can someone explain why people are complaining about banks foreclosing?

[Engineer]

If you signed on the line, you owe it. Tough luck.

Also, if you CAN make payments on the loan that you have and decide to not pay and walk away (upside down, etc), there should be a special 20 year credit hit because you CHOSE to walk away while you were ABLE to pay. I'm sure that many will jump in here with the "it's a smart business decision" and maybe it is, but only because the punishment for walking away for your obligated contract is too lite.

Although I don't understand why the banks would rather keep foreclosing at the rate they are and potentially losing even more money if they can "offer" a better rate or some other terms to the homeowner to keep them making payments and keeping the home. The "underwater" status of many homes keeping them from lowering their rates, etc. is contributing to the foreclosure spike by not allowing people to refinance. It's the banks right to foreclose but seems that that would be trying to keep those people paying, even if a little less or lower interest, vs trying to recoup what they can in a shitty real estate market. Of course, too many people just want to walk away because they are upside down. My opinion, walk away and don't be able to get a mortgage for 20 years.

 

[Stuxnet]

<---P&N

I'll bite. How about deceptive lending practices? Or loans with extensive fine print only a high-end lawyer/banker/astrobiologist can decipher? What about your loan getting sold to yet a new bank/creditor every time you turn around? Its damn inconvenient to have to send your mortgage check to a different place each month. What about robo-signing to foreclose a home without all the paperwork/due process that homeowners are entitled to? The list goes on. It isn't as simple as "you owe X and didn't pay X", especially if you got an adjustable rate one. Mortgages shouldn't be complex instruments. The math works out pretty easily on a fixed-rate mortgage. The terms don't need to be buried in fine print.

FAILarious. You calculate a budget. You determine what you can afford. You stick to it. PERIOD. The bank is not your personal financial advisor - they're selling a product. I don't walk into a car dealership and ask how much car I can afford... why would I do that with a bank? My personal finances are my personal responsibility, and I don't leave them to chance with someone who has a conflicting interest. If I don't like the terms of my loan or can't understand them, I walk.

As far as note selling, yeah, it sucks and it's inconvenient, but you still owe $x/month. Having to change the address isn't an excuse. If your money was lost, all you have to do is show a cancelled check and VOILA, you've got the bank(s) pinned to the wall.

Here's the bottom line: a bunch of people bought shit they couldn't afford: homes, cars, televisions, you name it. When the music stopped and they couldn't push debt to another credit card, they were left without a chair. Same goes for their ARM (and really, if you can't understand the terms of an ARM, you shouldn't own a home). Now these people are trying to blame someone else by saying they were told they could afford X when they couldn't afford X. FAIL. It's YOUR responsibility to know that - no one else. And since figuring a budget requires only 5th grade mathematics, casting blame is pretty ridiculous.

 

[IronWing]

FAILarious. You calculate a budget. You determine what you can afford. You stick to it. PERIOD. The bank is not your personal financial advisor - they're selling a product. I don't walk into a car dealership and ask how much car I can afford... why would I do that with a bank? My personal finances are my personal responsibility, and I don't leave them to chance with someone who has a conflicting interest. If I don't like the terms of my loan or can't understand them, I walk.

As far as note selling, yeah, it sucks and it's inconvenient, but you still owe $x/month. Having to change the address isn't an excuse. If your money was lost, all you have to do is show a cancelled check and VOILA, you've got the bank(s) pinned to the wall.

Here's the bottom line: a bunch of people bought shit they couldn't afford: homes, cars, televisions, you name it. When the music stopped and they couldn't push debt to another credit card, they were left without a chair. Same goes for their ARM (and really, if you can't understand the terms of an ARM, you shouldn't own a home). Now these people are trying to blame someone else by saying they were told they could afford X when they couldn't afford X. FAIL. It's YOUR responsibility to know that - no one else. And since figuring a budget requires only 5th grade mathematics, casting blame is pretty ridiculous.

I won't argue with any of your points. However the lenders did the same math and signed the same contracts. The banks should have been held to account for their own actions in entering these contracts. However, that didn't happen. The banks got bailed out for their poor choices and the rest of us will pay the consequences through years of low-no growth and a devaluated currency. The banks effectively passed their investment losses off onto the broader economy while keeping their profits. "Socialize risk, privatize profit" wins again.

 

[Jadow]

If banks couldn't foreclose, then they wouldn't give out loans, if they don't give out loans, no-one buys a house unless they save up a shlt ton of cash.

<-- Thanks to my great bank for giving me a 30 year loan at 3.875 percent!

 

[the DRIZZLE]

Although I don't understand why the banks would rather keep foreclosing at the rate they are and potentially losing even more money if they can "offer" a better rate or some other terms to the homeowner to keep them making payments and keeping the home. The "underwater" status of many homes keeping them from lowering their rates, etc. is contributing to the foreclosure spike by not allowing people to refinance. It's the banks right to foreclose but seems that that would be trying to keep those people paying, even if a little less or lower interest, vs trying to recoup what they can in a shitty real estate market. Of course, too many people just want to walk away because they are upside down. My opinion, walk away and don't be able to get a mortgage for 20 years.

If the banks let everyone write off principal in their mortgage then everyone who is underwater will demand it or threaten to not pay. They know that most people underwater won't strategically default so it makes more sense to foreclose on the people that do and lose money on those rather then write down everyone's mortgage to the market value of the home.

 

[Engineer]

If the banks let everyone write off principal in their mortgage then everyone who is underwater will demand it or threaten to not pay. They know that most people underwater won't strategically default so it makes more sense to foreclose on the people that do and lose money on those rather then write down everyone's mortgage to the market value of the home.

Didn't say anything about writing off principal. You borrowed a said amount, you paid said amount + interest. I meant the rates could be adjusted to keep those folks paying instead of trying to sell a foreclosed home on a depressed market.

 

[IEC]

Personal responsibility is dead.

 

[IronWing]

Personal responsibility is dead.

Yep, and corporations and banks blazed the path.

 

[DrPizza]

I'm amused by the "holier than thou" attitude of a few posters. Even wealthy people (especially wealthy people) have financial advisers. Why? To help them make wise decisions with their money. But somehow, the average Joe is supposed to be smart enough to not spend too much on a home... WHEN THE BANKS are telling him, "don't worry! You can afford this! We worked it out." When we were looking at houses & were seeking pre-approval for a loan, we were looked upon by the financial gurus as if we were foolish for looking in the price range that we were. "Are you kidding? You should be looking at houses for at least <5 times what we paid for this house.>" And honestly, we could have afforded significantly more house. Sadly, when bombarded with constant images of living in McMansions on television, bombarded with shows like "flip this house," etc., there was a huge amount of pressure on people to actually believe they could afford more house than they really could.

Now, that doesn't mean that I disagree with foreclosing on them, (provided it's done properly - no robo signers, etc.) - They got to live a higher lifestyle than they actually could afford for a few years; but that doesn't entitle them to continue on that way.

 

[DaWhim]

This lie really needs to die. The government has never required banks to lend money to unqualified borrowers. The banks chose to make those loans out of pure greed.

educate yourself a bit more.

i found out about this after reading this book by thomas sowell.
http://en.wikipedia.org/wiki/The_Housing_Boom_and_Bust

"For example, he links the Community Reinvestment Act to decreased lending standards that resulted in an increase of subprime mortgages, as the law forced banks to set up quotas of lending to minorities.[1] As a result, "lenders had to resort to 'innovative or flexible' standards.""​

 

[JS80]

I'm amused by the "holier than thou" attitude of a few posters. Even wealthy people (especially wealthy people) have financial advisers. Why? To help them make wise decisions with their money. But somehow, the average Joe is supposed to be smart enough to not spend too much on a home... WHEN THE BANKS are telling him, "don't worry! You can afford this! We worked it out." When we were looking at houses & were seeking pre-approval for a loan, we were looked upon by the financial gurus as if we were foolish for looking in the price range that we were. "Are you kidding? You should be looking at houses for at least <5 times what we paid for this house.>" And honestly, we could have afforded significantly more house. Sadly, when bombarded with constant images of living in McMansions on television, bombarded with shows like "flip this house," etc., there was a huge amount of pressure on people to actually believe they could afford more house than they really could.

Now, that doesn't mean that I disagree with foreclosing on them, (provided it's done properly - no robo signers, etc.) - They got to live a higher lifestyle than they actually could afford for a few years; but that doesn't entitle them to continue on that way.

..

Personal responsibility is dead.

 

[halik]

educate yourself a bit more.

i found out about this after reading this book by thomas sowell.
http://en.wikipedia.org/wiki/The_Housing_Boom_and_Bust

"For example, he links the Community Reinvestment Act to decreased lending standards that resulted in an increase of subprime mortgages, as the law forced banks to set up quotas of lending to minorities.[1] As a result, "lenders had to resort to 'innovative or flexible' standards.""​

This.

Nov 4, 2004:

Fannie Mae and Freddie Mac will be required to increase financing to low- and moderate-income home buyers and to increase their commitment to underserved areas under new rules by the Department of Housing and Urban Development.

http://www.bizjournals.com/buffalo/stories/2004/11/01/daily11.html

 

[mrCide]

Everyone got greedy. I don't feel bad for people who are in foreclosure but I don't feel bad for the banks either. Banks were loaning to subprime borrowers, approving ANYBODY just to get their cut and share. Lot of people made millions and a lot of people got screwed. Most in either case had to do with timing.

Is it a wonder why it's so much harder to get a loan now than it used to be 6 years ago? Banks were stupid and people went along with it thinking they could cash in, too. This wasn't just a few or a hundred or a thousand people. This happened massively around the country and even the world and now because of that greed our economy is broken and we're dealing with the aftermath.

Also, as was noted, banks are fucking a lot of people because they weren't prepared, but at the same token a lot of people fucked the banks. Those who could get away with it do, and why wouldn't they? If you think there are any morals in this business you're living in the stone age.

 

[JS80]

educate yourself a bit more.

i found out about this after reading this book by thomas sowell.
http://en.wikipedia.org/wiki/The_Housing_Boom_and_Bust

"For example, he links the Community Reinvestment Act to decreased lending standards that resulted in an increase of subprime mortgages, as the law forced banks to set up quotas of lending to minorities.[1] As a result, "lenders had to resort to 'innovative or flexible' standards.""​

+freddie/fannie

 

[halik]

+freddie/fannie

Covered above. Don't forget Bawney Fwank

"These two entities ...are not facing any kind of financial crisis ... The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

-BF, 2003

 

[alent1234]

<---P&N

I'll bite. How about deceptive lending practices? Or loans with extensive fine print only a high-end lawyer/banker/astrobiologist can decipher? What about your loan getting sold to yet a new bank/creditor every time you turn around? Its damn inconvenient to have to send your mortgage check to a different place each month. What about robo-signing to foreclose a home without all the paperwork/due process that homeowners are entitled to? The list goes on. It isn't as simple as "you owe X and didn't pay X", especially if you got an adjustable rate one. Mortgages shouldn't be complex instruments. The math works out pretty easily on a fixed-rate mortgage. The terms don't need to be buried in fine print.

Every mortgage I've had was written in simple 8th grade English, clearly said adjustable or fixed rate and came with an ammortization schedule

 

[Red Squirrel]

The bank just took 400 bucks out of my account! Just like that! It says mortgage payment, but I should be able to not pay, and still have a house! Banks are evil!

 

[Engineer]

Oh, and my opinion is that the banks should be allowed to go down just like the average Joe on the street can lose his house if he doesn't pay. No bailouts for anyone (but it's too late for that, isn't it?).

 

[randomrogue]

Every mortgage I've had was written in simple 8th grade English, clearly said adjustable or fixed rate and came with an ammortization schedule

Although true, and I've read the whole thing for my parents (twice), it is so damn long that it's very tedious. I think the whole package was 1.5 inches thick and had all kinds of garbage in there including things about the patriot act or something. Either way, if you buy a home, you read it.

 

[IndyColtsFan]

I'm amused by the "holier than thou" attitude of a few posters. Even wealthy people (especially wealthy people) have financial advisers. Why? To help them make wise decisions with their money. But somehow, the average Joe is supposed to be smart enough to not spend too much on a home... WHEN THE BANKS are telling him, "don't worry! You can afford this! We worked it out."

Those of us with "holier than thou" attitudes are the ones who end up paying for the mistakes of these idiots in one form or another (and you are paying too). People need to take responsibility for their own actions and should have been smart enough to know that the bank is trying to make money off you and will tell you anything. Back when real estate was hot, the bank wasn't risking much -- if you defaulted, they foreclosed, took the house, and then resold it and probably made even more in the process.

Regardless, by law, all terms were disclosed during the sale of the house so if these people didn't understand something, it was their responsibility to ask for clarification.

When we were looking at houses & were seeking pre-approval for a loan, we were looked upon by the financial gurus as if we were foolish for looking in the price range that we were. "Are you kidding? You should be looking at houses for at least <5 times what we paid for this house.>" And honestly, we could have afforded significantly more house.

We were approved for around double the amount we finally spent on our house. We were not pressured to look at more expensive houses then and I wasn't pressured to look at more expensive houses when I bought my first house either. My anecdotal experience aside, letting someone pressure you on such a huge and important purchase and convince you to spend more isn't an excuse.

Sadly, when bombarded with constant images of living in McMansions on television, bombarded with shows like "flip this house," etc., there was a huge amount of pressure on people to actually believe they could afford more house than they really could.

Peer pressure is an excuse?

 

[Mike Gayner]

A lot of people here are taking a really complex issue and boiling it down as if it were really simple. I think it's because a lot of people here have simple minds that can't compute complex issues.

 

[LegendKiller]

Covered above. Don't forget Bawney Fwank


-BF, 2003

I didn't know Countrywide was a CRA regulated entity. In fact, I didn't know that Option arms and i/os with teasers were what CRA intended or were a large % of CRA loans.

In fact, I didn't know that 2nd houses, or 3rd or 4th, or flippers were CRA borrowers. For that matter, I didn't know that CRA was anything but statistically insignificant when it came down to the overall amount of subprime mortgages originated.

Finally, I'd love to see how you could tie this to the GSEs, even though, as a % of mortgages, they declined in the market. Sure, they bought RMBS, but it's not like they bought huge amounts of CDOs and CDO^2s or even wrote CDS.

Blaming this on the GSEs is ridiculous.

 

[IndyColtsFan]

A lot of people here are taking a really complex issue and boiling it down as if it were really simple. I think it's because a lot of people here have simple minds that can't compute complex issues.

It really isn't a complex issue. If you don't understand a contract and the implications, why would you sign it without having someone clarify it for you? You're not going to Wal Mart to buy a $10 shirt, you're paying hundreds of thousands of dollars for a house that you're going to be paying for over the course of decades. I've bought two houses in my life and in both cases, I read and researched everything I needed to know and had my house payments calculated even before I settled on a house to buy. That's called being responsible.

Now, obviously, people who lose their jobs and can't afford their homes any longer are in an unfortunate situation and it sucks, but the anger most people have is directed at the "house flippers" who got caught underwater and want to just walk away and those others who didn't understand the implications of not having a fixed rate mortgage.

 

[Engineer]

but the anger most people have is directed at the "house flippers" who got caught underwater and want to just walk away and those others who didn't understand the implications of not having a fixed rate mortgage.

That exactly why I blame Home and Garden channel and all of those darn flip this and flap that house shows.

Those shows and channels destroyed the world economy! :hmm:

 

[IronWing]

educate yourself a bit more.

i found out about this after reading this book by thomas sowell.
http://en.wikipedia.org/wiki/The_Housing_Boom_and_Bust

"For example, he links the Community Reinvestment Act to decreased lending standards that resulted in an increase of subprime mortgages, as the law forced banks to set up quotas of lending to minorities.[1] As a result, "lenders had to resort to 'innovative or flexible' standards.""​

The CRA did not require lower lending standards. It required lenders to look at borrowers as individuals and to stop red lining neighborhoods. It said that borrowers have to be evaluated only on criteria directly related to the borrowers' ability to repay a loan, not based on race or the area of town they happen to live in. Neighborhood characteristics could be considered when during property appraisal but not when qualifying a borrower.

During the housing bubble lenders chose to lower lending standard in order to originate more loans. Since the lenders intended to pass the loans off to other parties as quickly as possible the incentive for ensuring loan quality had evaporated as did lending standards. No one told the banks they had to offer liar loans, offer loans to people who had no income, or any other ridiculous practice the banks chose to engage in. Greed was the only driver needed.

This is very important issue as the type of remedy needed to prevent a repeat of the fiasco of 2000-2008* will be based on the perceived problem. If we misidentify the systemic problems, we'll select inappropriate solutions. In this case, the ability of banks to pass risk quickly and to have little skin in the loans they originated led to a profit model that encouraged what would have otherwise been considered extreme risk taking on the part of the banks.

*My pegging of the housing bubble dates is based on what I saw when I bought a house in 2000. By then liars loans were available, CDOs were flying, and Greenspan was flooding the world in cheap money. It could have very well started a couple years earlier.