Think bad mortgage loans aren't still happening? Think again.

[RandomGuy]

So I took my two boys to an indoor playscape over the weekend. (Radijazz in Austin, five star place to take kids under 7 www.radijazz.com)

We go and they are running around doing the things that little kids do, and I collect them for a quick break and some water/snacks.

They have free coffee, and I am sitting there drinking a small cuppa joe, and look at the little bulletin board by the tables.

Right there in front of me, printed up on about 50 little yellow flyers:

"Get a fast home loan with NO money down".

WHY THE **** AREN'T THESE PEOPLE IN JAIL YET? :ihit:ihit

If you don't understand the subprime crisis, here is an AWESOME slige show, with reluctant cred to Aggie Hoopsfan, as explained by stick figures:

**google docs slide show, takes a while to load, but very worth it**
http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1

[remingtonbo2001]

:lmao

[Richard Cranium]

Get it while you can!!

[ashbeeigh]

Ridiculous. Except they're why I have a job.

[BacktoBasics]

Its a fucking flyer. Nothing more. You have no clue as to what the actual terms and conditions are. Zero down is nothing but a buzz word tossed up on some print to get you to call. I thinks is premature to form an opinion based on a flyer.

[CosmicCowboy]

Thats the power point I wanted to post last week.

[RandomGuy]

Its a fucking flyer. Nothing more. You have no clue as to what the actual terms and conditions are. Zero down is nothing but a buzz word tossed up on some print to get you to call. I thinks is premature to form an opinion based on a flyer.

I don't. I am seriously tempted to call the place back, and have the guy read me the number so I can find out the details.

I have read other news stories that detail some of this still happening however, and given that Austin is still a "hot" market, would not doubt that some of those types of loans are still happening.

It is a bit premature, as you say. But it makes for an interesting OP. :p:

[BacktoBasics]

I don't. I am seriously tempted to call the place back, and have the guy read me the number so I can find out the details.

I have read other news stories that detail some of this still happening however, and given that Austin is still a "hot" market, would not doubt that some of those types of loans are still happening.

It is a bit premature, as you say. But it makes for an interesting OP. :p:
I might be wrong but ARMs aren't illegal. Its still a form of optional financing. If they disclose it and the mark is dumb enough to buy into it then its on the consumer not the lender.

Thousands of people signed contracts without reading it over and understanding what they were getting into. Its not as simple as bad lending practices. Its not that cut and dry.

Dealers advertise payments on automobiles all the time they just don't say you need a 720 FICO and 10% down until they take the app and get the whole picture.

You have to know what the fuck you're doing or you're going to get fucked. Half the problem is the people not just the lenders.

[BacktoBasics]

"Get a fast home loan with NO money down".


I could get that from my bank in 10 minutes. Thats not false advertising. It didn't say no credit, bad credit or anything like that. Even if it did credit is so subjectional its hard to call anything false advertising.

[RandomGuy]

I might be wrong but ARMs aren't illegal. Its still a form of optional financing. If they disclose it and the mark is dumb enough to buy into it then its on the consumer not the lender.

Thousands of people signed contracts without reading it over and understanding what they were getting into. Its not as simple as bad lending practices. Its not that cut and dry.

Dealers advertise payments on automobiles all the time they just don't say you need a 720 FICO and 10% down until they take the app and get the whole picture.

You have to know what the fuck you're doing or you're going to get fucked. Half the problem is the people not just the lenders.

It isn't the consumers fault, so much as the mortgage broker and the underwriter.

A LOT of the time the full consequences were not only not disclosed, but were actually hidden from the borrower.

You CANNOT simply point the finger at someone who wants a loan for a house and place all of the blame on them.

The banks are the ones who are supposed to be professional enough and expert enough to be better judges as to who gets what loan.

It is VERY obvious that they weren't. I am not expecting banks to be perfect, but they have failed in a VERY obvious way, because they KNEW they could repackage and sell their crappy loans before the loans went under, forcing some other guy to ultimately take the hit.

The mortgage brokers were right there complicit in this theft because they made their money upfront. They didn't have ANY stake in good underwriting.

The banks doing the initial lending didn't have any stake in good underwriting.

Watch the slide show linked in the OP.

[BacktoBasics]

It isn't the consumers fault, so much as the mortgage broker and the underwriter.

A LOT of the time the full consequences were not only not disclosed, but were actually hidden from the borrower.

You CANNOT simply point the finger at someone who wants a loan for a house and place all of the blame on them.

The banks are the ones who are supposed to be professional enough and expert enough to be better judges as to who gets what loan.

It is VERY obvious that they weren't. I am not expecting banks to be perfect, but they have failed in a VERY obvious way, because they KNEW they could repackage and sell their crappy loans before the loans went under, forcing some other guy to ultimately take the hit.

The mortgage brokers were right there complicit in this theft because they made their money upfront. They didn't have ANY stake in good underwriting.

The banks doing the initial lending didn't have any stake in good underwriting.

Watch the slide show linked in the OP.I bolded what I totally agree with you on.

I'm not saying lenders did no wrong. A lot of them took advantage of people, lied, cheated and stole.

I agree with you. Its a huge problem. However lots of people signed up full knowing what they were getting into they didn't think twice about.

My point was and still is that you can't look at a flyer and determine that someone is attempting questionable work practices. 2nd chance financing is still available. 0 down is still out there. Legally I might add.

The flyer only stated they could secure quick financing terms. Which they probably can. For all you know its some legit startup business with limited funds for expensive advertising. I think you're being presumptuous.

[CosmicCowboy]

I lived through the RTC mess and don't understand why they are bailing these guys out like this. At least during the RTC deal, they shut down the "bad" institutions, paid off their depositors, and then resold the assets to recover part of the cost. This time they are just letting them continue to exist and just walk away from the bad debt. There are and were a lot of banks that had responsible lending practices that are still healthy. why reward the "bad" banks and let them off the hook while penalizing the "good" banks by making them continue to compete with the gunslinger banks?

[ashbeeigh]

Where people are getting in trouble with ARMs is saying that they signed a Fixed rate mortgage when it is really an ARM. That's what people say to me everyday..."I signed a fixed rate mortgage, but then it went up."

With the recent Frank bill that was signed that was made illegal, calling it fixed then adjustable.

[Anti.Hero]

This is gay. I JUST finished not saving up for a down payment and they pull this shit.

[mrsmaalox]

LOL "privatizing gains, socializing losses"

[BacktoBasics]

Where people are getting in trouble with ARMs is saying that they signed a Fixed rate mortgage when it is really an ARM. That's what people say to me everyday..."I signed a fixed rate mortgage, but then it went up."

With the recent Frank bill that was signed that was made illegal, calling it fixed then adjustable.
of course everyone is going to say that. Its the new excuse. It was illegal in the first place. We didn't need Frank to figure that out.

I'm just going to put a % on it. I'm not saying its accurate but judging by what I'm hearing and seeing this is what I'm coming up with.

85% - lenders, underwriters and third party contributors maliciously set people up to earn a quick commission or get a deal bought.

15% - consumers knew what they were getting into and got caught up in thrill of not only buying something but buying something thats so much nicer than they could ever dream of. They failed to listen to what they were told and failed to read the fine print. They blindly bought.

[CosmicCowboy]

A cut paste from an e-mail...my calculator doesn't have enough digits to check the math.

let’s assume there are 200,000,000
bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman
and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a
We Deserve It Dividend.

Of course, it would NOT be tax free.
So let’s assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage – housing crisis solved.
Repay college loans – what a great boost to new grads
Put away money for college – it’ll be there
Save in a bank – create money to loan to entrepreneurs.
Buy a new car – create jobs
Invest in the market – capital drives growth
Pay for your parent’s medical insurance – health care improves
Enable Deadbeat Dads to come clean – or else

Remember this is for every adult U S Citizen 18+ including the folks
who lost their jobs at Lehman Brothers and every other company
that is cutting back. And of course, for those serving in our Armed Forces.

If we’re going to re-distribute wealth let’s really do it...instead of trickling out
a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.

If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!

[BacktoBasics]

A cut paste from an e-mail...my calculator doesn't have enough digits to check the math.

let’s assume there are 200,000,000
bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman
and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a
We Deserve It Dividend.

Of course, it would NOT be tax free.
So let’s assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage – housing crisis solved.
Repay college loans – what a great boost to new grads
Put away money for college – it’ll be there
Save in a bank – create money to loan to entrepreneurs.
Buy a new car – create jobs
Invest in the market – capital drives growth
Pay for your parent’s medical insurance – health care improves
Enable Deadbeat Dads to come clean – or else

Remember this is for every adult U S Citizen 18+ including the folks
who lost their jobs at Lehman Brothers and every other company
that is cutting back. And of course, for those serving in our Armed Forces.

If we’re going to re-distribute wealth let’s really do it...instead of trickling out
a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.

If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!way to progressive for this country. Much easier to piss the money away.

[Extra Stout]

The math is off by a factor of 1,000. Oops. $425 not $425,000.

Also, the bailout is $700 billion, not $85 billion.

So, really, $3500 per adult.

But only 60% pay taxes.

So, $5833 per taxpayer.

[baseline bum]

85 billion divided by 200 millon is 425

[CosmicCowboy]

unfortunately the math is wrong.

[BacktoBasics]

Thanks for getting my hopes up CC. I'd still take 5800 though.

[Anti.Hero]

There is a simple solution to all of this.

Everyone just keep having kids.

[BacktoBasics]

The simple solution is to lower gas prices. We can pump billions into an effort to cover up stupidity but all they really need to do is find a way to regulate gas prices. Don't give the demand argument either. It was never about demand. Demand is up less than 3%. It was and always will be about richers hedging money on oil.

[BacktoBasics]

This is why the bail outs won't mean shit.



Crunched credit
The price may be right, but if buyers can't borrow enough, the house isn't affordable. Difficulty borrowing is keeping many Americans from buying. "The industry went from little or no credit standards to credit standards on steroids," says Marc Savitt, president of the National Association of Mortgage Brokers.

According to the Federal Reserve Board, about 85% of lenders, worried about falling prices and rising foreclosures, have stiffened requirements for borrowers in the past three months. Those with a credit score of 600 or lower cannot get loans at all, says Keith Gumbinger of HSH Associates, a mortgage information publisher.

The upshot: 21 million, or 13% of those who have credit records, many of whom would have qualified for mortgages during the bubble, can no longer do so.

Those whose credit scores are high enough to qualify for a mortgage will likely pay more. Fannie Mae and Freddie Mac, which set the lending criteria for most loans, in November will require a 740 score, up from 680 for buyers to escape a surcharge that ultimately increases their interest rate.

As a result, the 33 million Americans whose scores fall between 680 and 740 (roughly 20% of adults with credit histories) may have to pay half a percentage point more to borrow. On a $300,000, 30-year loan, that would add about $100 to a buyer's monthly payment.

Adios, easy money
Back in the go-go years, lenders fell all over themselves to make no-down-payment loans. Those are gone, and lenders want some skin in the game, at least 5%. But to avoid paying extra, most buyers need the full 20% demanded in days of yore. To buy a $400,000 house, a family would now have to amass $80,000 in cash, up from $20,000 or less a few years ago.

Buyers also face higher interest rates, which allow them to borrow less. In mid-2004 a borrower with good credit could have qualified for a rate of 5.87% on a 30-year fixed $300,000 loan. That translates to a monthly payment of $1,774. Now, with the rate for the same loan at 6.57%, the same monthly payment could support a loan of just $278,500.

Back in the day, option ARMs and other exotic mortgages with low teaser rates helped struggling purchasers stretch to buy houses that they could not otherwise afford. Those deals have largely disappeared.

And while banks once allowed a homeowner's monthly principal, interest, taxes and insurance (PITI) to make up as much as 45% of a family's before-tax income, now buyers are restricted to using only 32% for a house payment. If PITI rises beyond that limit, banks consider the loan unaffordable and the family cannot receive a mortgage.

That limit boosts the amount of income a homeowner needs to purchase. Say your house has dropped from $425,000 to about $395,000. A couple of years ago a family needed an income of only $80,000 to buy. Now, even though the house costs less, a prospective buyer must have an income of $92,000.