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#868406 - 12/07/07 12:23 AM Re: GWB & subprime plan CRAatBOK
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Originally Posted By: KCGeoQueen
According to Bush this is not a "bail out" because the government is not putting out any money for it?


And that is correct - until taxpayers money is used, no bail out - the reality is - it's all political lip service at this point - with the next election in mind.

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#868414 - 12/07/07 12:48 AM Re: GWB & subprime plan Pale Rider
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quote] ever read any underwriting guidelines Ron? Institutions don't lend money to people that can't pay it back, it is a very bad business model!

Chees!!! I thought you were in an MBA program!!!! [/quote]

Obviously the guidelines were a little off when the first rate increase causes a default. So the bank didn't care. The game was to sell the loans off without any recourse and pocket the fee income.

Large banks were pushing many people over to affiliate sub prime lender companies they owned.

The people that do the actual work are never totally aware of the very big and intertwined picture that senior management has instigated. Its covered by many layers of buracracy which makes most people believe they are only doing their job.
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#868422 - 12/07/07 01:31 AM Re: GWB & subprime plan X
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Originally Posted By: _X_
You cannot give the financial institutions are free pass on this, they are losing billions ....


That's a mighty expensive free pass, X.

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#868425 - 12/07/07 01:47 AM Re: GWB & subprime plan Don_Narup
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Originally Posted By: Don_Narup
quote] ever read any underwriting guidelines Ron? Institutions don't lend money to people that can't pay it back, it is a very bad business model!

Chees!!! I thought you were in an MBA program!!!!


Obviously the guidelines were a little off when the first rate increase causes a default. So the bank didn't care. The game was to sell the loans off without any recourse and pocket the fee income.

Large banks were pushing many people over to affiliate sub prime lender companies they owned.

The people that do the actual work are never totally aware of the very big and intertwined picture that senior management has instigated. Its covered by many layers of buracracy which makes most people believe they are only doing their job. [/quote]

can only speak of my bank, we pushed no one anywhere
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#868430 - 12/07/07 02:10 AM Re: GWB & subprime plan TB 12
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Originally Posted By: Sox in 07
That is a broad statement, Ron. To the extent a lender knowingly committed fraud, or did not properly disclose the loan terms to the customer, yes.

However, as I stated earlier, the people around here trying to seek relief are not meeting the requirment of showing they didn't understand what they got themselves into. They understood, but can't handle it for many reasons, which include values that have not only stopped appreciating, but have declined. People bought homes at the height of the market with 100% or more financing...

so aren't financial institutions more financially savvy than the average joe homeowner that enrolled in these programs? my question isn't about what the borrowers got themselves into-they likely knew the terms or should've- but rather how can banks argue "hey, they wanted this much money, it's there fault." i know that i can't just get a $10MM loan. why? because it is unlikely that i could pay it back as a student. now if we move from the extreme situation to the ones affecting these homeowners and the market, can these lenders in good conscience say that they felt that these terms were actually manageable for these customers given the bubble happening in the market? certainly the economists couldn't say with a staight face that the housing market would continue to grow and appreciate well nto the future; at least for the terms of these loans.

listen, i'm not saying that we need to bail out these consumers; they are culpable as well. i'm just saying that this isn't just some arms length situation where the lenders are completely innocent.

Quote:
There was nowhere to go but down.

so to sum up, the financial institutions didn't know this or work it into their underwriting scheme? oh, i think that they did...a little too well. they could get their interest-only until the bottom fell out like they wrote their contracts to reflect. the "conservative" banker got greedy and tried to capitalize on consumer irrationality.

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#868431 - 12/07/07 02:14 AM Re: GWB & subprime plan X
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Originally Posted By: _X_
Originally Posted By: Ron Mexico
is there any culpability on the part of financial institutions in knowing that they entered into terms that they know the customers couldn't handle?


Huge Ron - are you starting to wake up? It's the financial institutions that have created this mess, each directly or by funding mortgage banking operations. A high percentage of sub-prime paper was generated directly to the market, not through financial institutions - that fact is possibly the most troubling in that there are apparently no underwriting standard, if they can see breathe on a mirror, you are now living in a 1/2 Million house!

Im just wondering if the sum-primers have all received their property tax bill.


me wake up?! i'm surprised that you are with me on this issue. but don't remove any culpability form the originators. they can't act like "hey, i don't care where this backing is coming from but i am making a killing on these fees! i'm rich, *****!"

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#868432 - 12/07/07 02:17 AM Re: GWB & subprime plan Sinatra Fan
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Quote:
I find it more than a little ironic that some of the affected borrowers could have stated their income in such a way while applying for the loan that they could handle the payments, and now those same borrowers might be getting ready to state their income to whomever is empowered to grant them relief that they can't handle the payments.

i'm with you. i'm just on the side of the consumer, too, insofar as some people want to place all the blame on them.

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#868433 - 12/07/07 02:19 AM Re: GWB & subprime plan Pale Rider
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Quote:
Institutions don't lend money to people that can't pay it back, it is a very bad business model!

i hope that you were being ironic; that's EXACTLY what happened.

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#868434 - 12/07/07 02:24 AM Re: GWB & subprime plan Don_Narup
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Quote:
Why didn't any lender factor in how an increase in payment amount would effect an applicants ability to pay? Such a simple process to do. Could it be the rejection rates would have been very high and the income stream much less if that was done?



Quote:
The people that stuck the money in their pocket who knew full well the implications of what they were doing,should not escape their responsibility in causing this.

but by the same token, the lenders who orignate and say "hey, not my problem now. it's out the door already!" can't play dumb. and certainly investors have a responsibility to know what was happening and thus should be able to accept the risk.

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#868435 - 12/07/07 02:27 AM Re: GWB & subprime plan X
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Quote:
turning CDO's lousy underlying credit into gold-plated (AAA) bonds. At least on the surface.

well, investor should be prepared to lose their shirts! if they wanted a risk free investments, they should've gone with government bonds or something. perhaps they can sue the bond raters instead of losing their shirts.

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#868437 - 12/07/07 02:31 AM Re: GWB & subprime plan Sound Tactic
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Quote:
why he had to cheat his way through school and could not get a job at a law firm.

you are ridiculous and little. now you are accusing me of cheating?! second, why do you think that i couldn't get a job at a law firm? i've asked you this before and you've never answered.

shemp, seriously, if you have a problem with data entry, go into the hospitality industry or go to cooking school or something. don't hold it against me or make ridiculous claims.

hopefully somebody can quote this reply so that he can see it. (like he hasn;t peeked )

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#868438 - 12/07/07 02:33 AM Re: GWB & subprime plan X
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Quote:
also, a huge responsibility to the shareholders

now why do you think that i owe them anything? they aren't my shareholders!

Quote:
that's why the head of Citi was fired.

careful. shemp-o has "a lot of experience in this area". he's even read thomas friedman books!

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#868443 - 12/07/07 02:53 AM Re: GWB & subprime plan Pale Rider
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can only speak of my bank, we pushed no one anywhere

Of course not ALL banks did. But some mega banks had dozens of affiliated companies all over the US. Their corporate structure had HMDA reporting of affiliated companies under another bank name in the holding company that may not even be in the same state as the bank.

Applicants did receive calls from these bank owned sub prime lending companies the day after they turned in an application at the bank.

In one city bank affiliated companies had automobiles painted with ads and cruised LMI areas.

We are talking billions of dollars all done under legal practices.

Nope, community banks were not the problem but bet your boots some mega banks pushed the envelope a tad.Some are now changeing structures to make it very difficult to track HMDA reported information as it will no longer be publicly reported data.
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#868471 - 12/07/07 05:05 AM Re: GWB & subprime plan Hated By Some
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#868430 - Today at 08:10 PM
#868431 - Today at 08:14 PM
#868432 - Today at 08:17 PM
#868433 - Today at 08:19 PM
#868434 - Today at 08:24 PM
#868435 - Today at 08:27 PM
#868437 - Today at 08:31 PM
#868438 - Today at 08:33 PM

J's First Law of BOLdynamics:

A BOL poster's level of actual involvement with the banking industry is in perfect inverse correlation to that individual's relative level of annoyance and perceived self-importance as a BOL poster.

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#868472 - 12/07/07 05:08 AM Re: GWB & subprime plan Jokerman
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isn't it "negative" correlation? and it wasn't self-importance, i just felt bad about missing such a good debate... (but seriously, i just had a a lot to say to each post that kept popping up when i read them in order)

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#868513 - 12/07/07 01:33 PM Re: GWB & subprime plan Hated By Some
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From Todays ABA Newsbytes:

President Bush Outlines Plan to Help At-Risk Homeowners

President Bush yesterday unveiled a plan that would, among other things, freeze interest rates for five years on certain adjustable-rate subprime mortgages to help stem the rising tide of foreclosures. Treasury Secretary Henry Paulson worked out the voluntary program with other regulators, loan-servicing companies, investors and banks. Subprime ARMs originated between Jan. 1, 2005, and July 31 of this year, whose interest rates will reset for the first time between Jan, 1, 2008, and July 31, 2010, would be eligible for the plan's five-year interest-rate freeze.

Under a screening process, homeowners who currently have the financial wherewithal to make their payments but may struggle to pay a higher reset rate, could qualify for refinancing -- depending on their debt and income. Homeowners who are staying current on lower introductory-rate payments, but cannot afford the higher adjusted rate -- and have credit scores below 660 and less than 3 percent equity in their homes -- would qualify for the five-year freeze.

ABA expressed its appreciation for the administration's efforts in bringing together private- sector players to develop the program. "The plan appropriately focuses on those who are current in their financial obligations but will be unable to meet reset-rate payments," ABA President and CEO Ed Yingling said. "Doing this will not only reduce foreclosure risks and help families in need, it will also add substantial stability to a portion of the mortgage market that has been in disarray."

Yingling emphasized that ABA strongly supports the HOPE NOW Alliance, the at-risk homeowner outreach program. The alliance --of which ABA is a member -- "is dedicated to helping keep Americans in their homes by maintaining effective lines of communication between banks and homeowners so that help can be provided before there are potential payment difficulties," he said. Read a White House fact sheet on the plan. Read about HOPE NOW. Read Yingling's statement. For more information, contact ABA's Bob Davis.
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#868558 - 12/07/07 02:08 PM Re: GWB & subprime plan DeeQ
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Who runs this screening process, and essentially underwrites the borrower to determine if they are eligible???
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#868565 - 12/07/07 02:13 PM Re: GWB & subprime plan TB 12
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On a related note:

ABA Opposes Mortgage-Bankruptcy Bill

ABA opposes a bill (S. 2136) that would allow bankruptcy judges to modify mortgage terms in a Chapter 13 proceeding, the association said in a for-the-record statement submitted this week to the Senate Judiciary Committee for a hearing on mortgage foreclosures. ABA emphasized that the legislation would make it more difficult and costly for consumers to obtain mortgages; encourage more bankruptcies; discourage borrowers from working with lenders to facilitate resolutions; and eliminate helpful credit counseling requirements. Read the statement. For more information, contact ABA's Bill Boger.
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#868566 - 12/07/07 02:13 PM Re: GWB & subprime plan TB 12
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Pulling people out of the ditc...
When Ms. Gilmore and I bought our first house, we had been married 10 years and I worked 2 jobs to make sure we could afford it. It was evident to me that we couldn't afford a house before that, as the cost was more than we could handle (can't spend more than is coming in, it really doesn't grow on trees). People make poor credit choices all the time.

What is next, bailing out people who are upside down in their car loans because they financed their Suzuki Vitara for 84 months to get a note of $150 per month, owe $9,000, and it is worth $2,000?

This is not a government bailout issue, and I hope that it is litigated to the nth degree to keep it from being implemented. If an individual borrower was decieved, they have recourse through the court system.
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#868577 - 12/07/07 02:22 PM Re: GWB & subprime plan HappyGilmore
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Likewise, my husband and I were in an apartment for 7 years before we could afford a house, a fixer upper, at that. People and their "I have to have it now" mindset are going to destroy our country!
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#868611 - 12/07/07 02:38 PM Re: GWB & subprime plan DeeQ
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In general, to the extent the program is really, actually voluntary, I don't have a problem with it. If the Feds are just working to coordinate and publicize the terms of forebearance that would make sense, anyway (after all, what are the lenders going to sell this ORE for, in this market?), then I think they can play a constructive role.

But, I remain skeptical that these are all terms that the lenders/investors truly think they will benefit from, and question whether the whole thing won't just prolong the problem.

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#868616 - 12/07/07 02:43 PM Re: GWB & subprime plan Jokerman
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I really haven't read through this thread much, only here and there. And while I generally agree that those who take out mortgages are responsible for their investment decisions, do any of you think that there may have been a form of previously undefined predatory lending taking place in this situation? If so, why? If not, why not? (And please do not give me the thoughtless answer of "because the law did not call it predatory" as another certain BOLer who will not be mentioned, did in another thread, otherwise I would not have stated "previously undefined")
Last edited by The Man of Steel; 12/07/07 02:49 PM.
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#868617 - 12/07/07 02:43 PM Re: GWB & subprime plan Jokerman
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From what DQ posted, this sounds like the same type of program I mentioned earlier that is offered here in Mass through MHFA. It will be interesting to see how many of these borrowers would qualify.
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#868664 - 12/07/07 03:06 PM Re: GWB & subprime plan DeeQ
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Yes I think most of us went the don't buy until I can afford it route. Thank goodness for a VA loan in my case.

But at one point Subprime lending was looked on as a good thing

"Chairman Ben S. Bernanke
At the Federal Reserve Bank of Chicagos 43rd Annual Conference on Bank Structure and Competition, Chicago, Illinois
May 17, 2007
The expansion of subprime mortgage lending has made homeownership possible for households that in the past might not have qualified for a mortgage and has thereby contributed to the rise in the homeownership rate since the mid-1990s. In 2006, 69 percent of households owned their homes; in 1995, 65 percent did. The increase in homeownership has been broadly based, but minority households and households in lower-income census tracts have recorded some of the largest gains in percentage terms. Not only the new homeowners but also their communities have benefited from these trends. Studies point to various ways in which homeownership helps strengthen neighborhoods.
For example, homeowners are more likely than renters to maintain their properties and to participate in civic organizations. Homeownership has also helped many families build wealth, and accumulated home equity may serve as a financial reserve that can be tapped as needed at a lower cost than most other forms of credit."

Then it was found out a month later that the underwriting standards could be a problem

"Governor Randall S. Kroszner
At the public hearing under the Home Ownership and Equity Protection Act (HOEPA), Federal Reserve Board, Washington, D.C.
June 14, 20

During today's hearing, we will seek information from panelists on certain specific questions. I would like to close by briefly touching on some of those. There are four terms or practices that have been most frequently cited as troublesome in the mortgage market, especially the subprime and home equity markets. They are:
Prepayment penalties,
Failure to require escrows for taxes and insurance,
Stated income and low-documentation lending, and
Failure to give adequate consideration to a borrower's ability to repay a loan.
At least some of these practices can be beneficial to at least some consumers. For example, an informed borrower might choose a loan with a prepayment penalty in exchange for a lower interest rate or lower closing costs. On the other hand, prepayment penalties also can be abusive, such as when a borrower is unaware that an adjustable rate mortgage loan has a substantial prepayment penalty that will extend beyond the first adjustment of the loan's interest rate, making it costly or impossible for the borrower to refinance the loan to avoid a higher interest rate and payment. We hope to gather information that helps us determine whether rules can prevent the abusive use of loan terms or practices while preserving their use in instances where they provide benefits to consumers.

And a few weeks later

"The practices of some mortgage originators have also contributed to the problems in the subprime sector. As the underlying pace of mortgage originations began to slow, but with investor demand for securities with high yields still strong, some lenders evidently loosened underwriting standards. So-called risk-layering--combining weak borrower credit histories with other risk factors, such as incomplete income documentation or very high cumulative loan-to-value ratios--became more common. These looser standards were likely an important source of the pronounced rise in "early payment defaults"--defaults occurring within a few months of origination--among subprime ARMs, especially those originated in 2006."

So IMO this is not something you can blame entirely on a misinformed consumer. The lenders did agressive marketing especially in LMI areas. It was an easy sell and dollars could be made.

The above are taken from speaches by the Fed Folks and are not in total context. But they said it

Personally I don't think the full extent of the problem has surfaced yet. I do think its fair that lenders that created this situation should take the hit when it comes to rewritting these loans and working with people to prevent forclosure. I don't think taxpayers should have to anti up, nor the borrower be hit with another round of fees to correct this.



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#868684 - 12/07/07 03:21 PM Re: GWB & subprime plan Don_Narup
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Quote:
It was an easy sell and dollars could be made.


Don - there are 2 sides to this. yes, home ownership is one of the classic American dreams, hopefully that is what most, if not all, try to achieve. Sure, there are lenders who offered ARMs which let people buy at a low rate, but is it the lenders fault that the purchaser chose to ignore/disregard/not pay attention to the ballon rates and what the costs would be 2, 3, 4, 5 years down the road? I've yet to hear any of these hapless homeowners say that a gun was held to their head and they were forced to purchase this home.

If you aren't financially savvy enough to understand that you make $2,000 a month, and your hosue note in 3 years will be $1,500 a month, then maybe you should seek some financial advice on whether you can afford this or not.

I see the commercials for the E-Class Mercedes every day, and I'd love to own one. And one day I will. but I'm not about to shell out $650 a month on a car note, knowing that it will cause me to struggle to meet other obligations I have. Why should these homeowners be any different?

If there are predatory lennders, then go after and prosecute them. But the mortgage industry as a whole is not to blame here.
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