feel they were a victim of fraud to contact the FBI in your area because most reports of fraud are being investigated to some depth.

the interesting thing about these clowns is had they taken the time to actually learn the business they would have been able to make a living the right way.
The advent of automated underwriting was allowing many more borrowers to get into homes with conventional financing so the sub-prime market was almost unnecessary. All in all the automated system also contributed to the drama due to the tremendously high ratios and super low down payments the system would allow.

Good luck to those who feel battered and a bit hopeless. Keep up your efforts and there will be light at the end of the tunnel.

we have a little saying when someone claims “they did not know it was illegal” “i was told to do it”

“ignorance to the law does not exempt you from it”

i really feel bad for those who were victims of sleazeball brokers or were “tricked” into signing any paperwork. It is really a bad situation when the lender wants to foreclose and if there is a complaint filed about misrepresentation, it is quite possible the docs the borrowers signed could be used against them.

Quick quip
-the form that the borrowers sign at closing, the 4506t, correct it is for the lender/investor to pull tax returns. But it is not only to compare income, but to potentially be used for legal reasons if the note is defaulted on in the future. Since that form is usually sent through the mail with other mortgage papers, it now becomes a possible federal mail fraud charge for the person who executed the form.

Sometimes it was used to score the originator on how the income stated on the application matched the tax returns.

Ironic….the homeowner may be kicked out of their current home and actually find themselves in a minimal security
facility with free room/board.

As rick said it seems this aspect is not a priority of the investigations at this point.