[quote]HoustonGuy wrote:
[quote]angry chicken wrote:
[quote]HoustonGuy wrote:
[quote]ironcross wrote:
[quote]HoustonGuy wrote:
To answer your “real” argument why should the responsibility of a lie be taken off of the liars shoulders and placed on the victim?[/quote]
How would making the responsibility fall on the lender’s shoulders be doing that?[/quote]
Well who lied to who? The lying applicant swindled the money grantor. Frankly the borrower should not only lose their home to be returned to the bank but should also be arrested for fraud.[/quote]
I disagree - MOST of the fraud committed was between the loan officer, the realtor and the title/escrow company.
Hell, in the “emerging market” sector, people that didn’t speak English were signing an application/disclosure package an inch thick - you think they READ it? Or had the ability to read it?
It wasn’t “lying applicants” at all. The incestuous relationships between the banks, the brokers, the realtors and title companies created an environment where “warm bodies” were needed. If you had a credit score of 500 and the ability to fog a mirror you were SOLD on the idea that you can buy this house. “just rent a room or two”. “you’ll be fine”. “you can ALWAYS refinance when the payment goes up”.
In fact, for the negative amortization loans, Bear Stearns created a spreadsheet (I probably still have it somewhere) where you plug in the Sales Price and it auto populated a spreadsheet that “predicted” how the house would appreciate MORE than the neg am and you could just do it again when the loan re-cast. It essentially took a 400K house and gave it a $900 payment and SOLD you on the idea that it was SAFE and RISK FREE.
Half of the LOAN OFFICERS pushing these products were too stupid to know that it was smoke and mirrors, so how do you think CONSUMERS were supposed to know that?
And do you know how much an MTA (the index of negative amortization loans were generally pegged to the Monthly Treasure Average) paid in POINTS? FOUR fucking points if you maxed out the margin on the “full payment” and SIX fucking points if you gave the client a prepayment penalty! That’s a 24K commission on a 400K deal. For about an hour’s worth of work… You don’t think the Realtors, and Title companies and appraisers weren’t “in on it”? EVERYONE was getting paid and the client was getting screwed.
As for why these products were LEGAL, we return again to the BANKS. They created such a complex and convoluted algorithm to rate these products, that S & P, Moody’s etc… DIDN’T UNDERSTAND THEM. So they “asked for an explanation” and were LIED TO. That’s how they got the AAA rating!
It wasn’t about consumers lying on their applications, it was about the MASSIVE DEMAND and GREED of the banks to push these products down the throat of ANYONE who had a pulse so that they could sell the derivatives on the secondary market and PROFIT.
This shit was caused by the GREED of banks and NONE of the “big players” have gone to jail.
[/quote]
I understand the intrinsic motivation greed places on agents moving money very, very well but, in it’s simplist form, how is it anyone but the applicants fault for putting pen to paper on a deal they simply can not afford?
[/quote]I addressed this in the above post. Often times the paper work the client signed and the paperwork submitted to the lender (who then checked all the boxes, packaged and sold the loan on the secondary) were NOT THE SAME. [quote]
Assuming they know their budget and the room it allows for a mortgage payment, both now and in the future when they can potentially refinance. Your Bear Stearns spreadsheet example is alarming certainly but unless agents made $2k monthly $1k on the contract how is anyone really being duped? And if that were the case surely a lawsuit would be in order given existing policy and law.
[/quote]Your use of the word “agent” here is the crux of the problem, because even YOU, a well educated, savvy business owner ASSUMES there is an AGENCY relationship when in fact NO SUCH RELATIONSHIP EXISTS! The loan officer is an AGENT of the BANK!. That’s why the margins got maxed out - if the loan officer was an AGENT of the CLIENT, then they would advocate for the LOWEST possible margin, index and interest rate with NO PPP. As for any lawsuits, who are they going to sue? All the lenders IMPLODED, all the brokers went out of business, all the " bad loan officers" left the industry when they realized they actually HAD to understand mortgage and actually QUALIFY a client.[quote]
In reference to appreciation, especially on a very specific time table, common horse sense tells you not to count your eggs until they hatch. I would say the greed was a double edged sword, the agents as you describe and the buyers wanting to believe they could afford more than their money would allow.
[/quote]Common sense? LMAO!!! EVERYONE seemed to lack that during “the bubble”, why should you penalize the consumer when EVERYTHING they were hearing on the news, from their officials and from the FED was that “things are GREAT”? [quote]
Both parties were guilty, the banks lost money and had the gov’t not stepped in would have gone out of business and the buyers would’ve lost their homes or did.
The market would have regulated itself which was my original point to a bigger gov’t and an added bonus would have been a reversal in real estate inflation trends.
[/quote]
I hear and applaud your point - it’s spoken like a TRUE CAPITALIST! 
HOWEVER, (you knew there was a “but” coming right?) Your assumption and the assumptions of those imposing the current “regulation” really don’t have a grasp about what really happened and remain ignorant (blissfully so) about how widespread the fraud going on actually was. The ROOT of the problem, IMHO, is with the banks and how they sell loans on the secondary market. (the other major contributing factor the the melt down was “mark to market” accounting, but that’s ANOTHER big can of worms)
Banks sell loans in tranches or “buckets”, if you will. Each “bucket” is organized by loan program (30 yr fixed, 15 yr fixed, 5/1 ARM, etc…) AND by “coupon” which is the sum of the interest rate and yield spread premium, in other words, the TOTAL “yield” of the bond that this “bucket” will sell for. The FUNDAMENTAL problem is that a loan ENTERS this “bucket” as soon as it is locked. Generally a loan is locked at the time of application BEFORE underwriting. So the bank has already made a promise to it’s investors to DELIVER that loan. If it is unable to do so, it faces fines and penalties which it passes on to it’s brokers and storefront banks. With retracting credit markets, often times that “bucket” of loans is sold EVEN BEFORE the loan is actually closed or is finally underwritten because the bank has to “clear it’s warehouse line” for NEW loans.
*EDIT If said loan FAILS to clear the warehouse line, then it STAYS there taking up space and generally has to be paid for IN FULL by the institution holding the warehouse line or the creditor will take the line away. That’s a pretty big incentive to get that loan closed, right?
So let’s say a bank runs into an “issue” with a loan it’s already sold, what does it do? If YOU were a mid level manager or an account executive who was STILL compensated by volume and working in a department where nearly ALL of your former co-workers have been FIRED, what would YOU do? You’d find a way to close that fucking loan. You would discreetly play with the findings (D.O. for Fannie Ginnie and D.U. for Freddie) until you got your “Approve/Eligible” - this generally involves “tweaking” the assets which affects the algorithm in a positive way and let the loan officer know that the borrower needs to show $XYZ assets. The loan officer will then go add the borrower to an account showing more than those assets (for a fee of course), write an LOE, and the loan closes, get’s sold and everyone is happy. THAT’S how it’s currently being done.
But what do I know? I’m just a felon with no HS diploma who got “regulated” out of the mortgage industry.