I would say it’s not even capitalism, but market fundamentalism – the belief that regulation is a kind of pollution that makes capitalism impure. The belief that capitalism is an end in itself, rather than a means to create and distribute wealth. A disdain for a democratically elected government, and its ability (however inefficient) to look out for the common good.
I don’t think this is the case. For the most part, I do not believe lending institutions want to become property owners or landlords. Moreover, it is rare for a lender to hold a mortgage these days.
I think this is sensible. It’s more a cultural mindset than anything else–most everything else stems from that.
Whoever held the debt didn’t care whether the person paid or not. It doesn’t matter whether the original lenders held the debt (which does happen, sometimes) or whether the debt was sold to some other villain. The point is that it didn’t matter whether a person defaulted on a home loan or not, because if the price of housing goes up, it’s impossible to lose money by lending it to people to buy houses. The only thing banks cared about was creating as many mortgages as possible in a market where housing prices were going up. They KNEW the boom wouldn’t last forever, because the prices were being artificially driven by the artificial demand THEY CREATED by making these loans so accessible. It doesn’t take a fucking genius to see that model is NOT sustainable, but no individual who made decisions to sell sub-prime loans will ever have to answer for it. Or if they do, they’ve already made their money, so who cares?
I’m a poster child. Here’s my story:
We were homeowners for 10 years, and for the first 7 we used our equity as an ATM. Of the money we took out, about 1/3 went to paying for our children’s college. About 1/3 went back into the house: remodeled kitchen, bathrooms, floors, carpets, exterior paint, roof, furnace/ac. And about 1/3 we spent on hookers & blow (figuratively speaking).
So our mortgage kept getting higher; so did the value of our home. But we were getting seriously stretched, and found a monumentally stupid solution: we re-fi’d into an interest-only mortgage. 2 years of low payments that we could afford; which would then “adjust” (with a huge prepayment penalty which would keep us from re-financing for another year). We signed, crossing our fingers that it would all work out.
The “adjustment” took our mortgage up 50%. We paid this dutifully for 1 year, by maxing out our credit cards…hoping that we could just stagger to the finish line, and then re-fi into a more reasonable mortgage.
When the prepayment penalty expired, we were turned down for a re-fi because our credit was shot.
We went to the lender and asked for a loan modification, and were turned down. So, at the lender’s request, we put the house up for a short-sale (about $100k less than we owe) in June; left the house spotless and tidy; and moved into an apartment. We’ve had 3 offers, but the lender hasn’t even reviewed our file yet. You would think that they would realize that the value of the home is not going to go up anytime soon, so there is value in haste. But they do not appear to be thinking very clearly.
So yes, we were stupid, but we paid a lot of money in good faith, and our rapacious and usurious mortgage company is left holding the bag. I feel a tiny bit guilty; but I’m sleeping fairly well.
Well Obama is still in as much denial as everyone else:
“I know this is especially frustrating for young people, because, you don’t even have any money…I know I remember what it was like, eating pizza every night” :rolleyes:
How much does that cost, about $5k per year? I am told that around here, during the last depression, you couldn’t find so much as a rabbit within a mile of town.
We are incredibly spoiled and this is going to be a massive shock to many people.
Countrywide did this to me (and additional $100 month) on my rental property because the next town over is the poster-child of defaults (said the nice lady on the phone, though the stated reason on my form letter is that my taxes went up). I could split out the insurance and taxes from my mortgage, but this is considered risky by the industry because I could neglect to pay both and the house/asset would be in jeopardy. For that added risk, Countrywide was going to raise my rate an extra .25%. So, I refinanced with my mortgage broker friend in LA. Countrywide quickly re-bought it after 3 months or so of payments. If you can’t refinance, you can save yourself the extra $100 a month, and try to negotiate not being slapped with that extra .25%. I heard it worked, though it didn’t work for me. Though, a threat to refinance might work, assuming you have enough equity.
No offense intended, but my rental property even in the depressed market is valued at more than your house, but my mortgage before refinancing was still $1600 a month less. Is there no other home insurance game in town?
If you buy the Totino’s frozen pizzas when they go on sale at the grocery store around here, you could have one every night and it would cost you $365/year. Just FYI.
Two names: Barney Frank, Chris Dodd.
The finger pointing should be to everyone’s greed, ultimately. People wanted bigger houses and more stuff. People felt the right to do something with their home equity. Politicians like the political capital of the FNMs because they can say that they wanted to put more people in homes and live out the American Dream. Investors loved the returns they were getting. The GSEs were fundamentally wrong for the economy. Nobody had the balls to kill the goose laying the golden eggs, and now it’s too late.
Freddie Mac Money Trail Catches Up With McCain McCain is intimately involved with Fannie and Freddie lobbyists. They run his campaign and are his advisers.
McCain's Lobbyist Friends Rally 'Round Their Man - ABC News If you are trying to get away from their influence McCain is not the place to go.
Yes. McCain always claimed he was anti lobby and he is buried in them. When he pays them off we will be in the hole even deeper. Hypocrisy ,thats the diff.
Close, I think.
In my view, it’s that banks tend to be conservative, oddly enough. They were ordered to provide these loans to low income families, and did not want to assume the risk. So one firm, at least- JP Morgan- hired a bunch of whizkids from MIT and U Chicago to figure a way to minimize the potential loss. They came up with credit deferral swaps- which meant, in this case, rebundling the loans, and either reselling them, or insuring them.
They made piles of money, so other accountants spammed the method, not understanding how it worked, and created a housing bubble.
It’s actually the people. The banks rebundling made piles of money. Investors wanted the massive returns these methods funded. The market responded by serving its investors- all of us- as was desired, and that meant spamming the methodology. Which meant failure.
I guess it’s a matter of perspective. One has lobbyists in his inner circle, the other has a former CEO of the same place. I fail to see much of a difference.