U.S. Taxpayer to bail out the mortgage industry which faces $1 trillion or more in losses.

http://www.house.gov/apps/list/press/finan...ess050307.shtml



We all know real estate prices skyrocketed from 2002-2005.

How did house price double in those years? It was a giant ponzi scheme funded by idiot lending that used $0 down to allow people to gamble with other people's money.

Well, with the lenders taking billions in losses each quarter on these $0 down loans, the are now refusing to give $0 down. Without that flow of idiot money, the market is going to crash HARD!


Lenders have been trying to "rescue" borrowers. Yeah, right. The bank is doing you a favor.... NOT. They are trying to lock you into an overpriced house for as long as possible. But it didn't work, because within 3 months, 40% of those "rescued" houses were back in default.


So, a week ago they went to Senator Dodd and asked him for a taxpayer bailout. He floated a trail baloon, and that got nuked hard.



So, all the lenders got together and worked on a set of workable principles. These involved everyone in the industry "helping each other out". Wells Fargo and Countrywide, the most responsible of the many completely irresponsible lenders said HECK NO, when asked to "take one for the team".


So today, congress is again trying the federal bailout, but they are trying to sneak it in.

They are doing it through FHA, the federally backed lending insurance.

http://www.house.gov/apps/list/press/finan...ess050307.shtml


* Increasing loan limits
* Authorizing zero down and lower down payment FHA loans
* Directing FHA to underwrite to borrowers with higher credit risk than FHA currently serves
* Permanently eliminating the current statutory volume cap on FHA reverse mortgage loans

*An amendment by Reps. Frank, Gary Miller, Scott, and Neugebauer to permit mortgage brokers to participate in FHA by posting a $75,000 surety bond, in lieu of the current audit and net worth requirements,

* An amendment by Rep. Capito to require a government ID of some sort to qualify for an FHA loan. (as opposed to before when they had to prove citizenship)




So, let's let EVERY lender, write as many loans as they want, for as much as they want, to anyone they want, including illegals. And when the loans go bad.... The lender is paid back out of the U.S. Treasury.


This is NOT about keeping you in a house or getting you into a house. IF a lender thought there was a remote chance you'd stay in that house, they'd give you a loan RIGHT NOW. Thier books are PACKED with houses they've taken back in foreclosures.

This is about bailing out the banks who have made trillions of dollars worth of stupid loans agaist houses with prices WAY above the fundamental support level.

If the government cared about the home buyer, they would have stepped in back when flippers and con-men were using "coerced" appraisals to make huge proffits by driving home prices WAY above the fundamental support levels.

Housing is crashing, and the bankers don't want to get trapped under it. Well, as a HUGE tax payer I don't want to take their place.

WRITE YOUR CONGRESSMEN TODAY. SPREAD THE NEWS!!!!

NO TAXPAYER BAILOUT!!!

I guess I don't even need to say it.

one thread wasnt enough???? lock this thing up... go back to your other mortgage disaster thread.

That is the mortgage disaster thread.


This is the "I don't want to catch the falling knife" thread.



Anyone want to argeu the REAL purpose of this bill?????

If this goes through, there will be riots in the street. Using taxpayer money to bail out the banker? Oh hell no!!!!

What country do you live in?

In the streets? Are they already full of those that could not afford their mortgage and lost their homes?

No. There won't.
They could march us straight into camps, and 99% of the people would comply.
They could tax the air or the sun, and people would pay for the proper permits.

There will never again be "riots in the streets" by Caucasians in the United States.

*shrug*

That's poker.

I never understood the whole "my tax dollars" argument. Who cares what they spend it on, you have to pay it anyway. Bitching about it isnt going to make them stop taxing you

SO how much will this increase the cost of gas?

I really, really hope you're wrong, but I'm afraid you may be right.

Guess I'm the one that's going through the stages of grief.

People that scammed the system, get rich.

People that bought at the top get screwed.

People that played by the rules and lived within thier means get screwed.

The businesses that created the problem get bailed out.



I've been in denial, thinking I could stop it.

Then jumped to anger as I realized hoe bad it is.



Bargaining lasted for about 3 minutes... What's to stop me from taking out all the equity in the house, and then letting it go into foreclosure, wait a year, and buy it back for half price?

Oh, that's right. Foreclosure doesn't remove your obligation to pay. They can sue you, and if you have income, you have pay.



Okay, I'm in depression now. It is like taxes. Those that have money, pay. Those that don't, don't. Those that scam the system, get away with it. It is what keeps the economy running.


Gawd dam my dad for teaching me to study hard, work hard, live within my means, save, etc..... Freakin' jerk sould have tought me how to work the system.

I find this an odd attitude. The reason our taxes are so high is the sum of lots of stupid little programs that add up to a lot and grow into big programs.

Taxpayers should never have to pay for the mistakes companies make in the free market.

Read "Rich Dad Poor Dad". Your dad taught you wrong.

And what is complaining about it going to do about it? Its not going to change anything. They're still going to tax you however they feel

"Go to your Senator, start a petition..." Yea, ok

"Bend over, grab your ankles, and if you're lucky, lube up"?

Letting people know about this nonsense and complaining about it, and yes, writing to Congress, is the ONLY way to change it. This "just accept it" attitude is why this BS continues. Bunch of f'in sheep.

He's wrong in his attitude, but he's right in the effect he speaks of.

First off, we need to fight the thievery of the national government in America.

Second off, now we actually have to do it.... that always seems to be the hard part.

Last time this happened was under Bush 1, S&L crisis.

Made some people rich, made other poor, governement absorbed the cost, and passed it on. People pulled money out of real estate, put it in stocks.

Then the stock market got crazy, prices through the roof, IPOs were a sure fire 400% bump if you could get in one.

Until it fell, then people put their money back in real estate.




Some people believe the real reason for the S&L crisis was the removing of thousands of little 'banks' and the consolidation into larger banks for the US to compete on a more global scale. Which has been good for the country.

Others think it is a cyclical occurance that will happen again in our life times.

Me: I'm just glad I'm rich and liquid enough to be in a position to buy up discounted property if/when this occures.

Sucks for you guys though, maybe next time.

The reason for the S&L Crisis was, as with most of these cases, mismanagement of "free markets" (yeah right) by the federal government. For many years, the federal government limited the number of activites an S&L could engage in, and in return, guaranteed the assets. It's a bad system, but at least it was stable. Then, the feds removed the activities they could be involved in but kept the guarantees. Hmmm, how's that for incentives. Let's see, we'll free you to compete, let you take the risks you want, and if you take a shot and lose, we'll pay the cost.

Imagine if you were given that choice: use your own money and get 1% returns, or take a chance on 30% returns with a guarantee that you'll get your money back. Of course the S&Ls took a chance to compete for customers, and they competed by taking riskier and riskier chances until the whole thing collapsed.

As far as I know, there are no such incentives in the sub-prime lending market, so no bailout is necessary nor desirable.

And I'm glad that I'm poor and don't own any property. Real estate, schmeal estate.

Didn't Beal make most of his bread during the S&L deally-o?

I can't seem to remember if he bought discounted debt, or the actual banks themselves?
Someone here will know fo sho.

Either way, it was a brilliant contrarian play at that time.

I was thinking of Beal when I wrote this.

So real estate failure is +ev for poker

The real estate bubble had this incentive at just about EVERY level.

The flipper:
The flipper walked in with 0 down and bought a house for tens of thousands over market, got those tens of thousands back at closing, and using a "generous" appraisal, got it all rolled into the mortgage. If it really tanked, he took his tens of thousands that he got back at closing, and walked away. ZIP, ZERO risk.

If his inflated appraisal pushed up the market, then he resold into a market that was inflated, making risk free cash coming and going.



The realtor, got his cut, no liability.



The mortgage borker, took his cut. Only risk was if a loan was found to be non-conforming (someone lied), it could be kicked back. So, he formed a corp, and had the transaction be within the corp, then the corp paid he a fee. Leave very little cash insode the corp. If too many got kicked back to the corp, the corp just went bankrupt. The fees, being comission to an employee, could not be touched. Huge comissions for no risk.



The banker bought the loans from the brokers, then resold then to bond traders. They collected monthy processing fees for collecting mortgage payments. There only risk was if the property went into default. In that case, they had to pay to foreclose. For any but sub-prime, they got first chance to get paid out of the proceeds of the sale. So, their risk was really only sub-prime, where the bond holders had first right to any proceeds from foreclosure sale. Still, even with sub-prime, what are the odds the house would not be able to sell for close to appraised value???

One could debate whether they really knew the houses were selling for way above value. They certainly should have known the fundamentals. Whenever there has been a run up in the past, they've always returned to the level of the three fundamentals. Namely, what it could rent for, what people can pay, and what it costs to build. These fundamentals generally run suxh that median house runs 15-30% median household income. So with median household income in the $50K range, median home price should have been $150K range. In reality, $250K range. Some citiess werewell over $500K median. Affordability index of Orange County and San Diego, and many other markets went below 25, meaning the median income was only 25% the amount needed to afford the median house.

So, they SHOULD have know that they had substantial risk. They acted as if they didn't have any risk.


The bond purchessers also had the insurance that if it crashed, they'd have right to the house. For sub-prime, they got first right to proceeds from a foreclosure sale. For other loans, they got second right. Still, the house should cover the debt, right?

Again, they "Should" have known that prices were way inflated, and they should have known they had huge risk. Again, they acted as if they had no risk. That at foreclosure, the house would surely sell for appraised value, despite what the fundamentals said.




So, huge number of loans went bad. And shockingly, couldn't be resold for appraised (or owed value). The bond holders started taking losses, so began reviewing every loan in the portfolios, and kicked them back to the bankers, that kicked them back to the brokers... that up and went bankrupt. 30+ so far, with a couple more each week that passes.

When the brokers went under, the bankers got stuck with any non-conforming loans. And, as their inventory of foreclosed homes jumped, and more and more could not be sold for appraised value, they started taking huge losses.


So, no more $0 down.

Up to 1/3rd of suckers... sorry... people that are still willing to buy near the top, have now been sliced out of the market since the odds of them defaulting soon after origination is huge. POP.


WAIT, this is the "I don't want to, but have accepted I'm going to have to, thread.

Anyway....


Hopefully this "FHA Reform" is just another trial baloon, and hopefully it gets out and people scream to their congress men.

It basically opens the treasure to the bankers and says, "Take what you need".

Somehow, I think it will happen.

Could you image what would happen to the economy if this crisis spread through the bankers, causing them to collapse. It would cause a crisis in auto lending, credit card lending, signature loans, etc.

I don't think congress will let that happen... DANG IT!!!

I own six properties in total, so this actually means something to me... but not enough to make a stupid new thread about it.


Lock this up.

Talking about it doesn't make it worse.

Long-term, the fundamentals set the price, affordability, price of rent, price of construction.

Talking about it doesn't change the fundamentals.

Besides, with sub-prime implosion, and Alt-A now requiring significant down, talking about it doesn't matter. Buyers that want in, can't get in.


The market has popped. If you're still in, it is too late to get out.

All I'm doing is mentioning that the barn door is open, after the cows have already been run down on the interstate.

And, how is that working out for you?

Well, at least you didn't create a new thread trying to start an e-fight.

Any reasoning at all for making this post?

Seems a little trollish...

They aren't as high as you think.

Just a little walk down memory lane... Oh, the good old days when I stupidly believed there was only $1 trillion in losses coming. Only took a few months to up that to $2 trillion estimate. The more I've learned, the more I've had to ratchet up the estimated losses. $2+ trillion from residential. Probably almost that much from commercial, then there is the business debt and non-mortgage commercial debt.

This is atleast a $5 trillion problem.... at least.

naaaaaahhhh

I know you asked this a year ago, but it's working out wonderfully. The terrible thing is that I sold two buildings last year and had a huge capital gains hit on my taxes. Thankfully Obama will probably get elected so that I can pay more. I love taxes.

You my friend are a true patriot