And there goes Countrywide....

[Vic]

Originally posted by: dmcowen674
8-20-2007 Layoffs begin at Countrywide

LOS ANGELES - Countrywide Financial Corp., the nation's largest mortgage lender, has begun laying off staff as part of its effort to ride out the credit crunch that has rocked the home loan industry, according to a report published Monday.

The job cuts occurred in Countrywide's Full Spectrum Lending unit, according to the Wall Street Journal, citing an internal e-mail sent Friday to employees of that division.

This must be fantastic news for you, Dave. News of mass layoffs is just the kind of thing that gets your day off to a good start, right?

:roll:


Anyway, Full Spectrum is Countrywide's subprime retail unit, so this isn't very surprising given how that market was rocked earlier this year, nor would I see it as related to the CFC's overall health. And once again, like the OP and most of this thread, this is rumor, not fact.

 

[Vic]

Originally posted by: Rogodin2
The USD was value-based to gold (gold standard); Nixon changed its' tie to 'oil'. Whatever happens in this 'infinite growth' economic model is truly fudge.

We're on the top of a mountain and about ready to fall down the incline.

Rogo

And SkyLab was up during the Nixon Administration. Coincidence? I think not!

 

[Ricochet]

Now it gets interesting. I doubt Countrywide is going under. The trick is finding the bottom of when to jump in.

 

[Vic]

Well, Capital One is closing Greenpoint.
Not unexpected here, but kinda sad in a way. Long before the boom, Greenpoint was way back one of the first of what much later became known as an "Alt-A" lender. It wasn't anything "bubbly" or underhanded, they just had their own way of doing business and found a niche in it. A lot of lending is like that. If everyone lent the same product there would eventually only be one lender.

 

[Jhhnn]

Interesting take on it all here-

http://www.bbc.co.uk/blogs/the...07/08/liars_loans.html

What that means is that the eventual purchaser of the collateralised debt obligation has no more idea what?s in that bond than a sap eating a Turkey Twizzler knows what he or she is eating.

The problem is that nobody really knows just how tall the whole house of cards really is... if sufficiently large, it could threaten the whole banking system, given the way fractional reserve lending works...

Somewhere in all of this, it'll be necessary for people to man-up, take the hit they've set themselves up to receive, whether that's the homeowner who paid way too much and can't support the payments, or the entities who own the turkey-twizzler bonds. Probably both. Yeh, sure, others in the chain will also suffer, but they're not chained to the anchor...

Only when prices recede to the point where standard mortgages for regular buyers become the norm and defaults return to historical levels can the situation be regarded as stable- that's a predictable model that investors can actually depend on- collateralized or not. That will also depend on current overstocks of housing being sold to reliable mortgage holders.

Right now, the big guys are doing their best to hold off on taking the eventual losses, holding prices high on repo property, trying to get the govt to step in and take the hit...

Sooner or later, they'll have to sell for whatever they can get to achieve liquidity, since the Fed and European govts can't afford to support them with "emergency funds" forever...

It's a classic example of a speculative market scenario, the boom and bust of basically unregulated capitalism showing its darker side...

 

[Vic]

Originally posted by: Jhhnn
Interesting take on it all here-

http://www.bbc.co.uk/blogs/the...07/08/liars_loans.html

What that means is that the eventual purchaser of the collateralised debt obligation has no more idea what?s in that bond than a sap eating a Turkey Twizzler knows what he or she is eating.

The problem is that nobody really knows just how tall the whole house of cards really is... if sufficiently large, it could threaten the whole banking system, given the way fractional reserve lending works...

Somewhere in all of this, it'll be necessary for people to man-up, take the hit they've set themselves up to receive, whether that's the homeowner who paid way too much and can't support the payments, or the entities who own the turkey-twizzler bonds. Probably both. Yeh, sure, others in the chain will also suffer, but they're not chained to the anchor...

Only when prices recede to the point where standard mortgages for regular buyers become the norm and defaults return to historical levels can the situation be regarded as stable- that's a predictable model that investors can actually depend on- collateralized or not. That will also depend on current overstocks of housing being sold to reliable mortgage holders.

Right now, the big guys are doing their best to hold off on taking the eventual losses, holding prices high on repo property, trying to get the govt to step in and take the hit...

Sooner or later, they'll have to sell for whatever they can get to achieve liquidity, since the Fed and European govts can't afford to support them with "emergency funds" forever...

It's a classic example of a speculative market scenario, the boom and bust of basically unregulated capitalism showing its darker side...

Why is it that so you're so full of sh!t that you always have to diarrhea all over this forums?

I'm sure your posted blog has some decent information, but you ruined any validity it might have with your own vomit.

Here's a few tips:
- Those "turkey twizzler bonds" are securitized by real property. Dirt and houses. Not paper.
- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.
- Defaults are already at historical norms. The recent alarm is that defaults have increased to norms from historical lows, and the Street foolishly banked on the previous trend would to continue indefinitely.
- If your sole source of information on this are blogs and media, you haven't a clue as to the facts.
- And if you think that this is the result of "basically unregulated capitalism," then you're a blind idealistic moron. Very few industries in the US are as heavy regulated quite so much as banking and stocks. In fact, there exist several entire regulatory bodies whose sole function is to regulate those industries, and that's just on the federal level.

 

[compuwiz1]

Originally posted by: Vic

Originally posted by: rpanic
Ok Vic I guess all of the businesses and mainstream articles on the subject of piggybacking are wrong and you are right ok.

VA loans I can actually agree with you and they were an incentive to join the military. But your chart barely increases from the 60s on and I would also like to see a more current chart than 1996 were is it now.

Why are you so stupid? Corn and I have been very clear to say that piggyback itself is legal. What is illegal is using that misrepresentative information to obtain a mortgage loan. Photoshop is perfectly legal too, and you can use that to doctor your paystubs. But if you use those photoshop-doctored paystubs to qualify for a mortgage, then you've broken the law. Get it?

Regarding the chart, like I said, the 50s and 60s was when PMI came into widespread use, allowing for less than 20% for conventional purchase money loans, which proved wrong your argument that poor people could buy homes when 20% down was a requirement. Like I said, you can literally see the corresponding increases on this graph. So either you didn't read or you don't get it.

I work in finance, and I had a customer actually show me a website, where one can generate a paystub that says anything you want, for a fee. There has been a lot of fraud in the mortgage industry, and the more foreclosures there are, the more the issue will rear it's ugly head.

 

[Slew Foot]

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

 

[Vic]

Originally posted by: compuwiz1
I work in finance, and I had a customer actually show me a website, where one can generate a paystub that says anything you want, for a fee. There has been a lot of fraud in the mortgage industry, and the more foreclosures there are, the more the issue will rear it's ugly head.

Oh yeah, I agree. In fact, I predicted some years ago that it was fraud that was going to shut the housing boom down. That it was the lenders (and by lenders, I mean the source of funds, not the conduits) who would eventually pull the plug as they overran their own risk right off the cliff, and not the other way around as many still keep imagining, that buyers would wake up and stop buying. That's the thing too. So many of these buyers were doing whatever they thought necessary, even fraud to qualify them for a mortgage they could never afford, to get into these houses. Whacky. And yet look, rpanic brought up fraud here in this thread (apparently unknowingly it seems now) and the usual gang here who normally attack lenders for making loans that borrowers couldn't afford defended that fraud as a "loophole." As though those 2 issues aren't completely intertwined!!

 

[compuwiz1]

What happened to the days, when there was actually due dilligence on the part of the mortgage lender, to make sure buyers could actually afford the house?
What happened to standards that made sure people didn't get over extended, like the old 25% payment to income standard, also requiring total indebtedness to not exceed 35 to 38%. Allowing borrowers to take on a mortagage with a payment of 50% of borrower's gross monthly income, just seems suicidal for the industry to me. :Q

And this is allowed because, supposedly, without such looser criteria, there would hardly be any sales. IMO, the industry is only shitting it's self. The reality check is coming. This is only the tip of the ice berg.

 

[Vic]

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

People never stopped buying with fixed rate loans. Nor are ARM products something new and unusual. Wamu and World Savings were selling "Option ARMs" back then too (although they used to call them "COFI" ARMs because they were linked to the Cost of Funds Index).

The move by lenders IMO that primarily affected this boom has always been the ready availability of high LTV financing. The whole thing kind of domino'ed. Thoroughout most of the 70s and 80s, interest rates had been very high. Double digits. That changed going into the 90s. As rates fell, prices rose. As price rose, lender risk dropped. As risk dropped, lenders could afford to be more lax in their underwriting criteria. Etc. But then the buyer nuttiness began to take hold in the past 5 or so years, and things got out of hand.

 

[chucky2]

Originally posted by: Slew Foot

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

This is sort of what I worry about as I'm preparing earlier next year (as a single person with an average to above-average job, in this area) to buy my first house.

I look at even these starter homes, and some of the prices in decent neighborhoods are just astronomically high it's not to be believe...but yet, Yes, that's what people are asking.

I'd prefer to buy in the St. Louis area where prices are lower (and my salary will stay the same), however if I can't swing that extended family-wise I'm wondering exactly what I'll be able to do around here in the Chicago-land area that's within realistic commuting distance.

It's win-loose really....win for me if housing prices slide down, loose for everyone else I know that does have housing. I don't like to see people take hits like that...

Chuck

 

[dmcowen674]

and the dominoes continue to fall.

Who said my predictions would not come true again?

8-20-2007 Capital One Mortgage unit Greenpoint shut down, cuts 1,900 jobs

Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The McLean, Va.-based company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.

GreenPoint, based in Novato, Calif., specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers.

 

[smack Down]

Originally posted by: Vic

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

People never stopped buying with fixed rate loans. Nor are ARM products something new and unusual. Wamu and World Savings were selling "Option ARMs" back then too (although they used to call them "COFI" ARMs because they were linked to the Cost of Funds Index).

The move by lenders IMO that primarily affected this boom has always been the ready availability of high LTV financing. The whole thing kind of domino'ed. Thoroughout most of the 70s and 80s, interest rates had been very high. Double digits. That changed going into the 90s. As rates fell, prices rose. As price rose, lender risk dropped. As risk dropped, lenders could afford to be more lax in their underwriting criteria. Etc. But then the buyer nuttiness began to take hold in the past 5 or so years, and things got out of hand.

And now we get to hit the undo button and do it all in reverse. Falling housing prices means more lender risk, which increases rates, which reduces prices creating more lender risk.

 

[Vic]

Originally posted by: dmcowen674
and the dominoes continue to fall.

Who said my predictions would not come true again?

8-20-2007 Capital One Mortgage unit Greenpoint shut down, cuts 1,900 jobs

Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The McLean, Va.-based company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.

GreenPoint, based in Novato, Calif., specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers.

I already posted this 3 hours ago, Dave. Do try and keep up, eh?

Speaking of... 1,900 people out of work. Most of them good jobs, too. Almost certainly better paying than those manufacturing jobs lost you and some others here always cry about. So is it party time at the McOwen house tonight? Cracking the champagne in celebration of the suffering of others?

 

[compuwiz1]

Originally posted by: dmcowen674
and the dominoes continue to fall.

Who said my predictions would not come true again?

8-20-2007 Capital One Mortgage unit Greenpoint shut down, cuts 1,900 jobs

Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The McLean, Va.-based company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.

GreenPoint, based in Novato, Calif., specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers.

Damn, you've got bad breath today, Dave.

 

[Vic]

Originally posted by: compuwiz1
Damn, you've got bad breath today, Dave.

And the space shuttle is still up! Coincidence? I think not!

 

[Slew Foot]

Originally posted by: Vic

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

People never stopped buying with fixed rate loans. Nor are ARM products something new and unusual. Wamu and World Savings were selling "Option ARMs" back then too (although they used to call them "COFI" ARMs because they were linked to the Cost of Funds Index).

The move by lenders IMO that primarily affected this boom has always been the ready availability of high LTV financing. The whole thing kind of domino'ed. Thoroughout most of the 70s and 80s, interest rates had been very high. Double digits. That changed going into the 90s. As rates fell, prices rose. As price rose, lender risk dropped. As risk dropped, lenders could afford to be more lax in their underwriting criteria. Etc. But then the buyer nuttiness began to take hold in the past 5 or so years, and things got out of hand.

Not that people stopped using fixed rate loans, but in places like CA, no one could afford them so they took on ARMs, I/o, neg am and stuff like that. I think I read in 2005 75% of loans in the bay area were i/o or neg-am. That's got to come back and bite people in the ass if prices dont appreciate.

 

[Jhhnn]

Nice to see you resorting to personal attack, as usual, vic. That usually means somebody is getting too close to the truth for you to be comfortable in your hubris.

Let's see-

- Those "turkey twizzler bonds" are securitized by real property. Dirt and houses. Not paper.

Indeed they are, and I never claimed any different. The value of those bonds, however, is dependent on a lot of things, selling price of real estate being one of them, both directly, for foreclosed properties, and indirectly, in terms of investor confidence in such securities. The value of existing bonds cannot be maintained in a falling market, particularly when combined with stricter lending practices. That's obvious, given that nobody will buy them...
particularly not the 20% component of the 80/20 deals that have beens so popular recently- they might be worth a dime on the dollar, if that... The purchasers of such bonds are also often highly leveraged, making them extremely vulnerable to what nobody wants to mention- "insolvency" rather than a mere liquidity problem...

There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Sigh. 20 years ago, some of the stuff that's been common practice over the last several years simply didn't exist, and would have gotten anybody laughed right out of the lender's office at the slightest suggestion. I suppose that my terminology was vague, allowing your usual nitpick followed by misdirection. The vast majority of loans of that era and older were "standard mortgages" of 20-30 years' duration, backed up by proof of income and a thorough credit investigation, whether they were from banks, VA or FHA, whatever. Everybody was in it for the long haul, or at least had to show that they could be...

Only the advent of extremely creative financing and giveaway rates from the Fed have allowed prices to soar quite so high, particularly when the homebuyer and the mortgage holder have become utterly disconnected through a series of pie on the sky representations made to both by a series of middlemen...

And if you think that this is the result of "basically unregulated capitalism," then you're a blind idealistic moron. Very few industries in the US are as heavy regulated quite so much as banking and stocks. In fact, there exist several entire regulatory bodies whose sole function is to regulate those industries, and that's just on the federal level.

Yeh- you mention all the so-called regulation, which isn't really regulation at all unless it's effective. That's clearly not what's happened, given runaway prices over the last several years, or the denouement currently unfolding...

 

[Vic]

Originally posted by: Jhhnn
Nice to see you resorting to personal attack, as usual, vic. That usually means somebody is getting too close to the truth for you to be comfortable in your hubris.

Let's see-

- Those "turkey twizzler bonds" are securitized by real property. Dirt and houses. Not paper.

Indeed they are, and I never claimed any different. The value of those bonds, however, is dependent on a lot of things, selling price of real estate being one of them, both directly, for foreclosed properties, and indirectly, in terms of investor confidence in such securities. The value of existing bonds cannot be maintained in a falling market, particularly when combined with stricter lending practices. That's obvious, given that nobody will buy them...
particularly not the 20% component of the 80/20 deals that have beens so popular recently- they might be worth a dime on the dollar, if that... The purchasers of such bonds are also often highly leveraged, making them extremely vulnerable to what nobody wants to mention- "insolvency" rather than a mere liquidity problem...

There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Sigh. 20 years ago, some of the stuff that's been common practice over the last several years simply didn't exist, and would have gotten anybody laughed right out of the lender's office at the slightest suggestion. I suppose that my terminology was vague, allowing your usual nitpick followed by misdirection. The vast majority of loans of that era and older were "standard mortgages" of 20-30 years' duration, backed up by proof of income and a thorough credit investigation, whether they were from banks, VA or FHA, whatever. Everybody was in it for the long haul, or at least had to show that they could be...

Only the advent of extremely creative financing and giveaway rates from the Fed have allowed prices to soar quite so high, particularly when the homebuyer and the mortgage holder have become utterly disconnected through a series of pie on the sky representations made to both by a series of middlemen...

And if you think that this is the result of "basically unregulated capitalism," then you're a blind idealistic moron. Very few industries in the US are as heavy regulated quite so much as banking and stocks. In fact, there exist several entire regulatory bodies whose sole function is to regulate those industries, and that's just on the federal level.

Yeh- you mention all the so-called regulation, which isn't really regulation at all unless it's effective. That's clearly not what's happened, given runaway prices over the last several years, or the denouement currently unfolding...

No, it's because you really have no idea what you're talking about. Which is why you backpedaled throughout this entire post of yours.

 

[Vic]

Originally posted by: smack Down

Originally posted by: Vic

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

People never stopped buying with fixed rate loans. Nor are ARM products something new and unusual. Wamu and World Savings were selling "Option ARMs" back then too (although they used to call them "COFI" ARMs because they were linked to the Cost of Funds Index).

The move by lenders IMO that primarily affected this boom has always been the ready availability of high LTV financing. The whole thing kind of domino'ed. Thoroughout most of the 70s and 80s, interest rates had been very high. Double digits. That changed going into the 90s. As rates fell, prices rose. As price rose, lender risk dropped. As risk dropped, lenders could afford to be more lax in their underwriting criteria. Etc. But then the buyer nuttiness began to take hold in the past 5 or so years, and things got out of hand.

And now we get to hit the undo button and do it all in reverse. Falling housing prices means more lender risk, which increases rates, which reduces prices creating more lender risk.

Which is what would happen if we lived in an actual capitalist country. But instead what will happen is that the Fed will cut rates and flood the banks and the Street with money to prop them and the housing market up. Which is how this started anyway... the rates were in the double-digits before because Paul Volcker kept them artificially high, and then Greenspan steadily undid that policy.

 

[dmcowen674]

Originally posted by: Vic

Originally posted by: dmcowen674
and the dominoes continue to fall.

Who said my predictions would not come true again?

8-20-2007 Capital One Mortgage unit Greenpoint shut down, cuts 1,900 jobs

Capital One Financial Corp. said Monday it will cut 1,900 jobs and shutter its wholesale mortgage banking business, a move that comes as lenders continue to struggle in the nation's housing and mortgage markets.

Capital One said it will shut down GreenPoint Mortgage and eliminate most of the jobs by the end of year. The McLean, Va.-based company will close 31 GreenPoint locations in 19 states and "cease residential mortgage origination" effective immediately but said it will honor commitments to customers with locked rates who have loans already in the pipeline.

GreenPoint, based in Novato, Calif., specializes in no-documentation and Alt-A mortgage loans for borrowers with slightly better credit than subprime borrowers.

I already posted this 3 hours ago, Dave. Do try and keep up, eh?

Speaking of... 1,900 people out of work. Most of them good jobs, too. Almost certainly better paying than those manufacturing jobs lost you and some others here always cry about. So is it party time at the McOwen house tonight? Cracking the champagne in celebration of the suffering of others?

How can there be any suffering?

Your buds on here say there is tons of high paying jobs to replace theirs.

 

[Jhhnn]

I haven't backpedalled, at all, vic, even if it's convenient for you to say so...

And putting it all off to the "nuttiness" of buyers is more than a little bit disingenuous, something I commented on earlier that you simply refuse to acknowledge. That factor has only been a part of the problem, with common sense maxims having been tossed out the window. Ones like this-

"They wouldn't loan me the money if they didn't think I could pay it back."

Unfortunately, they would, and they have, often quite knowingly, with a huge number of recent homebuyers.

 

[smack Down]

Originally posted by: Vic

Originally posted by: smack Down

Originally posted by: Vic

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

People never stopped buying with fixed rate loans. Nor are ARM products something new and unusual. Wamu and World Savings were selling "Option ARMs" back then too (although they used to call them "COFI" ARMs because they were linked to the Cost of Funds Index).

The move by lenders IMO that primarily affected this boom has always been the ready availability of high LTV financing. The whole thing kind of domino'ed. Thoroughout most of the 70s and 80s, interest rates had been very high. Double digits. That changed going into the 90s. As rates fell, prices rose. As price rose, lender risk dropped. As risk dropped, lenders could afford to be more lax in their underwriting criteria. Etc. But then the buyer nuttiness began to take hold in the past 5 or so years, and things got out of hand.

And now we get to hit the undo button and do it all in reverse. Falling housing prices means more lender risk, which increases rates, which reduces prices creating more lender risk.

Which is what would happen if we lived in an actual capitalist country. But instead what will happen is that the Fed will cut rates and flood the banks and the Street with money to prop them and the housing market up. Which is how this started anyway... the rates were in the double-digits before because Paul Volcker kept them artificially high, and then Greenspan steadily undid that policy.

Sorry vic, but the fed isn't going to save the mortgage market. No matter how cheap they make money their will be to much risk to invest in mortgages. Just like when the dot coms blew up the low interest rate didn't save them.

 

[dmcowen674]

Originally posted by: Slew Foot

Originally posted by: Vic

- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.

Not necessarily. 15-20 years ago people across the entire economic spectrum were able to buy, and more importantly keep their homes, with fixed rate loans. The reason? Prices were in line with wages. Now with prices totally out of whack, you need ridiculous loan products to buy a home. As the investors flee and housing returns to residences as opposed to investments, youll see the prices return to being in line with wages.

Originally posted by: Vic

Originally posted by: Jhhnn
Interesting take on it all here-

http://www.bbc.co.uk/blogs/the...07/08/liars_loans.html

What that means is that the eventual purchaser of the collateralised debt obligation has no more idea what?s in that bond than a sap eating a Turkey Twizzler knows what he or she is eating.

The problem is that nobody really knows just how tall the whole house of cards really is... if sufficiently large, it could threaten the whole banking system, given the way fractional reserve lending works...

Somewhere in all of this, it'll be necessary for people to man-up, take the hit they've set themselves up to receive, whether that's the homeowner who paid way too much and can't support the payments, or the entities who own the turkey-twizzler bonds. Probably both. Yeh, sure, others in the chain will also suffer, but they're not chained to the anchor...

Only when prices recede to the point where standard mortgages for regular buyers become the norm and defaults return to historical levels can the situation be regarded as stable- that's a predictable model that investors can actually depend on- collateralized or not. That will also depend on current overstocks of housing being sold to reliable mortgage holders.

Right now, the big guys are doing their best to hold off on taking the eventual losses, holding prices high on repo property, trying to get the govt to step in and take the hit...

Sooner or later, they'll have to sell for whatever they can get to achieve liquidity, since the Fed and European govts can't afford to support them with "emergency funds" forever...

It's a classic example of a speculative market scenario, the boom and bust of basically unregulated capitalism showing its darker side...

Why is it that so you're so full of sh!t that you always have to diarrhea all over this forums?

I'm sure your posted blog has some decent information, but you ruined any validity it might have with your own vomit.

Here's a few tips:
- Those "turkey twizzler bonds" are securitized by real property. Dirt and houses. Not paper.
- There's no such thing as a "standard mortgages for regular buyers" and never has been. "One shoe fits all" in mortgages would mean only the rich get to buy homes.
- Defaults are already at historical norms. The recent alarm is that defaults have increased to norms from historical lows, and the Street foolishly banked on the previous trend would to continue indefinitely.
- If your sole source of information on this are blogs and media, you haven't a clue as to the facts.
- And if you think that this is the result of "basically unregulated capitalism," then you're a blind idealistic moron. Very few industries in the US are as heavy regulated quite so much as banking and stocks. In fact, there exist several entire regulatory bodies whose sole function is to regulate those industries, and that's just on the federal level.

Badabing badaboom

Why are you so hell bent on defending financial thugs?