Ignorance of Common Sense Excuses No One:
This evening I was channel surfing and happened to come across the 60 Minutes segment “House of Cards: The Mortgage Mess“. Steve Kroft did the story, and I thought that it was a pretty good summary of the sub-prime mortgage meltdown in plain English even a layman can understand.
Even though the appraisers were not mentioned in the story, this is another sad example that ignorance of the law common sense excuses no one….except Charles and Stan - they are laughing all the way to the bank.
One can slice it and dice it any way they want - but everybody was party to this dance.
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Christoph Schweiger is a 34-year-old real estate agent living with his wife and son in sunny Scottsdale, Arizona ... 
Gary Miljour on Jan 28, 2008
I watched the clip, and it pretty much sums it up pretty well. I am glad that 60 minutes did show the consumer side of things. This is how I saw it from the beginning. When you have borrowers with no skin in the game (down payment) they have nothing to lose. So at the end of the day the last person holding the bag loses. Great Post, and thanks for sharing.
craig on Feb 28, 2008
I want to get something off my chest. The subprime market was created for primary residence borrowers who could borrow 100% with no money down by just stating their income with no verification of any kind other than a good credit report. What drove the real estate market to its peak up to the year 2004 were not the legitimate home buyers who were purchasing homes into the buying frenzy, but it was the investors that had created the frenzy by taking advantage of this program by lying on their applications that they were going to reside in the home, when they had no intention of doing so, only to get 100% financing with no money down so they could ‘flip’ the properties for a profit. There were buyers buying several homes at a time before multiple loans would show up on their credit report. A recent program on Kudlow and Company reported that 70% of all subrime loans were bought by people who had no intention of living in the home as their primary residence and had lied on their applications. The lenders never audited these loans to catch the fraud that was going on because these lenders were making so much money. So, now that the financial system has pulled a double whammy by raising interest rates and no more sub-prime loans the real estate market is imploding on itself. The fed is lowering interest rates, which helps…but, there is no demand because subprime has been taken away from legitimate stated income buyers. HUD is the new subprime lender thru the FHA program, but FHA won’t loan money to people within 3 years of a foreclosure. HUD needs to give amnesty to legitimate borrowers who recently lost their homes and who can legitimately afford to make payments but lost their homes because of the rise in interest rates. This would bring the demand back in the market and keep the market from continuing to implode on itself. Any thoughts anyone ?
Gary Miljour on Feb 29, 2008
Craig,
I do not think you can blame just sub-prime lending. The true reasons for this problem has NOTHING to do with subprime lending. The true problem was due to buyers knowing that they were going to commit loan fraud and no banking standards in place to help curb the problems. We all saw greedy loan originators who got into the mortgage business just to make a quick buck. With very little regulation in place, this could be a pattern to happen again. Since all mortgage companies did NOT want to lose out on loan opportunities (competition among the sharks) the banks hurt themselves. Most were forced out of business due to these practices. Then the other side of the coin is with property values going down. Homeowners and Investors who bought in the wrong areas could not refinance their Adjustable Rate Mortgages, and could not afford the high expenses (poor planning). I personally DO NOT see it as the governments job or HUD’s job to bail anyone out of this mess. One of the great freedoms in this country is my right to buy property. If I make a bad financial decision, then I need to learn from those decisions I made. If the government bails out every homeowner or investor who got themselves in trouble, then they would be setting a very frightening political policy. In the end, there was a lot of pieces of this puzzle to create what I would label as a perfect storm. The aftermath is now the Mortgage Banks have gone back to strict guidelines, so they do not continue to keep feeding a negative problem. Just my 2 cents.
B on Apr 17, 2008
Many bankers and finance companies tried to get me to refinance my home when the rates were so low, but they only wanted to do an adjustable interest rate, I just said “NO thank you, I’m not interested in a refinace.”
So I don’t think the sub-prime is the only issue here that has caused all the problems, it’s people wanting to move to bigger homes with lower interest rates, but not thinking about the rates eventually going back up and how it would effect that new house payment.