patrick.net

Fisk says

First, a significant number of buyers with problems are those who lied about income and/or assets to qualify for a no-doc loan.

Few people who worked in so called silicon valley "fortress cities" needed to lie about incomes/assets to qualify for "easy mortgages". We saw steady yearly increases in ARM loans from 15% to over 50% of total loans. But foreclosures have certainly increased in these ares while prices have declined. Sure they are still 'overpaying' on home which had no business being highly inflated in price anyway.

Fisk says

tarkin says

At the end of the day I really can’t fault the home buyers as they were told everyday by the whole system that it was good for them. Saying they should have seconded guessed the experts and industry leaders is like suggesting they should not have ever gotten flu shots, if the shots are ever proven to be bad for you in the future. The buyers were not ever meant to be experts about housing any more than we are meant to be experts about flu shots. We look to the experts in trust to help reduce our risks when engaging in elective activities that are not easily understood by ourselves. It does not matter if it is deciding to buy a house or get a flu shot we base our decisions on what we learn from the experts.
I am not saying flu shots are bad. I am saying that any risk in getting the shot is not my fault. I got the flu shot because I am told by the experts that it is safe and a good thing to do. No one forced me to get the shot anymore than they forced me to take out mortgage. In both cases I was told “you can do it”! You should do it! All the data I have to base my decisions on only comes from the experts.
Who ever they are “The Experts” are 100% to blame. They should have known that mortgages are bad for you and should have been telling house buyers that years ago.

No.
First, a significant number of buyers with problems are those who lied about income and/or assets to qualify for a no-doc loan. That is like you swearing to the clinic that you have none of the contraindications for the shot listed on the form, with full knowledge that you actually have those but want to get the shot anyway. Would you blame med. experts if one develops complications because of that?
Second, who are the “experts”? Flu shots are recommended by govt. med. scientists with no personal stake in whether you get one, based on massive FDA-approved peer-reviewed research. That’s quite different from columnist newspaper and NAR “experts”. Those are more similar to “experts” advertising on TV new fad diets for weight loss or sexual performance improvement. Do you fall for those?
Third, there are no known obvious reasons why flu shots are bad, which is why we trust experts saying they are good. A mortgage that you can’t pay when it adjusts by the stated amount in the clearly stated time is obviously bad for you, no matter what anyone says. That would be like a flu shot coming with written warning “In 3 years from the date of the shot, you would certainly contract a terrible flu with the following symptoms and consequences, which you have high odds of not surviving. While medical science might come with remedies for that condition before that time (to compare with the possibility of re-financing), no guarantee exists for that to happen or for any such remedies to be effective enough”.
Would you get that flu shot?

Those that lied were enabled, encouraged, and in some case even mandated to do so. I am not telling you how to fill out the form, but if you don’t complete this form in this fashion you will not get the loan. It is well known human nature when the system enables many will do. They experts knew this. There are scientific experiments that involve real volunteers that act as prisoners and wardens that have all but been band as they found even the kindest of people (pre-selected to be wardens) turn curl when a system enables the activity. Many of the volunteers that acted as wardens needed canceling afterwards because they could not cope with how curl they acted during the experiment. The scientist got very scared with what was observed and aborted the experiment a head of schedule.

Once at the clinic and filling out the form most people lie if needed on those forms before they get their flu shot. They don’t want to have to come back at another time. The experts know this, but they still tell you feel out the form for their protection not yours. If it was about protecting you they would do more than just let you feel out the form.

As for your second point the NAR has as much or more peer reviewed data as the FDA does going back on almost 100 years of housing data. In fact I would actually expect the NAR to be able to make better peer review decisions than the FDA. The government does have a personal stake in stopping national epidemics that could take out even as much as 5% or the workforce for as little as a week. The government is not trying to protect you with the flu shot it is trying to protect the country’s workforce, etc. Have you ever dealt with a business continuity plan that pertained to a significant loss of work force due to the H1N1 flu? Do you understand why the government was really scared? Please get a flu shot; do it for America; Uncle Sam would approve!

As for your third point I agree there is nothing bad about the flu shoot, but again that is just my opinion base solely on my trust of experts. The experts in the mortgage industry were telling people and giving direct and specific reasons as to why the interest resets would not hurt them. There are complications for flu shots and interestingly they are actually different each year because each year you actually get a different flu shot based what type of flu is forecasted to be prevalent. Do you know what this year’s complications are? I know that there is one minor one that is being seen unusually high this year. They are ignoring it and not talking about it as it would just cause people to want to go see their doctor and it is not life treating and nothing can be done about once you get the shot. Also, sometimes their forecasts are wrong and a different flu strain is active and the 100,000’s of flu shots they are giving are technically worthless yet they still give them. (They have to make the forecasted flu shout ahead of time and they usually only target one strain based on expert opinion) The year of N1H1, they had to rush production on a second flu shot and many people where told to get two flu shots.

I am not an expert, but I do believe the flu shot is safe and that you should consider it if you are at risk for the flu. That said I am not sure you really “want” to understand how close our desire to believe the flu shot is safe is to our desire to believe the experts when they say we can buy more than we can afford with minimal risk. We believe the flu shot has minial risk as well.

The experts were very afraid of N1H1, but they never a gave honest sounding reason. They were not telling us something. But they made it very clear that N1H1 was not any more dangerous than any other flu; just fewer people had a resistance to it. If you read the details there was no reason to panic, but they were acting like they were late for the Keep Fear Alive Rally. The doctor’s notes did not match the look on the doctor’s face. I guess that is how conspiracy theory’s are born. We should have known better than to get more shots than what was good for us, er...I mean than to buy more than we could afford.

The sad thing is that most of use will most likely still get flu shots and eventualy take out a mortage that leaves us on a tighter budget than we would like, but we should know better.
The experts wont let us take a flu shot we don't need or get a mortage we can't afford.

TechGromit says

I don’t know if I really blame the Realtors, they were just providing a service. They are no more guilty of a crime then Drug Dealers are.

If you are saying Realtwhores are on par with drug-dealers, you will find me in complete agreement.

native94027 says

TechGromit says

I don’t know if I really blame the Realtors, they were just providing a service. They are no more guilty of a crime then Drug Dealers are.

If you are saying Realtwhores are on par with drug-dealers, you will find me in complete agreement.

I can (typo) get behind that, too. Both the street thug real-estate pushers and the big-money backers are criminals.

tarkin says

At the end of the day I really can’t fault the home buyers as they were told everyday by the whole system that it was good for them. Saying they should have seconded guessed the experts and industry leaders is like suggesting they should not have ever gotten flu shots, if the shots are ever proven to be bad for you in the future.

No, that is bullshit. I know a lot of people that had the good judgment and self-restraint to stay out of the bubble. They had to endure years of uppity owner-snobs telling them in a condescending manner how they were missing out. This is why I have zero sympathy for bubble buyers.

I do understand your point though about the trust placed in realtors. People are generally unaware of what lying, incompetent scumbags they are.

klarek says

No, that is bullshit. I know a lot of people that had the good judgment and self-restraint to stay out of the bubble. They had to endure years of uppity owner-snobs telling them in a condescending manner how they were missing out. This is why I have zero sympathy for bubble buyers.
I do understand your point though about the trust placed in realtors. People are generally unaware of what lying, incompetent scumbags they are.

No kidding. I was told by my co-workers who all bought at the height of the bubble.."You should buy it now".."You will never be able buy if not now".."My condo value went up by...(even though there are no sale in that units for past couple of years)".."Real estate never goes down as such".."When are you going to buy".......

bubblesitter says

No kidding. I was told by my co-workers who all bought at the height of the bubble..”You should buy it now”..”You will never be able buy if not now”..”My condo value went up by…(even though there are no sale in that units for past couple of years)”..”Real estate never goes down as such”..”When are you going to buy”…….

Even worse is when they acted all hot about it. "I'm lucky that I got in before it was too late" or "I'm going to make a fortune on this place" (yes, I had a girl tell me this in 2006).

Now they all want principal write-downs or they'll walk. This country sucks.

klarek says

Now they all want principal write-downs or they’ll walk. This country sucks.

Walking is fine. The Mortgage Bankers themselves walked on their DC digs.

Non-recourse was instituted to keep the banks honest due to horrific abuses in a now-forgotten past.

Most of the valuation increase 2004-2005 was due to banks pumping up borrower's buying power artificially and unsustainably via all the suicide lending products.

Troy says

Walking is fine. The Mortgage Bankers themselves walked on their DC digs.

Model your personal behavior after unsavory organizations. It's the New American Way!

Excuse me, I'm going to go cause an oil spill in the gulf. BRB.

klarek says

Model your personal behavior after unsavory organizations

It's just business.

People being able to mail the keys back keeps the lenders honest. There were truly horrific abuses of this prior to the non-recourse laws.

TechGromit says

I don’t know if I really blame the Realtors, they were just providing a service. They are no more guilty of a crime then Drug Dealers are. People would have gotten there “Fix” from someone else if there local Realtor was unwilling to provide the service. It’s the banks that were the true suppliers of the drugs, or should I say money. It’s not to say people are blameless either. They shoulder just as much fault as any junkie does. They didn’t have to get addicted. They exercised the free will in signing there life away, just as someone takes that first hit of drugs at a party.

Couldn't disagree more - Realtors were lying to people's faces day after day, telling them that real estate couldn't fall, taking them to developments that gave the Realtor an extra bonus without telling the buyer about the conflict of interest, connecting them with mortgage brokers for kickbacks, etc. These people should be in prison.

Troy says

It’s just business.

And anybody that lives their life or won't honor their debt because of this mindset is a deadbeat sociopath.

Troy says

Most of the valuation increase 2004-2005 was due to banks pumping up borrower’s buying power artificially and unsustainably via all the suicide lending products.

Actually much of the South Bay buying mentaliity, post 2000, is based on the 'notion' that the tech boom of the late 90s would 're-ignite' later into the decade with another round of stock wealth. However, after nearly 10 years we are far from a similar economic boom.

JimAtLaw says

Couldn’t disagree more - Realtors were lying to people’s faces day after day, telling them that real estate couldn’t fall, taking them to developments that gave the Realtor an extra bonus without telling the buyer about the conflict of interest, connecting them with mortgage brokers for kickbacks, etc. These people should be in prison.

And not a single move by govt to change that behavior and eliminate the abuse.

klarek says

And anybody that lives their life or won’t honor their debt

The bank gives people money in return for the security of a lien on the collateral. If the risk is too high, they should not lend so much such as to lose money if they have to reclaim the collateral.

The banks are the root cause of this bubble, they can eat the consequences.

More data: This plot shows how much the largest banks have been making per year on the interest rate spread between deposits and loans.

Presumably only some of these are mortgage loans or mortgage bond interest, but with spreads on the order of $100B/year it gives an idea of the kinds of amounts of money we're talking about.

Note especially how the spread has *increased* from ~80B at peak lending to ~115B later, when the Fed lowered short-term (meaning: deposit) interest rates.

If you had any doubt, the savers are indeed paying for the bank losses through the Zero Interest Rate Policy (ZIRP).

Troy says

The banks are the root cause of this bubble, they can eat the consequences.

You will find many people after the tech crash in 2000 moved their 'savings' into buying homes. Sure they didnt trust Wall Street, so they started to use homes as "investments".
That is why you heard during the decade people buying up 2-3 homes.

I have found many in the medical profession and some tech workers actually buying homes hand over fist during the boom. To them it was all about 'investments'.

"Safe as houses".

I'll be first to admit the collapse of 2008 caught me by surprise. IIRC I had generally assumed that we'd start seeing wage inflation, like the 1970s, to bring things back into balance, combined with a 90s-style swoon too perhaps.

What was missing from my understanding (ca 2005) was the fact that the wider economy was being "stimulated" by the trillion-dollar flows out of the new housing equity. By mid-2007 I was groking that the housing market since 2002 was essentially a ponzi, finally.

tarkin says

The system promoted buying more than you could afford with expert opinion that you could sale the house for more than what you paid in only a few years before the interest reset.

Then the "victims" were acting on pure greed. Did the "victims" wonder how the next guy could possibly afford to pay "far more?" Obviously. they did not care, so long as they could have it NOW. Same mentality that keeps easy credit stores and certain car lots in business.

Are you of the mind that "society's" pervasive fast food stores, large portion sizes and pandering sedentary entertainment (cable TV, etc) is the cause of any individual being fat? After all, how could a lay individual decide for himself when the experts at Madison Ave, Hollywood, and government food inspectors are involved?

Troy says

By mid-2007 I was groking that the housing market since 2002 was essentially a ponzi, finally

Yes, a ponzi scheme, but long before 2002. Prices should have corrected widely post 2000 to mid 1998 prices, but didnt. The ponzi scheme just keep going on for many more years between buyers and seller.

Headset, you have exactly one comment per month since April. Are you making a limited comeback? -).

Wait, if you answer that it will be two comments in November. In any case, good to see you.

Troy says

The RE sector was an immense actor in the fraud. Not only rooking people into stupid buying decisions, hooking them up with shady loan fronts, but also as active buyers.
Nearly every real estate agent worth their hairspray has/had a string of rentals they’ve acquired. Being first in line at the feeding trough has its advantages. When all lending oversight disappeared the REIC was perfectly placed to acquire as many properties as their greed compelled them to — zero-down negative-am liar loans are awesome in the cash-flow management department.
The REIC commission skim was coming not from current production but from debt issue. It was significant.
But Wall Street also was pulling in hundreds of billions of dollars. I wouldn’t be able to hazard a guess on this without some actual analysis. The REIC might have been getting 6% up front, but the back end skim was structured over a number of years.

10000% correct

thomas.wong1986 says

Troy says

By mid-2007 I was groking that the housing market since 2002 was essentially a ponzi, finally

Yes, a ponzi scheme, but long before 2002. Prices should have corrected widely post 2000 to mid 1998 prices, but didnt. The ponzi scheme just keep going on for many more years between buyers and seller.

Ponzi, Getting the buyer into a generational debt slavery so our politicians can get big pensions, Realtors can get big commissions, and bankers.....

Troy says

The banks are the root cause of this bubble, they can eat the consequences.

And personal responsibility is kicked to the curb. Not for all, just the deadbeats and those who attempt to justify their selfish behavior.

klarek says

Troy says

The banks are the root cause of this bubble, they can eat the consequences.

And personal responsibility is kicked to the curb. Not for all, just the deadbeats and those who attempt to justify their selfish behavior.

That's the cornerstone of a free market, isn't it? That everyone acts in their own self interest?

klarek says

Troy says

Walking is fine. The Mortgage Bankers themselves walked on their DC digs.

Model your personal behavior after unsavory organizations. It’s the New American Way!
Excuse me, I’m going to go cause an oil spill in the gulf. BRB.

Remember: Think Global but Act Local. Just piss in the community pool and call it done. No need to go all the way to the gulf.