It seems I can’t find a non-biased source to confirm those numbers. The ones I looked at (from Cali) had those numbers. Texas biased ones used differing approaches to measure “success” (like migration from Cali to Texas, unemployment etc)
In that case, this one is doing fine ya’ll.
Well, that’s good. Still, this Floridian would rather deal with his worth-half-what-we-paid house than live in shudder Texas. 
You don’t know what you are missing. Quiet countryside, no car noises, foxes and rabbits running free. I can see all this poolside, all 30 minutes from Austin.
(Granted, can you take some of these 100 degree days back to Florida?)
The regulations listed in the OP represent “good choices” that people can make. Even without the regulations, home owners could have kept equity in their houses. In all the other states, people could have continued to put 20% down. Nothing actually stopped them from doing that, except that they wanted to house NOW instead of when they had the savings for it.
This to be is pretty conclusive proof that stupidity on the part of the US consumer is as much to blame as “greed” by the financial industry, along with incompetence by the government.
It also shows that deregulating the financial industry simply allowed idiots to be stupid, ie put zero down on a mortgage that was 125% of their house value. That was a decision that US consumers made, banks went along with, and the government happily watched.
When someone dies in a car crash, we could blame the manufacturer for allowing it to go so fast, the government for not having more radar traps, or the driver for choosing to drive in an unsafe manner. In all the talk of the mortgage meltdown, it seems the financial industry is where everyone wants to lay blame.
I will admit I am not well educated in finance. I don’t understand why a lender would lend anyone an amount of money they cannot possibly repay at their current income level. It’s all very well to anticipate raises and promotions - but we all know about counting chickens before they are hatched.
I’m not going to go into the stupidity of people who bought homes they KNEW they couldn’t afford. In most cases, I find it difficult to have much sympathy for them.
My question is why would a lender make such a loan?
And vice versa.
I mean, don’t you think that the financial industry was stupid and consumers were greedy (excuse me, “greedy”) too?
The "greedy " consumers had no way to force the banks and mortgage companies to offer 100 percent loans on a low interest rate ,that would seen affordable and then get onerous. This is a dream and a creation of the bankers. They called, emailed and sent letters to people offering these great deals. These “greedy” consumers were cajoled and wooed until the deals appeared too good to pass up.
If the bankers kept the mortgages ,they would never have made the deals . They immediately sold them off, passing the risk along. The home buyers were the smallest part of the equation and the one with the least power.
Thank you gonzomax, I was worried you weren’t going to show up.
So there you have it, can’t fault the consumers, they received phone calls!!!111one.
But the Texas example proves you’re wrong. Those two rules represent choices that consumers in California, Florida, and Nevada could have made. On their own, without government involvement. Instead, they choose no equity mortgages, and to max out what equity they may have built.
And you’re also wrong, it wasn’t the banks that dreamed up zero down mortgages, it was the government. How else are people supposed to get mortgages if they can’t save? Home Loan ‘Predators’ Were In Congress
The one thing you did get right was that if banks were holding the mortgages they’d never had issued shitty loans. Another fact the government didn’t like, so it set out to buy up as many mortgages as it could, allowing banks to issue more.
Except it doesn’t really prove he’s wrong. It’s because Texas was favoring one industry (insurance) over another (mortgage). Protecting the economy from greedy consumers is never high on a list of Texas priorities. Actually, the typical viewpoint in Austin is “greed is good”.
The bottom line is that Texas laws protect the insurance industry, which inadvertently provided consumer protections by basically not allowing consumers to take out as many risky loans, even if the mortgage companies would have loved to have done so. This wasn’t the case of protecting consumers from their own greed but protecting the insurance companies from mortgage company greed.
I guess you don’t keep tabs on Texas state politics, but this was a big sticking point for mortgage companies several years back (before the recession). They lobbied HARD to be allowed to make riskier loans. There was harder push back from the insurance lobby, who won out, due in no small part to having some highly placed friends in the state legislature. So, again, not about consumer greed but about corporate greed.
I guess this is a couple weeks old at this point, but the reason is that the lender fully intends to repackage a bunch of loans, sell them, who then repackages the loans again and re-sells them. The risk is minimal in the first year, and you can turn a nifty profit. At least this was the case before the market tanked. The lender is off the hook before the homeowner starts missing payments.
Just to follow up.
I was wrong.
It wasn’t the insurance lobby, but the realtor’s lobby. Here’s a Houston Chronicle article that also mentions that Slate article.
It should also be noted that the state legislature was Democrat at the time. And also that some of the mortgage lending regulations were enacted in the 80s in the aftermath of the S&L scandal.
None of this indicates keeping greedy consumers from wrecking the economy but (1) preventing greedy banks from wrecking the economy and (2) protecting a different industry sector (realtors) from greedy banks.
Only one side to a loan. The bank has the power to make whatever requirements it deems necessary to make sure the loan will be paid back. The lender lives by those rules. He has no power to force the banks to drop rates or offer better terms. But when banks knew they were not holding the loans, but selling them off, they broke all the rules. They did not care whether they were paid back or not.
Of course when they sold insurance guaranteeing the loans, they suddenly became vulnerable again.
Very soon the people of my area may have a economic disaster thanks to the “Texas Miracle”. You see where I live near Erie PA we have as the largest employer the General Electric Locomotive plant, in business in Erie for 100 years! They once employed 14,000 people at high livable wages, by far Erie’s best job and income provider. The plant now is down to 5,000 workers which for the times is still good. GE has announced it plans to open a second locomotive plant in Texas and you know what, the wages for those workers will be about half of what they make in Erie. The GE big-shots “have assured” our local officials that they have absolutely no plans of closing the Erie plant they just don’t want all their eggs in one basket, right? A Texas resident sent a picture of the new plant with a sign that said welcome to the future home of the GE Locomotive division. According to people who I know who have inside information the plan is with in three years to close GE in Erie that pays high union wages and switch to the Texas plant that will pay it’s workers half of that they make in Erie. So for Texas the wages will be better than Walmart but for my area it will be an unprecedented financial disaster for 5000 workers and all the local business supported by these families. GE makes out by the lower Texas wages, Rick Perry can talk about the Miracle in Texas. The sad truth is just the continued race to the bottom for American wages.
I would have thought the realtor lobby would be all for easier access to credit. Did they actually have the foresight to anticipate the long term effects of a bubble?
Pretty much. Realtors, as a whole, don’t tend to make a lot of money, and the ones associated with Texas tended to want a guaranteed small pie rather than a risky big pie.
As the article mentions, a real estate bubble would be bad for realtors, too. At least in the Houston area, the effects of the mortgage meltdown were still felt but at a lower level compared to other parts of the country. And the effects were delayed, to boot.
Texas has the highest percentage of people working at or below minimum wage. New Texas state motto: “Y’all want fries with that?”
“Would you like to Texas-size that?”
You are right that in a perfect Libertarian world of fully informed consumers these regulations would not be necessary. The problem is that it is basically impossible to be a fully informed consumer about everything unless that is all you do. Most people have their strengths and weaknesses. I won’t call you stupid if you can’t off the top of your head tell me the formula for the standard error of a maximum likelihood estimate. One can’t expect every American to be fully versed in finance.
When you don’t know about a subject it is reasonable for you to ask someone who does, and well who would know more about loans and finance than a bank that makes is business selling such things. You visit the bank they give you this informative brochure explaining why the loan they are selling is right for you. You read it it makes sense you fell now that you are well informed. They are a well respected institution and are highly recommended by others. Why wouldn’t you believe what they say?
The banks should be on the hook for this. They are the one who should have known better.
Classic, and totally wrong.
Oh, So you can explain how a person made the bank offer them a loan at over 100 percent of home value. Then he forced them to fudge the amount of money he made. How he forced them to take no down payment is a mystery. These home buyers then demanded the bank hire an estimator who would give the estimate the bank wanted.
All the power in a home loan is in the hands of the bank. If you do not understand that much, you are lost. So take time and rethink it. You are way wrong again.