Senator Art Torres (Ret.), Chairman of the California Democratic Party:
“President Bush bailed out the billionaires at Bear Stearns, but Assembly Republicans won’t lift a finger to help out the hundreds of thousands of homeowners facing foreclosure on their homes,” said Sen. Art Torres (Ret.), Chairman of the California Democratic Party. “The Republicans´ votes are a slap in the face to Californians who are struggling in the Bush economy and may lose the roof over their heads.”
GOP Legislators from Central Valley, Inland Empire, Southern California, Los Angeles Area Ignore Homeowners on the Brink of Losing Homes.SACRAMENTO — Assembly Republicans today voted in lockstep against a plan advanced by Assembly Democrats to provide assistance to homeowners facing foreclosure.Read More From the California Chronicle
No Responses
RICK you hit the nail right on the head !!!!
Posted on June 7th, 2008 at 11:41 am
Rick-
Again, missing the big picture. At the end of the day, if someone told you to borrow money at 1% to purchase the Brooklyn Bridge, would you take the offer? Or would you take time to analyze the opportunity and pass on it? Even more importantly, knowing that the Realtor and Loan Officer bringing this option to the table would receive a commission for the sale, would you not be a little suspicious, and maybe seek some outside advice…..this is called personal responsibility. Take ownership in your mistake. YOU are ultimately the person who bought the home…..no-one else. I bet you were one of the folks that purchased Pets.com when it was at $200+, and didn’t take any profit. You thought you had hit the jackpot, and the stock would keep increasing. Again my advice to you and many of Moe’s customer’s is the following: 1) if you have any equity, sell your home NOW 2) if you do not, try to negotiate your terms of the note with the lender to stay in the house (even use Moe’s services if they will assist you 3) If that does not work, let the lender foreclose on you, and consider it a very difficult and painful lesson which will assist you in your future business dealings. The laws of supply and demand can be very painful if you can not wait out a difficult market. Good luck!
Posted on June 8th, 2008 at 11:05 am
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!!!!
Posted on June 8th, 2008 at 11:11 am
Moe and Rick-
Again, still no cogent responses to any of my posts. I realize that Moe is attempting to make money by going after lenders and assisting homeowner’s which is fine. However, he needs to realize that this situation is like “closing the barn door after the horses have escaped.” I hope you are giving people the correct advice, not just a form letter for them to send to their loan servicer declaring some sort of “hardship.” As I understand it, most lenders’ will not even consider modifying the terms of a note until the borrower is six month’s behind on their mortgage payment. I don’t know that I agree with that philosophy, however, I understand the thought process. Many borrower’s had no “skin in the game”, and if the bank is going to take a hit on their asset (the mortgage note), they want to see that the homeowner is truly in dire straits.
Posted on June 9th, 2008 at 3:21 pm
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.
Posted on June 9th, 2008 at 6:33 pm
Oh, and Lookinthemirror, I didn’t fully read your responses and notice how nasty they were until just now. My bad, I would have slammed your head against the car much harder than I did.
Just suffice it to say, I am happily up over 50% this year with my portfolio. Soon to bail on the market and watch the fireworks though. What about you, happy following Cramer I suppose?
Posted on June 9th, 2008 at 6:53 pm
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.
Posted on June 9th, 2008 at 7:54 pm
Rick-
I am glad you were able to comment on my post. Again, you do not deal with any type of personal responsibility. One should always be careful whom they do business with and who their friends are. It sounds like this “scenario” you posted above is one that you may have participated in? If that is the case, I feel very sorry for you (or your fictional person) for taking advice from the Mortgage Pro and the Realtor. Please respond to the following questions, and do not give me any excuses or long-winded rhetorical answers:
1. Is it required that a person purchase a home in the United States?
2. If a person decides to purchase a home, do you not think it would be in their best interest to review the Purchase Contract, Note and Deed of Trust (Mortgage Contract) with someone other than their realtor and/or mortgage broker?
3. The note and deed of trust have very specific terms and conditions, would you not be a little concerned if the payments adjusted in 2 years’ or less, and you weren’t certain what they might adjust to?
4. Are you familiar with the saying: if it sounds to good to be true, it probably is?
5. If I told you that I thought real estate values would go up year after year, would you believe me?
If you answered “yes” to these questions, than I recommend that you read a book entitled Rich Dad, Poor Dad, it will explain basic supply and demand economics and fundamental decision making in a clear and concise manner.
You keep using the words “sold” and “advised”…..isn’t that the case with everything we purchase in life. We get information about the product, review our options, and then try to make the most informed decision based on the information at hand. You keep stating that all of these people were “swindled” by others out solely for commissions. Let’s take it one step further, have you ever purchased a “timeshare” or been to a “timeshare presentation.” Many people have, and after they made that decision, they often wished they had not. People need to make informed decisions, or they should not make those decisions. You are trying to blame the messenger or seller, yet you refuse to see that the buyer if offerred credit, must make the final decision on whether to accept the terms or not. That is why Banks require that buyer’s sign recorded documents. It protects them from all of the excuses you are giving: “I was sold something different”, “I didn’t know what I was getting”, “they lied to me”……all the lender has to do is pull the recorded document out and ask the buyer if that is their signature. If the answer is yes, than your reasoning is off-base. If there was fraud/forgery that occurred, than the buyer has a valid and enforceable argument to contest the loan. Other than that, they need to LOOK IN THE MIRROR!!!
With regard to your portfolio, I am glad that you are doing well. Hopefully, that will mitigate your losses based on your real estate transactions . That is, if you are explaining your “own” personal situation in the above commentary. Please focus on facts, not rhetoric, and nonsense.
Posted on June 9th, 2008 at 8:23 pm
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????
Posted on June 9th, 2008 at 8:33 pm
Carrie-
You made a poor business decision (for whatever reason) when you purchased your home. Move on with your life: a) sell the house if you can b) work with your lender to modify your note c) let the lender foreclose, and start over.
You have learned an invaluable lesson in life: DO NOT BUY SOMETHING YOU CAN NOT AFFORD NO MATTER WHO TELLS YOU THAT YOU CAN AFFORD IT!!! Quit making excuses and blaming “the system” and move forward. I guarantee you will be a happier person if you do.
Posted on June 9th, 2008 at 8:38 pm
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!
Posted on June 9th, 2008 at 8:52 pm
Look in the mirror -
I did not make a poor decision when I purchased my home. There were a lot of unforseen circumstances & hardships that have brought me to this predicament….
I hope you never fall off your high horse cause the fall is going to hurt - you are very judgemental and never give anyone the benefit of the doubt.
Do you think Ed McMan thought that his home was going to be foreclosed on? Or does it have a little to do with the market and other things? it is not always one sided…
we just want you to stop looking in your mirror with blinders on and look at all directions. open your window.
Posted on June 9th, 2008 at 9:00 pm
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.
Posted on June 9th, 2008 at 9:04 pm
I agree that blaming other’s won’t solve mine or anyone elses problem, we need to be finding solutions.
by the way please oh please do not feel sorry for me, I don’t…
I am healthy, have a wonderful loving family and am fighting & looking to find solutions to our situation. Please do not have a pity party on my account, there is truly no need.
I just look at all sides to a situation, and there is A LOT of things wrong with the market, unemployment, home depreciation, & economy. Which borrowers have nothing to do with.
I am just trying to suppport those who have true hardships trying to find a solution, and also learning from everyone, (including you) on different ways to view things and different ways to deal with all of this. I just don’t agree with everything you say, but respect everyones opinion no matter how far one sided they may seem.
just understand that where we live the average 2 bedroom condo sells for $195,000, the average home for $400,000. and if you were to rent a 2/2 condo rent avg about $1400.
I feel it is ok for a homeowner who truly wants to keep/save their home can & should exhaust every possible avenue, if that does not work they can wait for the bank to foreclose & in the interim save money & have another option set in place.
Posted on June 9th, 2008 at 9:17 pm
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.
Posted on June 9th, 2008 at 9:27 pm
Lookinthemirror, enough of your passive/aggressive BS. This will be my last ineraction with the likes of you. I say this after reading the last posts. You are one SICK person.
Posted on June 9th, 2008 at 9:31 pm
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.
Posted on June 10th, 2008 at 2:07 am
Rick - you kick ass in so many ways !
Posted on June 10th, 2008 at 8:23 am
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.
Posted on June 10th, 2008 at 8:43 am
Rick-
Please refer to my last post, and answer the questions with a “yes” or a “no”. This will help you in your quest….whatever that may be. Your analogy to the Jews at Auschwitz makes absolutely no sense at all……your unsound reasoning and comments are very interesting.
Posted on June 10th, 2008 at 10:49 am
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.
Posted on June 10th, 2008 at 11:21 am
Nazis??? Auschwitz?? so now lenders, re agents- (maybe the term clowns for this group) and mortgage brokers are now nazis??? and the poor dejected borrowers are “the jewish people”
I have to suggest that anyone that pulls the nazi card on anyone other than a nazi is either an idiot, crazy or insane.
“every one is having a big party so i want to have a big party too”??
talk about delusional…..this is exactly the heard mentality that produces a bubble in any market….it is now happening to oil. When the fed finally raises the overnight rate you will hear another whoose….this time from the commodities.
i am sorry but pulling the nazi card automatically eliminates that person from any rational discussion on this issue…or possibly any other.
Posted on June 10th, 2008 at 1:26 pm
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….
Posted on June 10th, 2008 at 7:59 pm
Pist-
By Looking in the Mirror, you can identify where the genesis of these problems lie. You can fog it, smoke it, try to look in someone else’s mirror, however the FACTS remain the same! The answer lies in everyone’s own mirror!!!! You reap what you sow……
P.S. Still waiting on an intelligent response from Rick????
Posted on June 10th, 2008 at 8:18 pm
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.
Posted on June 10th, 2008 at 10:26 pm
Alan-
I understood he was attempting an analogy…and 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…just 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….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’s 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….
Posted on June 10th, 2008 at 11:31 pm
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.
Posted on June 10th, 2008 at 11:33 pm
Alan
You will have to determine for yourself what you see as the ultimate fix for this problem. One thing I know, you can’t please all of the people all of the time.
As I said earlier, the smart thing to do is 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. Some people who write responses here, and I won’t mention who, obviously believe holding a gun to someone’s head is the right thing to do. I remember stories about people like Nathan Green, Ethan Allen, Nathan Hale and George Washington getting upset at tactics like that and began pointing there own guns.
You see, to my way of thinking, a nickel is better than nothing. If the banks, whose lack of underwriting guidelines (greed) allowed loan programs with no money down to be sold by phone, er, excuse me, mortgage salespeople (slick willies) who got clients from part-time real estate agents (couldn’t have passed the RE test if I hadn’t got my GED), the borrower would never have been given a loan they could not repay. So, in light of this, to my way of thinking, if the banks don’t want to lose half the value of the loan, they better work something out with the guy who doesn’t really want to move out of the house.
There is a bigger problem already, that most of the people reading this are completely unaware of. The losses among the banks are already so great, that many of them are bankrupt as we speak. The market just doesn’t know it yet, because of how accounting rules for large corporations work. It’s a little lengthy to go into here, but the losses on MBS, RMBS, CDO’s, CLO’s and CMO’s (derivatives) are already there, and are being hidden in “level 3″ assets.
Most of these derivatives have no buyers, so their essential worth is somewhere around $0.
Since there are no buyers, the accounting rules used by all the banks, brokerage firms, hedge funds and private equity funds allows them to claim that there are “no observable inputs”, meaning there is no current market for them. Because there are “no observable inputs”, the holders of these “securities” are allowed to move them from active balance sheets, “Level 1″ accounting, meaning they must, at the end of the day, balance its worth just like you with your checkbook, to an area of financial accounting called “Level 3″.
“Level 3″ accounting allows the holder to claim the value of whatever product they designate “with no observable inputs”. So, if a brokerage firm has a CDO they invested $1,000,000 into, they can still claim it has $ 1,000,000 of value if they move it into “Level 3″. Even if there are no buyers, which means it may be worth $0.
The biggest name most of us know who used these accounting principles was Enron.
Yeah, you would have thought they would have passed laws to prevent it. Actually the opposite happened. Glass-Steagall was the last vestige of 1930’s laws passed after the Great Depression designed to keep corporations from using dangerous accounting practices. It was repealed in 1998, by a bill written by Phil Graham. Yep, you can lay blame on him for Enron, because they could not have used those accounting practices without the repeal of those laws. Phil Graham now happens to work for UBS, the company that was recently indicted for teaching wealthy Americans how to create overseas accounts and avoid paying taxes. Oh, and he is also John McCains chief financial advisor.
OK - now, consider that there is around $600 Trillion in derivatives, most built on a $14 Trillion US real estate market, and even the simplest gun toter should realize “KEEP THE PEOPLE IN THE HOUSE, EVEN IF YOU MUST GIVE TERMS THAT SEEM LIKE THEY ARE BEING BAILED OUT! But they aren’t really being bailed out. Because the fat cats got filthy rich making these creative, exotic financial instruments and bilking investors, The FED and other gun toters think the fat cats should be given more tax money.
If too many people get tired of the guntoters and develop the Jingle mail philosophy (mail the keys back to the bank), the whole system will take one huge CR&P!
Now everyone tell me, no matter how screwed up the situation is now, what should we do next? Drop the Big One, or negotiate?
Posted on June 11th, 2008 at 12:11 am
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!!!!
Posted on June 11th, 2008 at 10:10 am
rick-
you are very close to the single significant reason for the spiral and continuation of this debacle. These insitutions were required to move these assets (esp the derivatives) from level 3 to level 1 and mark to market the values. If the assets were allowed to stay at level 3 until a buyer stepped back in the market then we would not have had the dramactic spiral that is now fullfilling the foreclosue projections. The products that once were there for homeowners to finance into from bad mortgages basically evaporated overnight because the buyers stopped buying all backed securities, even high quality performing MBS.
Even if the asset is performing at 80% it was being marked down to 20-30 cents on the dollar just for the very reason you mentioned-no buyer in this market- so the requirement to place a value on the “off balance sheet” assets that are not ready to be marked to market created the vicious cycle we are involved in at this point. The FED response was too late and the wrong move-lower the funds rate…that helps the big boys consolidate their holdings and stiff the public… It is very clear the overnight rate needs to increase 1-1.5% and you will see mortgage rates come down, oil drop like a rock and the dollar rebound like a spring.
Stability was somewhat created ( at least some of the bleeding was stopped)when the fed stepped in on the bear stearns collapse….there is a confidence issue with all the derivatives at this point. The deriviatives did what they were supposed to do, spread the risk, that is why you hear about all these foreign banks being affected as well. The formulas for the derivatives were solid except that they did not account for the psychology and emotion that will sometimes consume the markets.
Meanwhile we may be watching the greatest financial slight of hand ever performed. We are in the midst of the greatest reallocation of wealth you will ever see in another 80 years.
If you want to find the crook….follow the money…the big money.
You are right there with your analysis but you lose focus when you blame the wrong group-it is not the RE agent, Broker or the little fish you keep bashing….these guys were just pawns in a much bigger game…. how can you tell, most of them are starving right now. Great you say, well many say the same about the “greedy hombuyer” who can now not afford their mortgage payment and want help to stay in their homes. I view the bigger picture and the fact we are all casualties of the bigger game. The players of the game like mozillo who had influence and friends in places like fannie mae, HUD and even the regulators who were in charge of keeping the rules of the game within reason.
Here is an analogy for you- your MD gets hammered with pharm reps all the time in his office to push their drug- (vioxx comes to mind as a recent drug)-
How many good/great doctors gave perscriptions out for vioxx with the intent only on helping their patients based on the product education presented to him and then it turns out the drug has a high incidence of causing heart attacks and patients were dying in unacceptable numbers. based on your posts, would you bash any doctors who prescibed the drug, even if it was indicated for the patient, as quacks and string them up in public? Would your argument be that the doctor just wanted that free fishing trip to costa rica?
You see the professionals in any industry use the resources and tools avaiable to them to attain a goal for their clients. We count on the regulators regulating and keeping tremendously harmful products off the market.
If the product was not created and did not exsist then it could not be sold….
To continue the analogy- over the past few years in the RE market you had people jumping in to make money on all ends -homebuyers becoming investors, part time mortgage brokers and RE agents putting signs on the corner quoting rates and selling whatever they could. It is like those online pharmacies selling who knows what to whomever will log on and fill out a questionaire. If someone wants something there will be someone else who will give it to them.
This is america and if you want to buy something then you will be able to find a party who will sell that something to you.
I feel for many of those who find themselves in dire staits but many were not swindled only mesmerised by a dream and the ability to own their own home. Any real professional in the RE market did warn their clients when the numbers did not make sense…i have seen it first hand. I have seen people warned about taxes and other possible costs but we all have seem to have optimism that we will be able to make things work out.
Follow the real money and you will find the evil masterminds you are looking for…..
Posted on June 11th, 2008 at 10:38 am
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.
Posted on June 11th, 2008 at 1:08 pm
RICK !!!!!!! you rock ! you totally get it….
Moe Thank goodness for you and this site
Posted on June 11th, 2008 at 2:16 pm
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.
Posted on June 11th, 2008 at 7:37 pm
Rick-
i guess you missed my point… not all front line persons skipped on their fiduciary resposibility… and as far as the banks…they are responsible to reconciled every file they take on and keep on the books or sell to investors. If a walmart clerk is stated as making 90k a year and they did not question this then they did not hold up to their fiduciary responsibility to their employer-shareholders.
didn’t get the MD analogy?
As far as the accounting method…yes i am familiar with the dynamics and that was also my point…without diluting the point with boring nomenclature that only some would understand…..the rules were changed last year and effective 11/15/07, for all reporting periods forward institutions were now required to move many assets off level 3 and report a value…regardless if there was a buyer or not for that asset, and the best part they also had to measure value retrospectively. If there was no market at the time these assets were moved up the ladder then a “best guess” assumption is made. The reason these assets were help off balance sheet was not always to hide losses but to bring them on the books when there was a market or when the market would deliver a beter return on the asset.
This little change helped those institutions who deal in capital (banks) and basically cut investment banks at the knees…bear sterns, lehman, etc. Any entitly that is not a chartered bank will be beat down to almost nothing….yes some investment houses will go under….10’s of thousands of jobs lost and these people will not be able to pay their mortgage either. So rick you have to see we all are casulaties under this new reallocation of wealth.
We had a liquidity freeze last Aug and several times since because of this fundemental change in the mark to market requirement, you know this was not always the case and that is why you mention the timeline you did as it runs along with the fiscal reporting periods.
You hit one nail on the head the federal reserve act was a piviotal moment where the wealth effect was shifted to the big banks…as I said in my post JP morgan was handed a siver platter with a bear head on it worth cold hard cash. We are witnessing the transfer of wealth to the big 3…again JP Morgan, Citi and bank of america are on track to be the major forces to be left standing. Big Ben hates investment banks…read up on his past papers. His agenda is to starve off investment banks and have only a few banks that the fed is able to control…. He and his merry men are willing to inflict this incredible pain on the american people to accomplish this agenda. Just listen to volker (fed chairman during worst our inflation crisis)…he never speaks out and he is beside himself for this fed to raise the federal funds rate to get back on track. The fed rate needs to be raised 1-1.5% to help out all these distressed homeowners.
Let’s say you bought gold when it was 600 oz and wanted to wait until now when it is close to 900 oz does that mean you were hiding the value the past few years… you just wanted to capitalize on the demand that will deliver the best return.
Do you believe all thses level 3 assets are worth 0? The assets are worth what the market will bear and by requiring these assets to be marked to market when confidence is low and demand is almost nil you flood the market and devalue the asset even lower…if that is possible (hence IB’s have to build more capital to offset the devaluation and guess who is requesting the margin calls….JP, Citi, BofA).
No different if you dumped all the gold on the market at the same time. If these assets are actually non-performing and in default then by all means bring them on the books because now they actually have a value based on the non-performance models. However if the asset is performing then it is fine place in level 3 and hold it until demand will command a better return than the entry price paid.
I would suggest that you do not believe that all these assets are going to default, do you? I know they are not ultimatley worth 0 and that buyers will again step in and want to purchase the assets in question again. Even non-performing assets are not worth 0… That is the crux of the problem….even performing assets are being treated as junk, again you should know this as well.
If the asset is performing then there is no need to mark to market until there are legit buyers willing to bid on the asset itself. It is simple supply and demand.
As far as the bond market-japan and china have been keeping t-bills and MBS prices artificially high and rates low for almost 7 years now and only when confidence was sucked out of the market did the buying spree slow down. Once the fed starts to raise rates you will see a new cash infusion again and mortgage rates will drop lower than they are now.
i am all for helping people stay in their home but it is important that they understand what is actually going on….the re-distribuition of wealth to the big banks.
Rick while it is bad it is very important to keep this crisis in perspective….Defaults are nowhere near the percentages in the great depression but the numbers are greater due to more americans are in homes than back then. Only 7.9% of all loans are in default/foreclosure (approx 6.35% are 30 days late and 1.55% are actually in foreclosure) vs. over 50% of mortgages in default during the depression. We are heading that way unless there is enough pressure on the FED to do what is right and raise the fed funds rate and open up HOLC again to buy and refinance delinquent mortgages.
take a look at who is standing in the wings to pick up the pieces of these “worthless” assets due to the mark to market requirement that will destroy most investment banks…the grave dancers themselves-sam zell, blackrock, goldman, wilbur ross and even buffet through one of his entities-
you see rick I step back, look at this chaos from different perspectives and declare this for what it is, a re-distribution of wealth. For those who are in the midst of this turmoil do what you can to fight but if it were me I would take one of those mortgage payments and buy stock of the big 3 above….not your life savings but just a small amount. As sure as the sun rises these banks will be reaping huge profits the next 5-7 years.
you do not have to be an economist or accountant to see what is happening, one just needs to resist being diverted to the short term hysteria.
I say we have a national day of default….organize a massive homeowner default to force the issue…
Posted on June 11th, 2008 at 7:42 pm
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
Posted on June 11th, 2008 at 9:54 pm
Moe,
Good Luck. I tried. I’m tired. I’ll be reading you…..
Rick
Oh, and Carrie, good luck to you also, and thanks for the support. Things will work out for you, I’ve got a good feeling about that.
One last note to Gator - Do a little research, the FASB is the only accounting board that matters, and they only recently voted to unrecognize QSEP’s. I have no idea where you got that 2007 date, and quite frankly, don’t care.
Last but not least, to Iliketolookatmyselfinthemirror, the do as I say, but not as I do thing is a little weird, to say the least.
“Rick, you want to blame the fat cats”, then you say “But I think they want a redistribution of wealth”. OK, ??????? WTF do you mean? Only you have the magical knowledge to say that?
Then “You have taken some of my posts and added your spin on them”. You only changed your tune after I wrote. I guess you are not smart enough to know that Moe has the posts listed in chronological order. I’m ashamed I’m even responding to you, but I’m only doing it to say this “Iliketolookatmyselfinthemirror, don’t miss your psych appointment this Friday, you need the new prescription.”
Posted on June 11th, 2008 at 10:06 pm
Oh, and iliketolookatmyselfinthemirror, which Countrywide office do you work at?
Posted on June 11th, 2008 at 10:16 pm
Gator, I just read the whole of your post. If the rules took place on November 15, 2007, how did the two Bear Stearns Hedge Funds blow up at the beginning of June, 2007? At that point, they were already geared 12:1. By November, they were geared almost 30:1, attempting hail mary after hail mary.
Stop pretending, please. You never know who may run into, or where.
Posted on June 11th, 2008 at 10:36 pm
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
Posted on June 12th, 2008 at 9:02 am
Lookinthemirror -
i have read the posts - it seems that Rick has answered almost all of your questions, but you don’t like the answers.
& you are stated in the last line of your post. ” the underlying issues that caused this problem the largest is lack of personal financial responsibility”
YES - the lack of financial responsibility of the bank to loan money to people they well knew could not afford it & the bank/underwriters who used very loose guidelines to get them more Greed money & the Loan officers/Broker/Banks who allowed themselves to throw out their morals & ethics…
Now if you knew a little old granny needed to cross the street, who couldn’t hear or see well - would you hold her hand & walk with her checking & stopping if you knew she couldn’t make it across safely? I would
but the way you see things Lookinthemirror - is you would tell granny cross the street at the corner, but if you get runned over that is not my problem you didn’t have to cross that is your responsibility….
Posted on June 12th, 2008 at 9:09 am
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.
Posted on June 12th, 2008 at 9:28 am
Carrie-
It is not that I don’t like Rick’s answers, they just don’t make sense??? I prefer to take a logical and realistic approach to answering real world issues. That way, one can move forward, and learn from their mistakes. Blaming others doesn’t really solve any problems…..often times, it makes them worse. I really do wish you the best. It is a terrible thing to be in stuck in a hole. One of the best pieces of advice I have heard from someone is the following: “When stuck in a ditch…..stop digging.” This has not occurred, and won’t occur until people take ownership for their mistakes.
Posted on June 12th, 2008 at 9:32 am
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.
Posted on June 12th, 2008 at 11:09 am
Carrie-
If you look at my posts, I have given options/solutions:
1) Stay in your home and try to get help from family/friends to make the payment
2) Contact your lender and try to negotiate a loan modification/balance paydown from them
3) Send in the keys, and let them foreclose, and move on before values drop further.
4) If you have any equity (doesn’t sound like it) SELL the property immediately.
I think that is pretty clear….don’t know of any other solutions. If you have any others, let me know.
Posted on June 12th, 2008 at 12:34 pm
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.
Posted on June 12th, 2008 at 2:55 pm
Carrie-
Thanks, I hope all works out for you. My advice on investments is to SHORT stocks! Best of luck!!!!
P.S. What happened to Rick???
Posted on June 12th, 2008 at 3:50 pm
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?
Posted on June 13th, 2008 at 2:30 pm
Gator-
Nice post…..it’s funny how Rick disappears when he can’t answer a question, or is unable to formulate a coherent post. My guess is that he is over-leveraged and pretending to be one of the guys out to help the “poor consumer”, while in fact, he most likely made an unwise business decision himself when he purchased a home he could not afford. His posts are not concise or coherent, and when someone disagrees with him, he falls back on childish remarks. I am very interested in Rick’s work history at Countrywide??? Sounds like things didn’t work out very well for him in that endeavor. A little honest discourse on these posts is sure refreshing! My advice to anyone having trouble making their mortgage payments is to contact your lender immediately. That will at least start a dialogue, and hopefully you can receive some specific alternatives from them.
Posted on June 13th, 2008 at 5:01 pm
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?
Posted on June 14th, 2008 at 12:13 am
Rick,
Why am i still here??….another dig… what a suprise.
I am posting the same reason you are…to shed light on this crazy industry and help to inform those who are not as informed as you or i on the dynamics and fundementals.
We seem to have different views on how we got here and where things are going…but i think it is good for those who read these posts to see different perspectives… I do not think I am more right…I put forward an analysis of the current enviroment and what I see and the issues based on a great deal of input. It has served me well thus far.
I do not believe the bash and trash approach is productive and feel it dilutes your point to some degree. But that is my perspective and I think others who read your post may also get that impression.
I take the time to read and digest what you and others have to say and then add my input….i do not think i ever declared “i am right and you are wrong”…. maybe you are misinterpreting my tone?
I think it is good to see this chaos from different perspectives so i am not sure why the hit and run tactics are necessary.
You obviously feel you have something to share. The question I have is why do you feel the need to condescend those who have a different view or disagree with you?
Posted on June 14th, 2008 at 4:40 am
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.
Posted on June 14th, 2008 at 6:59 am
Rick-
Again, trying to bash someone because they disagree with you. Now you are using the “try to change the subject technique”. The facts remain:
1) People made poor business decisions and did not review the paperwork in detail prior to signing it (GIGANTIC MISTAKE….. now affecting home values, taxpayers, and government due to a potential bailout for irresponsible decision making).
2) Banks allowed underwriting guidelines to become very loose, which in turn created “easy money”. Easy money due to poor internal controls leads to a big problem (i.e. delinquencies, and ultimately workouts and foreclosures)(HUGE MISTAKE…..stock prices dropping, bank’s failing, layoffs)
3) Wall Street in search of “yield” after the dot com bust put together vehicles to package these high-yielding notes to sell them to investors, unfortunately their modeling techniques assumed an annual increase in home values of approx. 10% (HUGE MISTAKE……falling stock prices, recapitalizations, company failures, job losses)
4) Ratings firms in search of fees gave AAA ratings to companies and tranches that should never have been given those ratings (HUGE MISTAKE…..bond ratings firms are now essentially bankrupt, losss of jobs, credibility, stock prices fallen)
5) Government agencies which were supposed to oversee bank lending (HUGE MISTAKE…..now we have a huge tazpayer bailout due to lax oversight, and low interest rates for an extended period of time)
6) Responsible citizens who reviewed the terms of their loans, did not purchase a home with “no money down” or above their means no matter how hard banks/realtors/LO’s tried to cram the programs down their throat (No MISTAKE…..now they will have to pay for this debacle in the form of inflation, and a government bailout of people who bought in over their heads, and are now crying foul. These responsible citizens are in the MAJORITY, and as one of them, I am astounded at how this could have happened.
It just shows how our society is based on blaming others, and not taking personal responsibility for their own financial decisions.
Please answer the following question directly: IF THE PAYMENTS SEEM TOO HIGH, OR YOU DO NOT UNDERSTAND THE TERMS OF A LOAN, WHY WOULD YOU SIGN A RECORDED NOTE AND DEED OF TRUST WITHOUT AT THE LEAST GETTING A 3rd PARTY’S OPINION????
Due to this complete lack of responsibility on the part of ignorant/greedy buyers and those that used their home as an ATM, we are now in this terrible situation. There is no easy exit strategy for this problem. The pain has hit EVERYONE. Unfortunately, the people that will be affected the most, are those that made responsible financial choices.
Please stay on the message. The biggest mistake is due to people making unwise financial choices. This is the epicenter of the worst crisis the U.S. has ever faced. It is very easy to blame others….but at the end of the day, each person has to LOOK IN THE MIRROR, and ask??? What was I thinking by taking on that debt load???? I sure wasn’t forced to accept these loans….WHY IN THE HELL DID I DO IT??? This chain of events genesis begins with POOR FINANCIAL DECISION MAKING…..PERIOD!!!!
P.S. I am a male. I have read your posts in detail, and tried to respond to them all with coherent concise answers. I have never worked at Countrywide (as you did….interested in hearing your story there). I am not a “trust fund kid”…..trust fund kid’s most likely wouldn’t even waste their time on this blog because they don’t really worry about the state of our economy.
I worry for my children’s future due to the complete breakdown of personal responsibility in this country! What say you???
Posted on June 14th, 2008 at 9:03 am
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.
Posted on June 14th, 2008 at 10:52 am
Tom-
Do you really believe that. If people had not taken out unaffordable “loans”, then we wouldn’t be in the fiasco we are in. The banks made the products available to the “risk takers” , however, buyers ultimately make the financial decision whether or not to buy a house, and under what terms they would accept.
It really is that simple.
All of the other nonsense floating around is just nonsense. The real problem is that there is a larger amount of people out there that accepted terms that should never been given to them, and here we are today. The prudent homeowner has to pay for all of the mistakes people made while buying ABOVE THEIR MEANS! The hard lesson that the over-levaraged consumer learned, as well as the banks, and other Wall Street Firms made is that REAL ESTATE VALUES DO NOT ALWAYS GO UP. Just like stock prices, they fluctuate.
One note to Rick- The reason that Moe highlighted your comments on his website, is due to the fact that you believe whole heartedly that the “system” screwed people over. I, on the other hand, believe quite the opposite, and since I don’t agree with you and Moe it is highly doubtful he will put my comments on the headline of his website. His job is to earn a fee for assisting people that are in trouble with their mortgages, and his website promulgates that opinion. I hope he can help some people with their problems…..I am just trying to paint a broader brush on this issue.
One final note: In a capitalistic society, it is imperative that we have personal responsibility. This country is on the verge of becoming a socialistic society, in which the government makes decisions for the people. I prefer a society in which the people make the decision for the people. Mark my words, instead of allowing banks and bad decisionmakers to fail, the government wll have to backstop all of this by printing more money and issuing debt securities…….that only adds up to one thing: INFLATION. We are entering a new stage in this country’s history, and it is not a pretty one. The only exit strategy that is viable is for the country to become more socialistic, or for many banks to fail and merge, and for people to wake up, and realize not everyone is required to own a home.
The problem with socialism is that it removes incentives from society, and therefore defeats the principals on which this country was originally based on…….would love to hear a coherent post from someone about the “exit strategy” for this current situation we are in?????
Posted on June 14th, 2008 at 12:09 pm
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.
Posted on June 14th, 2008 at 3:48 pm