Another economic domino falls - Bear Stearns

Great Debates
121

[QUOTE=Renob]
Let’s see a cite not only for the allegation that I’m a “poor example of humanity” but that homelessness is growing rapidly.

Or is this just a manifestation of you being upset that everyone tore apart your unfounded assertion that the housing “crisis” was leading people to live in tent cities?
[/QUOTE]

Whats wrong with you.? When I put in the tent city site you could have simply responded with your name. It would save you a lot of typing. Every event to you is people are not as smart as you ands should have known better. After all it did not happen to you. Whatever happens to them you could care less.
The foreclosure crisis is not due to a borrower. The terms of the loans and the qualifying is determined by the industry, an essentially unregulated industry. If the financial sector did not make it possible to get these loans they would not have happened. Then no crisis would have occurred. Are you suggesting that the borrower forced the zero money down ,variable rate mortgages.
If the financial companies did their job there would be no crisis. If regulators stepped in and said you will not take fake employment or false levels of pay information. More so they encouraged and instructed the applicants how to get a mortgage accepted. ? They are beyond complicit. They orchestrated the entire fiasco to get rich quick. It is their fault.

122

[QUOTE=gonzomax]
Whats wrong with you.? When I put in the tent city site you could have simply responded with your name. It would save you a lot of typing. Every event to you is people are not as smart as you ands should have known better. After all it did not happen to you. Whatever happens to them you could care less.
The foreclosure crisis is not due to a borrower. The terms of the loans and the qualifying is determined by the industry, an essentially unregulated industry. If the financial sector did not make it possible to get these loans they would not have happened. Then no crisis would have occurred. Are you suggesting that the borrower forced the zero money down ,variable rate mortgages.
If the financial companies did their job there would be no crisis. If regulators stepped in and said you will not take fake employment or false levels of pay information. More so they encouraged and instructed the applicants how to get a mortgage accepted. ? They are beyond complicit. They orchestrated the entire fiasco to get rich quick. It is their fault.
[/QUOTE]

And if my grandmother had balls, she’d be my grandfather.

The “fault” lies in the complete alignment of incentives. Everyone was greedy. Everyone was making money. Everyone wanted it to last forever. This is not very complicated.

The financial services industry endures a staggering regulatory burden, for what it’s worth. This was not a regulatory breakdown.

123

[QUOTE=Shayna]
And that’s your biggest problem right there.
[/quote]

It’s “not a problem” I was filling in the blanks and describing possible scenarios, you might have some legitimate beef here if I was acting as though I did know the specifics. I didn’t, the only person who could tell me the specifics is yourself–and you didn’t, so I was simply speaking in a generalized way.

I didn’t claim you didn’t have financing, I just said that was one possibility. If everything is truly exactly as you said, your lender acted inappropriately and you could sue them for damages. It’s no one’s fault but your own that you allowed them to act in a manner that violated your agreement with them.

For example, if a land lord is screwing a tenant over–then yes, that land lord acted inappropriately. But if the tenant refuses to take legal action, then the tenant can’t simply act as though they are blameless in allowing the situation to continue.

No one forced you to buy this house, even if the lender DID spring fees on you in violation of your agreement with them YOU could have backed out. Yes, you may have lost your deposit with the seller of the home, but you could have taken legal action against the lender.

Although it is very possible that the lender didn’t act inappropriately, you just simply are ignorant of the leeway they have when it comes to estimating closing costs–something you should have educated yourself on before getting into the situation.

However, what you’re bitching about is closing costs, a totally separate issue than the interest rate on your loan and the structure of your loan. If you didn’t know those months before the closing, you acted very foolishly in not making sure you knew.

And you’re telling me NOWHERE in any of the paperwork you signed it was explained to you that the “estimate” of closing costs could, in fact, be an underestimate?

If you didn’t have the terms of your financing down HARD months in advance, you made a very big mistake, sorry, but that is your fault. I doubt very seriously your lender acted inappropriately, you did get taken advantage of–but there’s nothing wrong with a lender milking someone for money who is ignorant enough to let it happen.

Anyone, I find it telling that this is your “last post on this issue” that’s akin to saying “I’m taking my ball and going home.” Well, you do that. You’re a prime example of people who get in over their head when buying a home.

Sorry, last I checked you shouldn’t go into a major financial decision based off of “trusting advice of a friend of mine who has been in the real estate business for DECADES!!” I’ve been in the real estate business for decades, so have many other people I know–some of them can’t find their ass with both their hands.

The real problem is people who buy homes based on emotions rather than good business sense, it is the primary thing which allows people to get screwed over by lenders.

124

[QUOTE=gonzomax]
You guys don’t seem to grasp the significance of a macro over a micro economic problem. When hundreds of thousands of sub prime mortgages were sold it indicates a lack of oversight on the profession. This crisis would not have occurred if the regulation were in place to force better qualifying. Some guy who bought a house is not the problem. It is simply that an unregulated lending system took advantage of the lack of rules to crank out sub primes like an assembly line.
A response that I make a lot of money and got a good mortgage is a silly response. It does not deal with some other people who may not be Renob. There are such people.
[/QUOTE]

If it was just one obese person, it’s his fault. If it’s a country of obese people, it is McDonald’s fault?

Is that the kind of thinking you buy into? When you take out a loan there are two parties. A lender and a borrower. It is in the lender’s self-interest to only make responsible loans, likewise it is in the borrower’s self-interest to only accept loans they can afford to pay back over time. I do not deny lending institutions are part of the problem, but they aren’t the only part. People on both sides were acting very, very irresponsibly–people on both sides are losing a lot of money because of it.

That is what is supposed to happen when you’re stupid in a market economy.

125

[QUOTE=Gaudere]
Well, they kind of can. Their are no penalties for changing things from the good faith estimate; you are legally required to get the final closing costs the day before, but that’s not much time to find a new lender and going through a mortgage app again means adding another month to the close time, which will lose you the house if you contracted to close by a certain date.

See: http://www.bankrate.com/brm/news/mtg/20010607b.asp "Brokers and lenders can tell you anything they want – and even put it in writing – then turn around and say, ‘Oh well, things changed. You owe 9 percent interest instead of 7 percent.’

[…]It’s important to keep in mind that a rate lock agreement does NOT unconditionally guarantee your terms. If you didn’t follow tips one and two, you could end up paying a higher rate or more points than shown on your agreement. The lender or broker would justify the change by saying you overstated your income, your house isn’t worth what you said it was, etc. and would be completely within his bounds because rate lock agreements have fine print caveats in them.

And remember, rate lock agreements, conditional approvals and the like do not guarantee that you’ll receive those terms! If a lender discovers things during the underwriting process that you didn’t mention up front or that weren’t apparent initially, your terms can be changed."

Or: http://www.bankrate.com/brm/news/mtg/20010607a.asp
“Lenders, brokers and banks routinely change loan terms between the time of application and closing. Sometimes they have legitimate reasons for doing so, but often they don’t. […]And while lenders point out that people like Stresser are free to walk away and find new mortgage providers if they don’t like the terms presented to them, the NCLC’s Saunders says that isn’t practical in many cases. Market rates may have risen enough, for instance, that refinancers would have to pay higher rates if they started over at new lenders. And home shoppers can lose the properties they’re trying to buy.”

Basically, if they change the terms at the last minute you can walk away, but that may mean losing the house.
[/QUOTE]

My response to this is going to be “duh.” That’s precisely the point of my post, Shayna knew this could happen to her and didn’t care. If you’re careful you can avoid this happening to you.

While it was certainly possible that nowhere in any of the fine print of anything Shayna signed, there was any indication this could happen–I found it very unlikely that that was the case. It’s not unheard of for a lender to genuinely act in a way that violates a contractual agreement, but usually it’s a simple case of the borrower being taken advantage of due to their ignorance.

A loan is a business arrangement, I’ve taken many, many loans in my lifetime to finance lots of different things. I’ve had lenders play hard ball and I’ve told them I’ll take my business elsewhere. Some back down, some send me packing. But either way I’m not going to sign an agreement that is against my interests.

“Losing the house” is a laughable phrase. It was never your house to begin with, people get way too emotional about the home buying process. You act like losing that house means another house will never come by, guess what–it’s very easy to find a house right now. During the bubble, not so much–but sometimes you have to deal with the situation and keep looking.

It’s worth noting the borrower does have one option to avoid losing their earnest money deposit. The problem a lot of people face is they have a mortgage contingency in their real estate contract that expires at some point prior to the date in which the contract closes–leaving them with no out if something happens with their financing.

It’s a common understanding that when you initially sign an agreement to get financing, the financing is based on your current financial situation, and that if that financial situation changes at some point between the date of the agreement and the actual date at which the deal is finalized, the lender has a right to modify the terms at which they will lend to you or even refuse to lend to you at all.

This is why one should be very careful to get a mortgage contingency which protects them in such a situation, or a mortgage contingency that is contingent on getting a X type of mortgage (for example make it clear you have to be able to get an 80% mortgage or you are no longer locked into the real estate contract and can get your deposit back.)

Contracts are a negotiation, any seller that would refuse to allow you to put protections for yourself into the real estate contract isn’t someone to do business with. They are putting protections for themselves into the real estate contract (such as the earnest money deposit) if they won’t let you do the same, take your business elsewhere. A home sale is a business decision.

126

[QUOTE=gonzomax]
Whats wrong with you.? When I put in the tent city site you could have simply responded with your name. It would save you a lot of typing.
[/quote]

Instead, I decided to read the article you posted and realized that it didn’t say what you were claiming. Every other person on that thread who read the article came to the same conclusion.

If you think this industry is unregulated then you clearly know nothing at all about it. If you think the terms of loans are determined by the industry and borrowers have no choices, then that indicates a stunning ignorance of mortgages. When we got our mortgage we had a variety of options for it. We could have gotten a fifteen-year fixed rate, an ARM, an interest-only loan, etc. Like every other borrower, we had options. Had we chosen to go with a less expensive house, we would have had still further options. Had we put down more as a down payment, we would have had even more options. To think that we had only one option for our loan “determined by the industry” is complete rubbish.

And if people did not take them, they would not have happened. Merely having a product available to a potential customer does not force them to buy it. For instance, I went to the grocery store tonight. There were a lot of things that big, evil corporations made it possible for me to buy. I didn’t buy all of them. I just bought the ones I needed or wanted. Other people around me were doing the same. Perhaps I live in some special area where people can actually think for themselves and aren’t having their minds controlled by Big Business.

I’m saying the borrower certainly wanted these mortgages and took them willlingly, yes. What proof do you have that anyone was forced into taking them?

127

[QUOTE=Martin Hyde]
–but there’s nothing wrong with a lender milking someone for money who is ignorant enough to let it happen.
[/QUOTE]

Well, now - that’s a bit of a philosophical issue, isn’t it?

Personally I consider such people morally bankrupt. Nothing illegal per se about being, say, a sleazy car salesman, negotiating absurdly over market terms with the less than savvy. But it certainly isn’t a respectable way to lead a life in my book :).

128

[QUOTE=Martin Hyde]

A loan is a business arrangement, I’ve taken many, many loans in my lifetime to finance lots of different things. I’ve had lenders play hard ball and I’ve told them I’ll take my business elsewhere. Some back down, some send me packing. But either way I’m not going to sign an agreement that is against my interests.

[/quote]

That is true - but I’ve been involved in contract negotiations for million dollar purchases, and if any party came to the final contract signing with big changes, the other would never do business with them again. Lenders can get away with it because people only borrow once a decade or so, and because news does not get around. Unless there is a valid reason to change the terms, which there did not seem to be in this case, it may be business but it is unethical, shady business.

There is an even better reason for contingency clauses - if you are also selling. You don’t want to be stuck buying a house if your sale falls through. We always do contingencies on the purchase contract and refuse them on the sales contract. The last time we bought a house this came in very handy. In the case I mentioned above we had no plans to buy, so we learned cheaply.

129

Of course! Because he’s smarter, right? And if a retarded person buys a pack of gum from you, you can cheat them on the change! Because you’re smarter!

Of course, in your next reincarnation, you’ll be an assistant slime mold…

130

[QUOTE=Shayna]
And that’s your biggest problem right there. You’re wrong. We did have financing for our home. At completely different terms than what the lender sprung on us one day before closing, where the final documents were to be signed. That left us with no time to find another lender.
[/quote]
While I have no doubt that this can happen and probably does happen with a certain percentage of lenders/brokers, the question remains: Where was your lawyer?

I understand the emotions of buying a house, I bought one last year. However, if the good faith estimate came out to be so far out of whack with the day of closing costs, the lawyer should have halted the proceedings. The lender/broker has an opportunity to spring these last minute fees because they have total insight to the buyer’s financial data. This is a regulation in the industry. To say that this industry is unregulated, is very short-sighted, as this is some serious information to transverse between the parties.

Additionally, what you were not aware of as you hadn’t posted, is that there should be a mortgage commitment letter from your lender to the seller and that there should be a contingency based on you actually getting loan (sorry for being vague, but I’m recalling a conversation I had last night). If something was really wrong, the lawyer should have halted the proceedings and at the very least file an extension. No seller would unreasonably deny such a request. Additionally, the lawyer should’ve threatened the lender with civil suit not only for the amount of additionally money asked for, but also threaten the lender’s license as well. Even unscrupulous lenders won’t put their license in jeopardy.

131

[QUOTE=mazinger_z]
While I have no doubt that this can happen and probably does happen with a certain percentage of lenders/brokers, the question remains: Where was your lawyer?

[/QUOTE]

Where are you from? In NJ lawyers typically run a closing, but in California lawyers don’t get involved as a matter of standard practice. I don’t remember having one in Louisiana also.

132

[QUOTE=Voyager]
Where are you from? In NJ lawyers typically run a closing, but in California lawyers don’t get involved as a matter of standard practice. I don’t remember having one in Louisiana also.
[/QUOTE]

Here in NYC, I wouldn’t dream of going to a closing without my attorney.

133

[QUOTE=Voyager]
Where are you from? In NJ lawyers typically run a closing, but in California lawyers don’t get involved as a matter of standard practice. I don’t remember having one in Louisiana also.
[/QUOTE]
Right now, I’m in the Philippines (Manila) working with local counsel over a data center/billing dispute, and drafting a new agreement with our Customer. The last house I bought was in Orange County (investment property – long story). I got no strange looks when I brought my counsel. And, like Maeglin I wouldn’t dream of doing any home purchase without an attorney. Part of my job also involves legal review of buying technology and capital infrastructure, anywhere from the $10,000 server (when they used to cost that much) to a $2.4B IT infrastructure outsourcing agreement. Even with that experience, the complexities of a home purchase are not something I would want to learn on the fly.

134

Predatory lending - Wikipedia The term is predatory lending. =The companies actually coached applicants on what to put on the application documents,.
When I redid my mortgage I encountered some dishonest loan people at major companies. I had them email me all the terms. I had 3 companies going against each other at once. They would say one thing and put a slightly different thing on the proposed contract. I read them thoroughly and compared. Then when the final contract was offered I caught then making little changes again. I made it clear that I wanted a fixed mortgage from the start. Then an agent would email me a final contract and it would be variable. I told them no good . They assured me that it was completely safe and not to be worried. I told them to stuff it. But they may have easily convinced others to accept the changes. They were good salesman. I just knew what I wanted.

135

[QUOTE=elucidator]
Of course! Because he’s smarter, right? And if a retarded person buys a pack of gum from you, you can cheat them on the change! Because you’re smarter!

Of course, in your next reincarnation, you’ll be an assistant slime mold…
[/QUOTE]

Cheating someone on change is theft, i.e. illegal, I’m not condoning it.

I tend to view real estate deals as adversarial in nature. People often sympathize with one side over the other, but ultimately all sides are trying to “take” the other guy.

People need to go into it with that mindset.

I wasn’t making an ethical statement per se, ethics is a whole other can of worms. But in the real world most profit-driven companies (and individuals) will at best behave legally, behaving ethically isn’t assured and all parties need to realize that. You aren’t entitled to be treated in an ethical manner.

136

[QUOTE=mazinger_z]
Right now, I’m in the Philippines (Manila) working with local counsel over a data center/billing dispute, and drafting a new agreement with our Customer. The last house I bought was in Orange County (investment property – long story). I got no strange looks when I brought my counsel. And, like Maeglin I wouldn’t dream of doing any home purchase without an attorney. Part of my job also involves legal review of buying technology and capital infrastructure, anywhere from the $10,000 server (when they used to cost that much) to a $2.4B IT infrastructure outsourcing agreement. Even with that experience, the complexities of a home purchase are not something I would want to learn on the fly.
[/QUOTE]

Anecdotally I find it very uncommon that individuals I know involve a lawyer when buying a home. I just don’t understand that, it’s one of the more complex legal issues that most people will be involved in as a matter-of-course in their lifetimes.

Hell, I’d probably advise most people get a lawyer to look over a lease on rental property–such a service is free to many individuals and costs a pittance to those who can’t get it for free.

137

[QUOTE=gonzomax]
Predatory lending - Wikipedia The term is predatory lending. =The companies actually coached applicants on what to put on the application documents,.
When I redid my mortgage I encountered some dishonest loan people at major companies. I had them email me all the terms. I had 3 companies going against each other at once. They would say one thing and put a slightly different thing on the proposed contract. I read them thoroughly and compared. Then when the final contract was offered I caught then making little changes again. I made it clear that I wanted a fixed mortgage from the start. Then an agent would email me a final contract and it would be variable. I told them no good . They assured me that it was completely safe and not to be worried. I told them to stuff it. But they may have easily convinced others to accept the changes. They were good salesman. I just knew what I wanted.
[/QUOTE]

So. somehow or other, you managed to escape the wiles of the Evil Predatory Lenders[sup]TM[/sup]. How do you account for those who were unable to avoid falling prey? Are they merely less intellectually gifted than you, or is it something in the water that makes more people unwilling to read the fine print?

It is really difficult for me to understand all this. Why is is so hard to understand that the guy in the nice suit isn’t going to give you something for nothing?

Regards,
Shodan

138

[QUOTE=elucidator]

Of course! Because he’s smarter, right? And if a retarded person buys a pack of gum from you, you can cheat them on the change! Because you’re smarter!
[/QUOTE]
“You fucked up! You trusted us!”

139

The judgmental attitudes and blame of the home buyers is misdirected and scapegoating. The increased pressure on mortgage brokers to lend money to buyers was the force behind unscrupulous lending practices. The spin that these subprime loans were a benevolent option to open the home market to otherwise unqualified buyers is disingenuous. In a fiercely competitive and unregulated industry, deceptive and unethical practices thrived. Investment money pored into the home market; brokers sold off loans to investors; investors borrowed money to buy up more mortgages, and seemingly no one considered the consequences if the scheme went bad.

Maybe buyers should have been savvier, but when the health of the economy is intertwined with mortgages, investments banks, and investor speculation, it should be regulated. Obviously, Wall Street is driven by money; they are not operating in the best interest of the country, which is fine. It is the nature of capitalism. I am a firm believer in capitalism but with regulations to protect the nation’s – the world’s -economic health, not to mention the economic health of the increasingly inconsequential Joe consumer.
Just because you can take advantage of someone doesn’t make it okay, at least not in my world.

140

[QUOTE=Shodan]
So. somehow or other, you managed to escape the wiles of the Evil Predatory Lenders[sup]TM[/sup]. How do you account for those who were unable to avoid falling prey? Are they merely less intellectually gifted than you, or is it something in the water that makes more people unwilling to read the fine print?

It is really difficult for me to understand all this. Why is is so hard to understand that the guy in the nice suit isn’t going to give you something for nothing?

Regards,
Shodan
[/QUOTE]

Yes thats what a mortgage is something for nothing. Fraud,lies salesmen doing a bait and switch ,just a part of how we do business.
But the overriding point is that if it were not allowed for mortgages to be done with zero money down, no proof of wages, fraudulent assessments etc. the crisis would not have occurred. Proper regulation no problem. Overseeing the banking institutions should be one of our governments purposes. Millions took out mortgages. Should it just be a free for all with no regulation.? Is it OK to take advantage of the borrowers.? If they are not as smart as you should the attitude be screw them they are too stupid to matter.?