I have no sympathy for these banks. Many years ago, I was on the mortgage loan committee for a S&L, and we resold the mortgages we made. We had strict guidelines, if people couldn't afford the home, we could not make the loan, because we would never be able to sell it to the larger IB's. If the IB's were buying this crap, I say let them go under, F***'em' There comes a point where this kind of greed is ridiculous. If Bear Sterns wants to put themselves out of business, so what. That way the ones that survive will learn they can't get away with this BS. If they get bailed out, they will just do it again, and screw taxpayers over eternally.
The lending was never easy. The valuations were spiraling high. There was a comfort zone for the lenders and the borrowers that nothing can go wrong. There is a huge amount of regulation in the lending industry, multiple agencies are involved red tape etc. About 30% of mortgages originated were for 2nd homes or what is called " Specs" these were investors flipping condos, homes , mobile homes, whatever they can juggle with. From Las Vegas to Miami Beaches, they drove the market higher and higher. The builders reacted with more production. Than suddenly the buyers decided to hold off. They went into a wait and see mode. They wanted the prices to come down. they stopped buying, instead renting became a second nature. That is when the higher valuations stopped going higher and the house of cards fell apart. Now we see misery on all fronts. "Specs "are getting foreclosed. Jugglers just walked away forgiving their deposits. Homeowners couldn't refinance due to low valuations, sales were fewer and fewer and the prices started drifting lower. People started defaulting unable to sell or refinance. They are moaning and groaning and whining to kingdom come. These people who took out new mortgages often with lots of cash at closing, spent the whole wad on perishable goods, and are left with a garage full of junk and a house that they can't afford.
oh yes. socialism for the rich and capitalism for the poor. let's hold a charity benefit for bear stearns, countrywide etc.
This society is so screwed up you can't always rely on the free market, sad but true. A good politician these days is like a socialist, enact laws that help the country but they're always regulations, relief funds, incentives etc Those who can set regulations that achieve their intended goals are praised. How can a child learn about financial responsibility when his parents never have? I read from good productive members of society how right when entering University they were tricked into getting a credit card and then acted irresponsibly. These people DON'T make 30k a year, or live in a trailer house, they're smart and success but they fell to the same traps as the rest of them.
I agree. I bought my home about 7 yrs ago, and bought the nicest home I could afford to buy with no mortgage. I dont see much reason to have a mortgage in this business If you dont need one. Ever since I have been saving for a bigger home, again only to buy when I could pay cash for it. The areas I have been looking have also been prime targets for flippers, investors etc. They have doubled, trippled or more. I have no sympothy for anyone who were idiots enough to take mortgages they could not afford. Not only they have hurt themselves, they have hurt me, because I did not chase them into homes in the area with the over-inflated prices. Its not the end of the world for me, I still live in my 5000sq ft home in S. FL. Its not where I want to live forever, but there is not much to complain about it. I really feel though for people I know who have spent years renting waiting for a correction, or recent grads and 20-somethings who have no chance to buy a home in many areas that I did when I was thier age
If someone needs a 50 year mortgage or has to eeek by, paying only interest on a loan and still struggles financially even before the interest adjusts or principal is added to the payment then they should never have let themselves get to the mountain of paperwork. WTF did they think, interest would get lower or they would win the lotto? Of course for flippers or people that sell and upgrade every few years in a booming market these interest only/ARM loans make sense. That is until they get caught with their pants down when the bubbles burst. And they need to man up and take the loss and move on to the next arb. LOL The government isn't here to bail everyone out from being or acting stupid. We'll I didn't think they were or should be but I guess I was wrong. If the government wants to help they should not have handouts or band-aid fixes, they should educate the consumer more and ban fractional lending. I don't discount the role fractional lending plays here at all. IMO this is the major downfall and lenders are causing a HUGE issue. Why would lenders be selective when 9/10 of the money they loan isn't backed up? They have little to lose it seems. The bottom line though is it's up to us as consumers to make sound choices. EPIC FAILS are abundant since many arrogant Americans think "it will all work ITSELF out". I'm American so don't think I'm spouting off, I see this attitude first hand every day. Same with laws and enforcement/punishment. We are so lax and dumbed down that most people have no fear of punishment for doing wrong or being stupid. Time to stop counteracting Darwin and let nature take its course. [/soapbox]