We didn't learn a thing from the housing bubble

[auditor0007]

April's Fools Day is over and this is no joke. Would all the liberals who want to blame the conservatives for the previous housing disaster please mark this day on their calendar. President Clueless is at it again asking banks to make loans to people who are high risk and can't repay them......but not to worry, they will be backed by the government.

2016 can't get here quick enough.

Obama administration pushes banks to make home loans to people with weaker credit - The Washington Post

"The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default......."

Making homes affordable with low down payments is not a problem if it is only for those who are purchasing a primary residence which they will live in. Single lower income property owners were not the cause of the housing bust.

 

[eflatminor]

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Nope, apparently not.

So, will you vote for the very same politicians that seek to manipulate tax laws and commit to more bailouts, all in the name of 'the dream of home ownership'? Or will you take a different approach and vote for the limited government guy that stands against cronyism?

It's easy to denigrate companies in the loan industry that benefit from the loopholes and taxpayer backing, but that wouldn't be possible without meddling nanny state do gooders, would it?

 

[Mac1958]

.

Until we...

• Break up the "too big to fail" banks
• Improve regulation (note I didn't say "increase")
• Reverse our shallow, "I want it all now no matter what" consumer culture

... we will not be out of the woods. We're still on the precipice.

.

Yup, we sure are.

The big banks that perpetrated this fraud which caused the bubble in the first place did not suffer the consequences of their actions (Ninja loans, CDOs, credit default swaps, slicing/dicing mortgages and then selling them to foreign investors, etc.) In fact, bonuses and profits went up over the last four years. They had money put aside to pay the fines and penalties that came down from the state AG's offices for their malfeasance, which they are doing.

So why not make billions and billions again using the very same tactics that put them into a financial stratosphere that 99.9999% of us can't even imagine?

The banks definitely played a role, but the other two elements I listed were just as responsible in the macro picture.

.

 

[jwoodie]

While sub-prime financing played a somewhat significant part in the housing bubble and bust, it was only part of the problem. Average people who bought their homes were fine and could afford the payments, until the bubble burst and they lost their jobs in the ensuing meltdown. Once they lost their jobs, they could no longer afford the payments, but it wasn't because of the financing.

Amazingly illogical. Sub-prime financing was encouraged precisely for people who were NOT "fine and could afford the payments." Their failure to make these payments CAUSED the meltdown and loss of jobs, not vice versa.

Traditional "conforming" real estate financing required 20% down for residences and 30% down for investments. If these had been maintained, a dip in real estate prices would not have caused the banking collapse.

 

[Katzndogz]

It's not true that we didn't learn a thing from the housing bubble and crash. We learned a lot. We learned exactly how to engineer a major crash.

 

[editec]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Of course they are.

BOTH the GOP and the DNC have given then absolution for their previous sins.

MORAL BANKING HAZARD number 5 (or is it 6?) HERE WE COME!

 

[martybegan]

While sub-prime financing played a somewhat significant part in the housing bubble and bust, it was only part of the problem. Average people who bought their homes were fine and could afford the payments, until the bubble burst and they lost their jobs in the ensuing meltdown. Once they lost their jobs, they could no longer afford the payments, but it wasn't because of the financing.

Amazingly illogical. Sub-prime financing was encouraged precisely for people who were NOT "fine and could afford the payments." Their failure to make these payments CAUSED the meltdown and loss of jobs, not vice versa.

Traditional "conforming" real estate financing required 20% down for residences and 30% down for investments. If these had been maintained, a dip in real estate prices would not have caused the banking collapse.

The sub prime market was the cause of the inability to know the true value of the MBS's due to the questions regarding the risk involved. This was the trigger for what led to the banking crisis. The blame, however goes through all levels, from the lenders, to the borrowers, to the government, the regulators, the sellers and the owners.

There is all sorts of blame to go around, and the reason it went on so long was until the prices went down, no one was getting hurt and everyone was making money.

 

[peach174]

No. We didnt.

Buying and owning a house used to mean something different. It was a place you laid a foundation for life. You created memories, and remembered them for decades as you grew old with that grand or humble home. You buried the old loyal dogs you had over the years in the backyard. You watched the neighbors kids grow up.

Now? Well, now it's used as a piggy bank, to try to sell in a few years for a huge profit, so you can move into a bigger, more expensive home..........and thus, increase your self worth as a person, since EVERYTHING we use today to measure a man's worth is done in property and money.

So no. We didnt learn shit.

I see it as a necessity for retirement. A house is an actual tangible thing you can save for retirement.

I had a friend who was delighted to be able to cash out 20k from his home after paying into it for the better part of a decade. He refinanced 10 years into a 30 year mortgage with another 30 year mortgage. He told me it was no problem because his payments were the same. The fact that his 30 years had started all over did not seem to dawn on him as significant. People don't think about the future any more.

Your friend makes Forrest Gump look like a genius.

 

[flacaltenn]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

You are correct. Jack-crap has not changed. But you're wrong about the culprit. The "loan industry" STOPPED writing crap loans and that freeze endangered the economic indicators. So HARP and other Federal programs were commissioned to make it easier to write CRAP loans again.. Because Fannie and Freddy are still making tainted sausage out of what the banks are ALLOWED to issue as "documentated" loans..

It's ALWAYS been Federal policy polluting the loan market. Nothing HAS changed..

Matter of Fact --- look for the systemic meltdown of the new Federally defined "student loan program" coming to a theatre near you...

 

[kaz]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

That's funny. OMG, the government is offering deadbeats like me MONEY! What the crap is wrong with them! Haven't they learned anything! If you're still a dead beat, we know you haven't. If you really want to be sure that they haven't learned anything you need to follow through with an application because you don't actually know they wouldn't turn you down this time during the process.

 

[Little-Acorn]

It's not true that we didn't learn a thing from the housing bubble and crash. We learned a lot. We learned exactly how to engineer a major crash.

Yes, we did. And we are now about to put our knowledge into practice.... again.

http://www.usmessageboard.com/polit...nomic-collapse-of-2008-democrat-policies.html

See a summary of what led to the economic collapse of 2008 (from which we still suffer today). Complete with quotes, interviews, and references to videos.

 

[Two Thumbs]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Have you learned yet that the housing bubble was Carters idea that Clinton ran with?

And that since it worked so well for clinton, obama is going to do it again?

You, to get the same results.

Still glad you blindly supported obama?

well, are you?

Sorry, but you offer no facts about Carter. And actually it was Reagan who signed off on the law that gave banks the ability to securitize mortgages. Clinton signed off on the repeal of Glass-Steagall and the housing bubble began.

In July 1978, Section 121 allowed for a $100,000 one-time exclusion in capital gains for sellers 55 years or older at the time of sale.[7] In 1981, the Section 121 exclusion was increased from $100,000 to $125,000.[7] The Tax Reform Act of 1986 eliminated the tax deduction for interest paid on credit cards. As mortgage interest remained deductible, this encouraged the use of home equity through refinancing, second mortgages, and home equity lines of credit (HELOC) by consumers.[8] carter

The Taxpayer Relief Act of 1997 repealed the Section 121 exclusion and section 1034 rollover rules, and replaced them with a $500,000 married/$250,000 single exclusion of capital gains on the sale of a home, available once every two years.[9] This made housing the only investment which escaped capital gains. These tax laws encouraged people to buy expensive, fully mortgaged homes, as well as invest in second homes and investment properties, as opposed to investing in stocks, bonds, or other assets clinton

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

 

[OohPooPahDoo]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Don't do it!!
It takes two to tango.

Of course I'm not going to take out an ARM or reduce my equity to take a vacation.

I'm not worried about ME taking a junk loan.

I'm worried about hundreds of thousands of other idiots doing it, causing a housing crash, and reducing the value of MY property in the process. Just like last time around. Then what if I really really need to take out equity for a financial emergency?


The folks who took the crap loans weren't the only ones hurt. A lot of responsible people also got fucked. Many lost their jobs.

 

[OohPooPahDoo]

While sub-prime financing played a somewhat significant part in the housing bubble and bust, it was only part of the problem. Average people who bought their homes were fine and could afford the payments, until the bubble burst and they lost their jobs in the ensuing meltdown. Once they lost their jobs, they could no longer afford the payments, but it wasn't because of the financing.

The real problem was caused by speculators flipping houses. As prices were going up and up, investors stepped into the action in a very big way. As they purchased these homes, they continued to drive up the price as they could turn those homes for a 20% profit overnight. This continued to a point that in the last two years before the market bust, about one-third of all homes sold were sold to speculators or to individuals buying a second or third home.

The charts reveal some astonishing facts. At the peak of the boom in 2006, over a third of all U.S. home purchase lending was made to people who already owned at least one house. In the four states with the most pronounced housing cycles, the investor share was nearly half—45 percent. Investor shares roughly doubled between 2000 and 2006. While some of these loans went to borrowers with “just” two homes, the increase in percentage terms is largest among those owning three or more properties. In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20 percent of originations, almost triple their share in 2000.

Investors Are Different from Owner-Occupants
Whether they were buying vacation homes or flipping houses, real estate investors behaved very differently from borrowers with just one first lien, a group almost certainly dominated by owner-occupants. For one thing, investors are very unlikely to move to the house they bought, especially if they own three or more properties. In rising markets, “buy-and-flip” investors typically want to hold properties for relatively short periods, and we show in our study that multiple-property owners in the mid-2000s tended to sell their properties much more quickly than those with just one first-lien mortgage. Importantly, we also show how buy-and-flip investors can make higher bids on houses, even if they had relatively little cash, by using low-down-payment loans. Nonprime credit—mortgage lending to borrowers who were unable or unwilling to qualify for cheaper, prime loans—enabled optimistic investors to speculate by making highly leveraged bets on house prices.

Because investors don’t plan to own properties for long, they care much more about reducing their down-payments than reducing their interest rates. The expansion of the nonprime mortgage market during the 2000s provided the perfect opportunity for optimistic investors to get low-down-payment credit, albeit at high interest rates. As shown in the charts below, investors were far more likely than owner-occupants to use nonprime credit to make their purchases, especially at the peak. Again, the colors show the number of properties the borrower owns, but this time we leave in the single-property borrowers for comparison.

?Flip This House?: Investor Speculation and the Housing Bubble - Liberty Street Economics

The problem with this is that all of a sudden, there were no more buyers. Because speculators pushed the market so hard, builders were going crazy building like there was no tomorrow and like there was an unlimited stream of buyers out there. The problem was that everyone that wanted to buy a house had done so, and then all of a sudden these speculators were caught holding all the excess inventory which nobody wanted. Since they couldn't even rent out these homes let alone sell them, they couldn't make the payments. We all know what happened after that.

So, the easy financing was somewhat of a problem, but it was exasperated by the speculators. Had the easy lending terms been limited to primary home buyers only, the bubble would likely have never happened.

The speculators were part of the problem but its hard to imagine how rising payments on ARMs did not contribute.

ARM packages should be illegal. If you want to effect an ARM, get a fixed rate loan and buy a swap from a derivatives dealer and if you have no idea what that last part means you've no business with an ARM anyway.

Think about this - the ARM is the more complicated product than the fixed rate, yet it is the borrowers who are less sophisticated and with less credit that tend to be offered ARMS.

 

[OohPooPahDoo]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Same old liberal social engineering that caused it the last time.

Liberals didn't invent the adjustable rate mortgage moron. Ignorant morons like yourself are going to allow this to happen all over again.

 

[OohPooPahDoo]

did we not learn anything from the housing bubble?

Nope and I anticipate making money off stupid for years to come.

How?

 

[The Rabbi]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Don't do it!!
It takes two to tango.

Of course I'm not going to take out an ARM or reduce my equity to take a vacation.

I'm not worried about ME taking a junk loan.

I'm worried about hundreds of thousands of other idiots doing it, causing a housing crash, and reducing the value of MY property in the process. Just like last time around. Then what if I really really need to take out equity for a financial emergency?


The folks who took the crap loans weren't the only ones hurt. A lot of responsible people also got fucked. Many lost their jobs.

Unless you're planning on selling soon not much you can do. Real Estate is an investment, which means there is risk. If the Fed actually does the right thing and raises rates then mortgage rates will go up adn your house will be worth less as well. So what? You want a risk free investment? Move to North Korea.

The only way we will see another housing crash is if the gov't sends the message that it will roll out program after program to help borrowers under water and will backstop banks by buying their toxic mortgage assets. Oh wait. We're fucked.

 

[OohPooPahDoo]

Would all the liberals who want to blame the conservatives for the previous housing disaster please mark this day on their calendar.

You're a moron.

 

[OohPooPahDoo]

The problem is bleeding-heart liberals that think everyone is entitled to participate regardless of financial stature.

Where the fuck did that even come from and what on Earth does it have to do with the OP? Participate in WHAT exactly?

 

[OohPooPahDoo]

We've been getting a lot of refi offers lately. A lot of ARM's, they always emphasize in bold letters we'll be able to skip up to two payments, and they always encourage us to consume the difference on our note rather than save it.

I ask of the loan industry and government - did we not learn anything from the housing bubble? Its like it never happened! These guys are ready to do it all over again.

Why shouldn't they try it again? They know big daddy government will be there to catch them if they fall.

We should have let everything fail, let the chips fall where they may. It would have hurt more in the short term, but we would have been a lot better off in the long term.

No it wouldn't have shit for brains. It doesn't make us "better off in the long run" to obliterate the economy and put everyone out of work. THat's the dumbest thing I ever heard. That's like amputating your head because you've got a brain injury.

It makes us "better in the long run" to keep these institutions from getting so big that a single failure will set us back to the stone ages. THen we can afford to let them fail as they deserve.