I left Louisiana just before the 1980-81 oil price crash which trashed housing prices, and I know several people who did just this when moving, without declaring bankruptcy. Isn’t great for the credit record, but better than bankruptcy I’d guess.
Actually, you’re both right. There were quite a few low quality loans that banks would have rather not made to lower income folk that the government did some armtwisting on. That was the whole point. Banks too, are a public trust. You can’t just walk in and only do what suits you. If you are going to profit from the community you must also serve its needs.
As it turned out, some of the creative financing techniques used could be scaled up and much money was made. Those creative techniques evolved and then were scaled back down to the lower income mortgages, and everybody was happy.
At this point the whole starts to turn into the Motley Crue “Behind The Music” episode on VH-1. An orgy of excess pushing things too far results in calamity.
Now we’re off to rehab.
Why, yes, of course, the inestimable New York Post. Where would we be without their bold and creative approach to journalistic integrity?
So its ACORN extortion, eh? Community organized crime, then?
“Lovely little system for the oppression of the proletariat you’ve got here. Be a shame if anything were to, oh, happen to it…”
Your guess is as good as mine. I’m a liberal Democrat, and I think she’s nuts, but she doesn’t want to discuss it because I’m her client. She’s 81 years old and has done pretty well over the years in a work hard, upper middle class sort of way, I think.
Perhaps it’s because he’s having a terrible, horrible, no good, very bad day.
There are actually 3 events going on and were discussing them as if it’s a singular event. I got in a huge argument at work back in the late 80’s that the housing market would collapse because it was running at twice the inflation rate. By default, it will extend beyond people’s ability to pay and the bubble will burst. It was just a matter of time.
Combine this with HUD’s mission to put poor people into their own homes and then flood the market with low interest rates and it was a done deal. As interest rates continued to fall, people refinanced their mortgages and banks borrowed money to meet demand.
The HUD experiment was noble but as I stated above, reducing the cost of a house by paying the down payment costs does not equate to the money spent on rent. Owning a house is an ongoing financial responsibility. Did it help some people? Probably. But without some kind of oversight it was a ticking time bomb. If your bonus as a government agent is 2 to 3 times your base salary then hitting a target number of happy new homeowners has a predictable outcome. An attempt was made in 2005 to address this and it was swept under the rug. It’s a political hot potato to go after free-bees to the poor.
Mortgage refinancing on a speculative basis is the other prong on this triad of failure and lower interest rates were tempting to both banks and speculators.
The housing bubble was a done deal. It was going to happen. It was made worse by government backed (and poorly managed) HUD money along with poorly managed speculative loans.
The solution is to let banks deal with their own bad mortgages and let the government deal with poorly managed HUD mortgages. The HUD program needs to end or be cut back with serious oversight on how it’s run. Bonuses for hitting target numbers need to be scaled to a percentage of base pay and not multiple factors of base pay.
Don’t make fun of that. It actually did happen.
M&T Bank being forced to loan money to a nice family of Mexican immigrants who wanted to buy a doublewide didn’t exactly cause the collapse of the global credit markets though.
Since when was Bush’s involvement in something a point in its favour? Given that their first instinct was to use almost a trillion dollars without accountability, why are the liberals here supporting yet another “time is of the essence, sign this RIGHT NOW” plan by the Bush administration?
Educate me.
Weren’t HUD loans federally insured? I thought that was how the government encouraged lending to the poor. If so then default or not the lenders were safe with their loans as someone was going to pay it one way or another.
And how was HUD at fault for the predatory lending practices of the lenders? They would over-inflate housing prices, offer tricky loan deals that looked better than they were to people who are not financially savvy (at this level) and give loans to people who had no business getting such a loan…HUD or no HUD.
Do you have a cite for HUD being the root cause, or at least a hugely significant part, of the subprime blowup besides a dicey Post article? You know…an article that does more than just assert but backs-up those assertions with actual, verifiable numbers? One that shows the government pushed lenders into writing brain dead awful loans because the bleeding heart liberals, who were not in control of Congress or the Executive branch for 6 of the last 8 years, thought it was a good idea to loan to absolutely anyone who asked?
Yes, thus all the hullabaloo about Fanny Mae.
I’m not saying it’s a root cause. I’m saying it was mismanaged. This was known in 2005 but ignored. The fact that it coincides with the collapse of the housing bubble has made it worse.
Ok…so who should have blown the whistle?
To be honest I simply do not understand the semi-private/semi-government backed nature of Fanny and Freddie. Were they obligated to pick up these loans once they were made or could they have said, “Screw this…these are a disaster waiting to happen”?
If not them Congress? The President? The Treasury? The Fed? The banks? The brokers? The SEC? Even if elected officials are all pussies unable to put the brakes is there some reason all the others had to participate in a race to the bottom?
It was blown in 2005 and swept under the rug. It’s not hard to understand that nobody has the balls to screw with an entitlement program.
No, if I understand it correctly, the government didn’t specifically back Fanny Mae but it was used in conjunction with HUD influenced programs so there is a connection that can’t be ignored.
As I stated above (grossly oversimplified) I think the joy should be spread out among dumbass banks and the Federal Government. And it should be done with a huge heaping bowl of oversight so it doesn’t happen again. Housing bubbles will always be a market force that can’t be regulated away but bad loans and overzealous government programs can certainly be addressed.
Now that sounds like a mighty tasty hat! I just might hit you up for a slice. 
I am still not buying your idea that the HUD loans were, in and of themselves, a bad idea.
Yes, they are a part of the blowup but because the LENDERS went nuts…not because the government shoved bad loans down the market’s throat.
HUD left it to the market to sort out and offered some insurance to the lenders so they would make loans to somewhat less than ideal candidates. That did not mean the government encouraged the massively irresponsible lending the mortgage companies got in to. It is one thing to loan to a husband and wife who have had a stable, if low paying, job for the past ten years and pay most of their bills on time to get a modest house. It is something else to loan to a crack addict who has had no job in the past ten years and just says he has resources…just trust him on it.
The government was NEVER pushing loans for the crack addict as some liberal entitlement fantasy run amok. Lenders however, in this feeding frenzy and the ability to shrug off risk easily and make their money on fees, loosened their own oversight to the point of recklessness. Further they were predatory. They offered complex loans that looked good to people who simply are not (generally) savvy enough to sort through what it all means to them. They see someone offering them a freaking house and are told it’ll cost them less a month than to rent. Of COURSE they go for it! Who wouldn’t? Looks like a good deal on the face of it. Nevermind the surprise waiting for them down the road that they don’t see coming.
Nah…the HUD thing was not such a bad thing in and of itself from what I can tell so far. Was it a part of this mess? Sure. But not by virtue of loaning to poor people but by no oversight all along the line to ensure reasonably good bets were still being made.
So, after they blackmailed the banks into making these loans…a pity bankers never had a sympathetic ear in Washington, what with the iron grip the liberals had for so long…after they got all the poor people mortgages and moved them out to the suburbs…
Was that the first part of the plan, and *then *they take all the guns?
Are you saying the decline in interest rates came from this, and not from Fed policy to ease the recession?
Do you have any numbers on the percentage of these loans that failed over time? I think that this kind of program more than repays the government outlay by cleaning up cities, raising property values, and lowering the crime rate. But whether it is good or not doesn’t matter now - what does matter is if the default rates are much higher than average. Another issue is how many were there? I could see banks deciding to take some number of these to get government off their backs - and to make up for credit discrimination - but would there be enough to take a bank down? I doubt it.
The development of unregulated instruments that no one understood didn’t play a role? Even if mortgages started to default, the banks could write them down. The stupider banks would fail, no doubt, but we wouldn’t be in the credit freeze we’re in today, which is the really dangerous part of the problem.
Absolutely. It was also made worse by unnaturally low interest rates, and the lack of regulation of mortgage brokers which brought more people, many unqualified, into the market and drove up prices. It was going to deflate, but with proper management it could have deflated relatively slowly.
How are banks going to do that, considering they are all over the place. One criticism of plans to have the government relax terms on mortgages after they buy the bad debt is that no one knows who owns the damn things, and that some pieces might never be acquired by the government. Bankruptcy judges are not bound by this. If banks always had the mortgages, this might never have happened.
I encourage you to research HUD in the real world. I just got done helping a friend rehap a rental house and it will likely be rented to a section 8 family. While working on it I was able to observe a number of potential section 8 tennants. Wow. Every one of them drove up in a better car than I had when I was saving for a house. And one of them was talking about where she was going to put her large screen TV (and where to hook up cable). WTH. I’m still watching broadcast TV on a 13" model. If HUD is paying 70% of the rental cost for 10 years what are we really funding? I didn’t see struggling-to-survive pull up in a car, I saw a rather nice tax-funded-lifestyle pull up. In real numbers that would be $84,000 over 10 years and that is not adjusted for inflation.
I’m all for helping the poor become self-sufficient but I’m not seeing it in the programs provided.
So some rich (or at least doing ok, savvy people) are gaming the system? There’s a shocker. :rolleyes:
And that does not argue for the notion that these people are horrid credit risks foisted on the banking system which sunk the subprime market.
No, not rich. I’m sure on paper these people are below the poverty line. I just don’t see any mechanism for self-sufficiency. My labor is getting tapped to support them but there is no obvious taxation of their labor or any plan to guide them financially.
Well, why didn’t you say you had an anecdote! Clearly, this debate is over once you bring out the heavy guns, evidence-wise.