No one forces anyone do do anything, there is no power, that’s what it means to have a contract. If the banks had power, or used coercion, the contract would lack consideration, and be void. No matter how you chose to word it, the consumer always has the choice to NOT get a mortgage. Does that make sense to you? You can keep calling me lost, but it doesn’t help your case.
I don’t care how many phone calls people got, the second they willingly put their signature on a piece of paper they exercised their level of control. And even those that got the shittiest toxic mortgage possible STILL could have chosen to save, unless you think the bank had power to stop them from doing that.
Banks offered a product, and people bought it. They could have chosen not to. And they could have chosen different terms. What the Texas example shows is that people in the rest of the country still could have CHOSEN to put/keep equity in their homes. Laws in Texas forbid that behaviour, and as a result Texas had less of a housing bubble and lower consumer debt.
No one was forced to get a mortgage, no one was forced to take out a home equity loan, and no one was forced to have a negative savings rate.
You said yourself, “a loan at over 100 percent of home value,” why the hell would anyone willingly do that? The bank has no power if the consumer decides to NOT pay 4 times what a house is worth.
So tell me, what power does the bank have, other than to offer a product for people to WILLINGLY buy?
You are so wrong . The power is a financial relationship is in the hands of the party with the money. They make the rules. If the banks kept it like it was in the past, the banking failure and the overheated housing market would not have happened. If you are in for a mortgage right now, go and tell the bank what you want. You want no down payment. You want 120 percent of the home value. Tell them you do not want your salary checked.
Somehow the borrows forced the banks to make those loans before. So I suppose they could do it now? After all the bank wants their business.
What you wrote is 100% correct and extremely central to the discussion. What you missed though was that in addition to consumers it is also impossible for corporations as well as governments to be fully informed.
Note that last part, even the government can’t be fully informed. They are passing laws and making regulations without much more information than the rest of us. As a result, it is very likely that they’ll be wrong, with disastrous results.
There were actually a lot of government officials and top level bureaucrats that believed Iraq had WMDs, as a result a lot of Iraqis lost their lives.
Why on earth would I believe what they have to say? Can you tell me any other business interaction where you would do the same thing? Buying a car? Going to a mechanic?
I’m currently in the process of replacing my bike with an very expensive new one. So I go to one shop and ask, “what bike is right for me?” Dude says $2400 Cannondale. I go to another shop and that guy says $2400 Trek. Third shop says $2400 Quintana Roo.
It shouldn’t surprise you to learn that the first shop only sells Cannondales, the second only Trek, third only Quintana Roo.
When I got my mortgage in 2008 (post crash) I went to 5 different mortgage lenders and grilled each of them. Even with everything that just happened they were STILL happily telling me to get three times our combined income. They still encouraged putting 5%.
And consider again what you wrote about “impossible to be a fully informed” and then “why the loan they are selling is right for you.” The bank isn’t fully informed either, there is no reason to assume they know what mortgage is right for you. They don’t know what your future salary will be or if you’ll get a bonus. They also don’t know what will happen to house prices, there was no reason to assume they’d continue going up (much less double).
Fine, if that’s what you truly believe, than the power is in the hands of the consumer. They pay for the loan, they are the ones with money to spend, and that’s how the bank makes money.
Apple sells iThings, banks sell mortgages. Do you also believe that Apple has all the power? Does Apple force people to buy their products? Would phone calls help them sell more products? People are powerless when they receive a phone call.
That is half right, and the point of this thread, and what the Texas case proves. In Texas can’t allow less than 20% down. But even if that rule was removed, consumers could still CHOSE to put 20% down. No one is forcing them not to. If Texas scrapped that rule, and all the banks suddenly offered 0% loans, would consumers willingly chose to get one?
Why? I told them what I want, and that was 30 years fixed at 3.825%, and that I’d put down 20%. I then showed them my assets, credit history, and work history. When I couldn’t get that I walked out and went to another lender until I got the mortgage I wanted.
If you want to know where I’m lost in all this, it’s who in their right might would want “no down payment on 120 percent of the home value with no verifiable income.” Sure the banks made those loans possible, but why did people get them? I also don’t know why so many people buy Apple products.
Well, technically it was that shareholders that demanded those loans get offered. They wanted more growth, and the only way to more growth was to issue more loans. And it was also the government. They wanted more growth, and they knew they only way to get that was to make getting a mortgage easier. They also wanted everyone to have equal access to the American dream, so they pushed for low income minorities to have access to mortgages.
That’s been a race that’s been being run forever; at one point, we were the cheap manufacturing nation versus the European ones.
I suspect part of the problem is that in Erie, PA, you probably have pretty strong unions that keep wages artificially high for people without real skills.
People who could relatively easily be replaced by people in Texas, and be paid non-union wages. GE will almost certainly relocate specialized skill people and management to Texas in that case, but why in the world would they want to pay high wages to some dude who just turns a wrench, just because he lives in PA, if they can pay some guy in Texas half that?
It’s good business… the unions in PA should have not priced themselves out of the market like that; if they hadn’t, then the plant would likely be staying, even though some of the workers wouldn’t be being paid as much.