http://www.physorg.com/news109356141.html
A soft landing or a national crisis depends on the feds. If they don"t raise the interest rates into the double digits, the economy will survive. And I don"t think the banks are that desperate for money to need to do that. Subprime lending and those with poor credit are the ones that will feel the repercussion. But "A" lending should survive and keep the economy moving forward. The crash in the subprime lending market is a big lesson in greed that needed to be learned. Banks should never have been lending money to people who proved they are not responsible with money. Enough venting... for now...
"...those with poor credit are the ones that will feel the repercussion." The scary part is, how many of us have poor credit, or WILL have poor credit as a fall out of the sub-prime mess? I like many others in our country, see the word dept far too often in a wide variety of stories. I'm beginning to get that sinking feeling that we are in way over our heads and the correction will not be pretty.
I'd say that it isn't that banks shouldn't have been lending money to "people with poor credit ratings". It's that banks should NEVER lend 125% of the value of a house. If I were a bank I would never lend more than 95%. That way if the mortgage defaults, I will still be ahead. Even if the housing market sinks a bit, I am still ahead. Any bank which lends out an amount of money greater than the net worth of an individual deserves to go belly up.
What really makes the whole thing sad is most of the time if you're on a major web site reading about the sub prime melt down and predatory loans...There's an add for a predatory loan on the page!
As I read this article, there was an add for a $200k loan with a $633 a month payment. Either it's a 50 year loan (with an incredibly LOW interest rate), or the $633 a month is a teaser rate that's going to balloon massively after a couple years.
The company knows the payments are going to double and triple in a few years. They're pretty damn sure someone's income isn't going to double or triple in a few years. And yet, there sits the offer...
It's a problem that needs to be attacked at both ends. Consumers need to be educated, and the companies that practice this crap need to be stopped, with some serious financial liability laid down on the CEO's. Fining companies is nearly pointless since they simply pass on the cost of the fine to the customers. Corporate structures are offering too much protection to CEO's and corporation owners from financial liability.
The other side of course is the consumers. They're selling a monopoly game that uses credit cards, because counting the fake money was too complicated! This is the generation we expect to intelligently shop for a mortgage? Oh yeah, this is going to turn out well...
As I read this article, there was an add for a $200k loan with a $633 a month payment. Either it's a 50 year loan (with an incredibly LOW interest rate), or the $633 a month is a teaser rate that's going to balloon massively after a couple years.
The company knows the payments are going to double and triple in a few years. They're pretty damn sure someone's income isn't going to double or triple in a few years. And yet, there sits the offer...
It's a problem that needs to be attacked at both ends. Consumers need to be educated, and the companies that practice this crap need to be stopped, with some serious financial liability laid down on the CEO's. Fining companies is nearly pointless since they simply pass on the cost of the fine to the customers. Corporate structures are offering too much protection to CEO's and corporation owners from financial liability.
The other side of course is the consumers. They're selling a monopoly game that uses credit cards, because counting the fake money was too complicated! This is the generation we expect to intelligently shop for a mortgage? Oh yeah, this is going to turn out well...
Consumerism in America is a neurosis, and an ingrained cultural assumption created, in part, by powerful corporate advertising. Couple that with an anachronistic economic philosophy that exhorts that a growing economy is a good economy, and a shrinking economy must be, at all costs, avoided.
Change that, and you change the world.
What would people do if they did not spend every waking moment thinking about what they are going to buy and how they are going to buy it?
This country needs to shrink its economy, spend less, consume less, live less luxuriously, and refocus its collective consciousness on something besides the accumulation of material wealth.
How we fill the vacuum left behind is the million dollar, er . . . excuse my inappropriately positioned monetary colloquialism, the spiritually engrossing question.
Change that, and you change the world.
What would people do if they did not spend every waking moment thinking about what they are going to buy and how they are going to buy it?
This country needs to shrink its economy, spend less, consume less, live less luxuriously, and refocus its collective consciousness on something besides the accumulation of material wealth.
How we fill the vacuum left behind is the million dollar, er . . . excuse my inappropriately positioned monetary colloquialism, the spiritually engrossing question.
Gopher, your intention is good, but that isn't exactly going to protect you if you were a bank. Housing prices are all about supply and demand. Subprime lending meant more people than ever before had access to funds (and many people qualifying for loan amounts much larger than they otherwise would.) So the demand went high relative to the supply. Price become artificially high as more people were competing for homes when many of them typically wouldn't qualify to be in that competition. So as most banks do, you get an appraisal and it is worth what people are willing to buy it for (how do you know the appraisal is actually 120% of the true value unless you foresaw the future tightening credit market).
So you lend 95% of the appraisal value (still wouldn't protect you in the event of forclosure, seller/buyer real estate agents command 7% commission in my state, plus prep and admin costs). Then people around the country stop paying loans. Suddenly there is no money to issue new loans. Far fewer people are competing to buy your foreclosed home. You are no longer able to command that price it was bought it for, next thing you know the outstanding loan is 120% the value of the house.
So you lend 95% of the appraisal value (still wouldn't protect you in the event of forclosure, seller/buyer real estate agents command 7% commission in my state, plus prep and admin costs). Then people around the country stop paying loans. Suddenly there is no money to issue new loans. Far fewer people are competing to buy your foreclosed home. You are no longer able to command that price it was bought it for, next thing you know the outstanding loan is 120% the value of the house.
QUOTE (gopher65+Sep 19 2007, 07:11 AM)
banks should NEVER lend 125% of the value of a house.
Good point that I didn't think of.
Subprime lenders got greedy.
Good point that I didn't think of.
Subprime lenders got greedy.
Ok, I don't understand this:
"Going forward, the inability to get home loans could affect consumer spending. It will become more difficult to shop at the rate we're used to, and at the rate the economy has come to depend on. Consumer spending accounts for 70 percent of the economy. That's a much bigger portion than construction, which means the potential impact is much greater."
How is a tightening of the home loan market going to impact consumer spending? The people who SHOULDN'T have been getting loans will no longer have access to them, and in the larger home loan market, people will be paying higher rates.
Just because people can't buy houses, or can't buy as upscale a house as they would like, doesn't imply to me that they will stop buying other luxuries and necessities. Conversely, being unable to move due to the home loan situation, wouldn't slightly more of their money be diverted away from housing?
There are a few conclusions here where I missed the jump.
"Going forward, the inability to get home loans could affect consumer spending. It will become more difficult to shop at the rate we're used to, and at the rate the economy has come to depend on. Consumer spending accounts for 70 percent of the economy. That's a much bigger portion than construction, which means the potential impact is much greater."
How is a tightening of the home loan market going to impact consumer spending? The people who SHOULDN'T have been getting loans will no longer have access to them, and in the larger home loan market, people will be paying higher rates.
Just because people can't buy houses, or can't buy as upscale a house as they would like, doesn't imply to me that they will stop buying other luxuries and necessities. Conversely, being unable to move due to the home loan situation, wouldn't slightly more of their money be diverted away from housing?
There are a few conclusions here where I missed the jump.
QUOTE (Chas+Sep 19 2007, 07:23 PM)
Ok, I don't understand this:
"Going forward, the inability to get home loans could affect consumer spending. It will become more difficult to shop at the rate we're used to, and at the rate the economy has come to depend on. Consumer spending accounts for 70 percent of the economy. That's a much bigger portion than construction, which means the potential impact is much greater."
How is a tightening of the home loan market going to impact consumer spending?
Because people still WANT to buy homes.
But in a tight credit market they will have to SAVE more to qualify for the loan.
Thus they can't spend as much.
Arthur
"Going forward, the inability to get home loans could affect consumer spending. It will become more difficult to shop at the rate we're used to, and at the rate the economy has come to depend on. Consumer spending accounts for 70 percent of the economy. That's a much bigger portion than construction, which means the potential impact is much greater."
How is a tightening of the home loan market going to impact consumer spending?
Because people still WANT to buy homes.
But in a tight credit market they will have to SAVE more to qualify for the loan.
Thus they can't spend as much.
Arthur
Couple that with an anachronistic economic philosophy that exhorts that a growing economy is a good economy, and a shrinking economy must be, at all costs, avoided.
This is because the # of people is constantly increasing. If you could set a limit to the number of people allowed in this country, growth would not be an issue. Keeping people from breading is THE real issue for MOST of our problems.
This is because the # of people is constantly increasing. If you could set a limit to the number of people allowed in this country, growth would not be an issue. Keeping people from breading is THE real issue for MOST of our problems.
QUOTE
But in a tight credit market they will have to SAVE more to qualify for the loan.
Add on top of that the people who won't be able to refinance to pull money out of a house, because the value of the house is dropping. That puts a drop on additional rooms and home improvement projects. People who are floating WAY too much debt on credit cards are going to have a harder time consolidating that debt as well.
The housing collapse is just getting started. The actual effects from it are going to take a while to really settle in. All we're seeing now is the top of the food chain getting slapped around by the consolidated debts/defaults. The lower level effects from unemployment and lowered consumer purchasing won't be as drastic, but will ripple out a lot more.
Greed is not good.
Yes, humanity really needs to refrain from an increase in population. However, no politician, or any religion I have heard from, would even make such a comment.
Our carbon footprint is far too large. I have survived on a pauper's income and am content as can be. I give and get free stuff on freecycle.org. Many humans think material goods will satisfy all of their needs. They place human relationships into a secondary status. Physorg had an article a few months ago showing that the more people were interested in making money, the less they were interested in their human relationships. Greed is a disease and needs to be treated as such. If someone had a dependency problem, such as alcohol, we have treatments for such. But if someone is a total a-hole to everyone and lots of money, they are considered successful. Yes, you can be a successful businessperson, but not necessarily a successful human.
Another way to look at it is: When you are overwhelmed by money and lose the joy of living, you are not human, just a facade. And what about this: Are you more American than human? Then you are not human. Are you more French than human, then you are not human. Are you more Iranian than human?
In reality, all we actually have is each other. We should embrace our loved ones and reach out to others. The serenity of this lifestyle will fully reward you. For your legacy will live on long after your body dies. Think about it.
Yes, humanity really needs to refrain from an increase in population. However, no politician, or any religion I have heard from, would even make such a comment.
Our carbon footprint is far too large. I have survived on a pauper's income and am content as can be. I give and get free stuff on freecycle.org. Many humans think material goods will satisfy all of their needs. They place human relationships into a secondary status. Physorg had an article a few months ago showing that the more people were interested in making money, the less they were interested in their human relationships. Greed is a disease and needs to be treated as such. If someone had a dependency problem, such as alcohol, we have treatments for such. But if someone is a total a-hole to everyone and lots of money, they are considered successful. Yes, you can be a successful businessperson, but not necessarily a successful human.
Another way to look at it is: When you are overwhelmed by money and lose the joy of living, you are not human, just a facade. And what about this: Are you more American than human? Then you are not human. Are you more French than human, then you are not human. Are you more Iranian than human?
In reality, all we actually have is each other. We should embrace our loved ones and reach out to others. The serenity of this lifestyle will fully reward you. For your legacy will live on long after your body dies. Think about it.
Not all subprimes are part of this problem. I believe that subprime lending is a lot like Jessica Rabbit...not bad, just drawn that way. There are companies, like Ocean Capital in Rhode Island, that make financing available for sole proprietor businesses that would not be able to secure financing in the traditional marketplace. We've all got to start somewhere and oftentimes a stated income loan is the only means to start one's business.
QUOTE (marianne+Sep 27 2007, 02:48 PM)
Not all subprimes are part of this problem.
True. And not all subprime borrowers are bad either. (but I disagree with your Jessica Rabbit analogy)
I guess what makes me bristle is the people who make (say) $20,000 but want to look like they make $120,000. They have glitzy cars, nice big houses, fancy jewelry clothes etc. but can't keep up the payments (because they didn't qualify in the first place) so they file bankruptcy. Then do it again. And again...
Many lenders are picky who they loan money to, and many weren't. The lenders that loaned money to those that had a proven bad track record are the ones that got hurt.
From now on lenders will have to scrutinize their borrowers and figure out if they have good intent or not.
There are many people in the US who are too greedy and didn't deserve home loans because they didn't care if they defaulted.
Subprime lending will not go away, it has a place in the market still - and always will. They just need to re model their business plan now. Loaning money to "anybody" was a good short term money maker, but a very high risk in the long term. Now the companies that survive need to focus on the long term goals again.
True. And not all subprime borrowers are bad either. (but I disagree with your Jessica Rabbit analogy)
I guess what makes me bristle is the people who make (say) $20,000 but want to look like they make $120,000. They have glitzy cars, nice big houses, fancy jewelry clothes etc. but can't keep up the payments (because they didn't qualify in the first place) so they file bankruptcy. Then do it again. And again...
Many lenders are picky who they loan money to, and many weren't. The lenders that loaned money to those that had a proven bad track record are the ones that got hurt.
From now on lenders will have to scrutinize their borrowers and figure out if they have good intent or not.
There are many people in the US who are too greedy and didn't deserve home loans because they didn't care if they defaulted.
Subprime lending will not go away, it has a place in the market still - and always will. They just need to re model their business plan now. Loaning money to "anybody" was a good short term money maker, but a very high risk in the long term. Now the companies that survive need to focus on the long term goals again.
I do not have any statistics about the American way of life. I’m not an American.
It was a great surprise to know that construction accounts for only 5% of the economy. But, according to my mind, this is a GDP style accounting. We need to account things differently for some special time. And this is one special time.
Richness is to be built as to be destroyed. Let’s see to the food stuff. We use to produce this kind of richness as we use to “destroy” it at the same speed. The remained richness is almost zero unless we account some inventory variation and value variation.
But it’s different at the real state market. Here we use to get some rural area with a very low price and transform it to a urban area with a very high price with a very special condition that there is no depreciation. The built over the land has long term depreciation. Those conditions are very favorable to richness accumulation.
This is a lot different from a high tech device. Here we need to new production over the depreciation volume. And the depreciation term use to be very short.
The richness accumulation means profits at the company accounts.
This real state credit crunch means, to me, just the start time for the troubles waters to other sectors. Of course it will be a troubled time. But there is a solution. The solution is to change some economic rules that are driving us to this one crisis.
This is what needs to be discussed this moment. We need to elect those bad rules that were made at the past and are conflicting to the state of the art of the moment economy.
All we need is to discuss some new models as simulate them to understand this special moment. And I’m sure this new model really exists.
It was a great surprise to know that construction accounts for only 5% of the economy. But, according to my mind, this is a GDP style accounting. We need to account things differently for some special time. And this is one special time.
Richness is to be built as to be destroyed. Let’s see to the food stuff. We use to produce this kind of richness as we use to “destroy” it at the same speed. The remained richness is almost zero unless we account some inventory variation and value variation.
But it’s different at the real state market. Here we use to get some rural area with a very low price and transform it to a urban area with a very high price with a very special condition that there is no depreciation. The built over the land has long term depreciation. Those conditions are very favorable to richness accumulation.
This is a lot different from a high tech device. Here we need to new production over the depreciation volume. And the depreciation term use to be very short.
The richness accumulation means profits at the company accounts.
This real state credit crunch means, to me, just the start time for the troubles waters to other sectors. Of course it will be a troubled time. But there is a solution. The solution is to change some economic rules that are driving us to this one crisis.
This is what needs to be discussed this moment. We need to elect those bad rules that were made at the past and are conflicting to the state of the art of the moment economy.
All we need is to discuss some new models as simulate them to understand this special moment. And I’m sure this new model really exists.
QUOTE
From now on lenders will have to scrutinize their borrowers and figure out if they have good intent or not.
It's a little bit harder than that. What really let this play out as long as it did was the original lender bundling and selling the debt in blocks. They cashed out and ran. Leaving the company holding the debt in trouble, and the debtor without a house.
So on top of scrutinizing potential debtors, the real estate companies need to be seriously eyeballed before the funding companies buy up their debts.
From toys to food to houses, we've got a serious problem with sellers saying "Trust us, it's in there." and not looking for ourselves. Caveat emptor needs to be tattooed to the inside of some folks eye lids.
Hello everyone, I am 38 years old divorced woman with three children and I need help to get home loan or any financial advice. Actually I would like financial advice on the best way to get a home loan. Never been a part of the financial end of matters. What is the best way to get a home loan when you are getting divorced? Any serious advice would be appreciated. Have a nice day.
QUOTE (elsarobert111+Jun 16 2008, 10:17 AM)
What is the best way to get a home loan when you are getting divorced? Any serious advice would be appreciated. Have a nice day.
Without any clue what your credit rating or finances are like, I'd have to say your best if not only option is a HUGE down payment. If you come to the table with enough cash, the banks are happy enough to supply a loan since it's much less risk for them.
Without any clue what your credit rating or finances are like, I'd have to say your best if not only option is a HUGE down payment. If you come to the table with enough cash, the banks are happy enough to supply a loan since it's much less risk for them.
How does this thread represent the PhysOrgForum forums? This is not science. 
Please stop whining and start posting when and where you should someplace else. 
Please stop whining and start posting when and where you should someplace else.
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