Congress to Aid 2.2 Million Sub-Prime Borrowers

Page 5 - Seeking answers? Join the AnandTech community: where nearly half-a-million members share solutions and discuss the latest tech.

JS80

Lifer
Oct 24, 2005
26,271
7
81
Originally posted by: Vic
Originally posted by: JS80
Originally posted by: Vic
Originally posted by: Citrix
Originally posted by: Vic
Originally posted by: Citrix
Originally posted by: Specop 007
Democracy works until people realize they can vote themselves money from the public treasury.

But really, we've been doing that for decades. Medicaid, Medicare, Social Security, WIC, etc etc etc.

Its getting to the point I wonder why the hell I even work anymore.

is there anything wrong with those programs you listed? without those programs our country would be a thirdworld country.

Lots of third world countries have strong central governments and social programs. It's the confidence and stability created by the equitable rule of law that keeps the US from being a third world country.

really? humm when i drive home tonight ill count how many shanty towns i see, or how many times i get hit up by starving kids for food.

SOrry man, i have been to quite a few third world countries and let me tell you there is nothing in the US that even comes close to comparison.

'Cause the standard of living is sky-high in North Korea?...

I think Citrix thinks only first world countries have strong central govt and social programs...he fails to realize third world countries are poor BECAUSE of the restrictive govt and failing social programs.

Well... I wouldn't say that either. I'd say they're poor because of a lack of equitable rule of law. For example, you could buy a house, but why when the corrupt government/dictator might decide to take it from you the day after you buy it? Or you could start a business, but why when the corrupt government/dictator/bureaucrat could shut you down for failing to pay the proper bribes or because your business is in competition with the mayor's brother-in-law's business or whatever.
There's no confidence in the system, and because of that no incentive to invest. Quite the opposite, you'd be a fool if you did. That's what plagues third world countries.

Meh, "lack of equitable rule of law" and "strong central govt" to me is the same thing and go hand in hand.
 

Aquila76

Diamond Member
Apr 11, 2004
3,549
1
0
www.facebook.com
Honestly, something has to be done. And of course going after the loan officers or banks issuing these mortgages is out of the question because that would hurt a company that funds the special interest groups, not a tax payer who is already stretched to the ends.
I work for several of these banks in a foreclosure firm. One of our clients gave a $250,000 mortgage to a single-mother of two who worked part-time at Dunkin' Donuts as a cashier. The hell did they think was going to happen? Within six months (meaning she made only two payments) she's in foreclosure.
 

LS20

Banned
Jan 22, 2002
5,858
0
0
they should let those mortgages fail, so i can buy a house i can actually afford, at less than i would have to pay :D
 

waggy

No Lifer
Dec 14, 2000
68,143
10
81
Originally posted by: IHateMyJob2004
Originally posted by: neovan
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1x64z58hsB4&refer=home

And who's going to pay for all this? The responsible tax payer.

I suggest writing your congressperson if you don't agree with this.

If the banking system fails, the US financial ssytem fails and we become a 3rd world nation. Get it?

wich is why i am 2 minds on this. on one hand i think the people that made such loans should lose everything. thats part of business.

but if the banking system really takes a hit then that is bad for everyone.
 

jagec

Lifer
Apr 30, 2004
24,442
6
81
Originally posted by: dullard

Congress should step in and help prevent these bad loans.

Oh, stupid people always find a way to do stupid sh!t. The only solution is to let them wallow in it.

This is great. Build your house in a hurricane zone, the government builds you a new one. Buy a house you can't afford, the government will help you pay for it. It's as if we expect life to come with guarantees...
 

jagec

Lifer
Apr 30, 2004
24,442
6
81
Originally posted by: HeroOfPellinor
This is the equity your shrill voices of the majority of this forum have been shrieking for. Robbing from the rich to give to the poor.....creating equality.'

No, this is robbing from everyone to give to the stupid.

Ironically enough, the responsible poor are probably less likely to take advantage of welfare, food stamps, this mortgage thing, and so on, simply out of pride or because they don't get in those situations in the first place. So, instead of giving them a hand up, we're throwing away money on the leeches.

Originally posted by: JS80
Meh, "lack of equitable rule of law" and "strong central govt" to me is the same thing and go hand in hand.

You couldn't be more wrong. China, North Korea, the old USSR, and many other countries have a "strong central government". That certainly doesn't make it equitable, and if anything it increases the amount of corruption.
 

Apex

Diamond Member
Oct 11, 1999
6,511
1
71
www.gotapex.com
Originally posted by: ElFenix
Originally posted by: dmcowen674
$5,000 wasn't enough, should be $50,000 to own a home right.

How bout eliminate mortgages and make it the full $232,000 to move in?

how about asking people to be smart?


Sad thing is, we're not even asking people to be smart. Heck, we're not even asking people to be of average intelligence.

We're merely asking people to have a basic, general understanding of 3rd grade math, and have a vague grasp of personal responsibility.
 

her209

No Lifer
Oct 11, 2000
56,336
11
0
Originally posted by: Aquila76
One of our clients gave a $250,000 mortgage to a single-mother of two who worked part-time at Dunkin' Donuts as a cashier. The hell did they think was going to happen?
They were expecting a large commission check?
 

compuwiz1

Admin Emeritus Elite Member
Oct 9, 1999
27,111
926
126
The mortgage industry fscked themselves on this deal. Blame it on subprime borrowers all you want, but subprime does not always mean "bad credit".

A person with great credit, but cannot prove their income, might be classified as "subprime". A person with great credit, but who does not meet "traditional' lending terms, might be classified as "subprime".

When you have agressive sellers, as well as lenders working in a vertical real estate market, like California, as an example, was, a couple years ago. These buyers are racing to buy a home, on much evidence that the market will get away from them, if they do not buy now. The lenders came up with all these 80/20 loans, ARM's, Stated Income, etc, to entice people, and really sucker people, into believing they could afford homes, they would not be able to afford.

If the above is not bad enough, some of these lenders would re-contact customers, after $30 or $40k, further appreciation, and offer NO UP FRONT FEE refinances, with cash back. I have a friend who got hounded by the same lender for a refinance 4 times.
Can anyone say, PREDATORY LENDING? You can't believe how polished the sales pitches that went with it were.
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
Originally posted by: jagec
Originally posted by: HeroOfPellinor
This is the equity your shrill voices of the majority of this forum have been shrieking for. Robbing from the rich to give to the poor.....creating equality.'

No, this is robbing from everyone to give to the stupid.

Ironically enough, the responsible poor are probably less likely to take advantage of welfare, food stamps, this mortgage thing, and so on, simply out of pride or because they don't get in those situations in the first place. So, instead of giving them a hand up, we're throwing away money on the leeches.

Originally posted by: JS80
Meh, "lack of equitable rule of law" and "strong central govt" to me is the same thing and go hand in hand.

You couldn't be more wrong. China, North Korea, the old USSR, and many other countries have a "strong central government". That certainly doesn't make it equitable, and if anything it increases the amount of corruption.

You said: "That certainly doesn't make it equitable" = these other countries have a "strong central government."
I said: "Lack of equitable rule of law" = "strong central government"

Countries with strong central governments LACK in equitable law, hence more corruption. So how are we in disagreement/how couldn't I be more wrong?
 

Specop 007

Diamond Member
Jan 31, 2005
9,454
0
0
Originally posted by: Citrix
Originally posted by: Specop 007
Democracy works until people realize they can vote themselves money from the public treasury.

But really, we've been doing that for decades. Medicaid, Medicare, Social Security, WIC, etc etc etc.

Its getting to the point I wonder why the hell I even work anymore.

is there anything wrong with those programs you listed? without those programs our country would be a thirdworld country.

Sure it would.... Keep dreamin the Democratic dream of paying the way for the poor off the backs of the rich.
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
Originally posted by: Specop 007
Originally posted by: Citrix
Originally posted by: Specop 007
Democracy works until people realize they can vote themselves money from the public treasury.

But really, we've been doing that for decades. Medicaid, Medicare, Social Security, WIC, etc etc etc.

Its getting to the point I wonder why the hell I even work anymore.

is there anything wrong with those programs you listed? without those programs our country would be a thirdworld country.

Sure it would.... Keep dreamin the Democratic dream of paying the way for the poor off the backs of the rich.

You say "Democracy works until" but I say Democracy does not work at all. In a democracy 51% can vote to steal from other 49%.
 

mrzed

Senior member
Jan 29, 2001
811
0
0
It amazes me how many of you are taking the knee-jerk path of claiming this is a bailout of poor people being proposed. In many of these cases, you couldn't be further from the truth. Let's make it simple with an example:

- Poor person obtains subprime loan at the peak of the market
- Poor person cannot afford payments and defaults
- Loan is for $400,000 on a current market value of $400,000 (very common - as lenders are often willing to go all-out)

Who loses? Who is bailed out? Not the poor person because they don't actually own anything. It is the lender, who owns $400,000 of bad debt that is being bailed out.

As in most of these cases, it is better, though more painful, to let the holders of the bad debt take the hit. Expanding your business by taking stupid risks is not the way to build a company or a banking system. In any case, it's not as though the US banking system as a whole is at risk here. Most large financial institutions have very little exposure to these kinds of shenanigans. It's better to let the lunatic fringe die off than it is to bail them out for being stupid.
 

Vic

Elite Member
Jun 12, 2001
50,422
14,333
136
Originally posted by: compuwiz1
The mortgage industry fscked themselves on this deal. Blame it on subprime borrowers all you want, but subprime does not always mean "bad credit".

A person with great credit, but cannot prove their income, might be classified as "subprime". A person with great credit, but who does not meet "traditional' lending terms, might be classified as "subprime".

When you have agressive sellers, as well as lenders working in a vertical real estate market, like California, as an example, was, a couple years ago. These buyers are racing to buy a home, on much evidence that the market will get away from them, if they do not buy now. The lenders came up with all these 80/20 loans, ARM's, Stated Income, etc, to entice people, and really sucker people, into believing they could afford homes, they would not be able to afford.

If the above is not bad enough, some of these lenders would re-contact customers, after $30 or $40k, further appreciation, and offer NO UP FRONT FEE refinances, with cash back. I have a friend who got hounded by the same lender for a refinance 4 times.
Can anyone say, PREDATORY LENDING? You can't believe how polished the sales pitches that went with it were.

Aggressive marketing is not predatory lending. Deceptive marketing is predatory lending. There is a difference.

BTW, "subprime" is "traditional." Goes to show what people know about banking here. Subprime lending traces its roots back to the traditional bank-by-individual bank lending practices before government lending took hold and standardized the industry. Hence, the industry word you were look for there was not "traditional," but "conforming" -- meaning that the borrower conforms to Fannie Mae guidelines.

Also, the borrower in your example with great credit who can't prove their income is not subprime, but "Alt-A." Those deals get bought up by the big Wall Street houses under very favorable terms.
 

Vic

Elite Member
Jun 12, 2001
50,422
14,333
136
Originally posted by: mrzed
It amazes me how many of you are taking the knee-jerk path of claiming this is a bailout of poor people being proposed. In many of these cases, you couldn't be further from the truth. Let's make it simple with an example:

- Poor person obtains subprime loan at the peak of the market
- Poor person cannot afford payments and defaults
- Loan is for $400,000 on a current market value of $400,000 (very common - as lenders are often willing to go all-out)

Who loses? Who is bailed out? Not the poor person because they don't actually own anything. It is the lender, who owns $400,000 of bad debt that is being bailed out.

As in most of these cases, it is better, though more painful, to let the holders of the bad debt take the hit. Expanding your business by taking stupid risks is not the way to build a company or a banking system. In any case, it's not as though the US banking system as a whole is at risk here. Most large financial institutions have very little exposure to these kinds of shenanigans. It's better to let the lunatic fringe die off than it is to bail them out for being stupid.

I agree in part with your point, that irresponsible lending practices are to blame and the lenders should (and no doubt will) take the brunt. I disagree with your emotional claim however of the "poor person" buying a $400k home with 0% down. Subprime lending is still subject to the same disclosure laws and regulations as all other residential lending. The borrower still has to sign at closing until their arm falls off. If a person can sign documents 200 times without bothering themselves to read or understand what they signed, I have no sympathy for them.
 

mugs

Lifer
Apr 29, 2003
48,920
46
91
Originally posted by: Vic
Originally posted by: compuwiz1
The mortgage industry fscked themselves on this deal. Blame it on subprime borrowers all you want, but subprime does not always mean "bad credit".

A person with great credit, but cannot prove their income, might be classified as "subprime". A person with great credit, but who does not meet "traditional' lending terms, might be classified as "subprime".

When you have agressive sellers, as well as lenders working in a vertical real estate market, like California, as an example, was, a couple years ago. These buyers are racing to buy a home, on much evidence that the market will get away from them, if they do not buy now. The lenders came up with all these 80/20 loans, ARM's, Stated Income, etc, to entice people, and really sucker people, into believing they could afford homes, they would not be able to afford.

If the above is not bad enough, some of these lenders would re-contact customers, after $30 or $40k, further appreciation, and offer NO UP FRONT FEE refinances, with cash back. I have a friend who got hounded by the same lender for a refinance 4 times.
Can anyone say, PREDATORY LENDING? You can't believe how polished the sales pitches that went with it were.

Aggressive marketing is not predatory lending. Deceptive marketing is predatory lending. There is a difference.

I recall seeing ads for Quicken Loans. They were advertising ridiculously low monthly payments on loans. But if you read the fine print, it was an introductory rate of 2% or something like that, and it adjusts after the first 6 months. :Q I think the ads were intentionally deceptive, but on the other hand I think you'd have to be an idiot to not read and understand the terms of your loan - at least the basics like whether it's fixed or adjustable, when the fixed period ends, etc.

It just blows my mind how people can be so dumb with their money. :(
 

Vic

Elite Member
Jun 12, 2001
50,422
14,333
136
Originally posted by: mugs
I recall seeing ads for Quicken Loans. They were advertising ridiculously low monthly payments on loans. But if you read the fine print, it was an introductory rate of 2% or something like that, and it adjusts after the first 6 months. :Q I think the ads were intentionally deceptive, but on the other hand I think you'd have to be an idiot to not read and understand the terms of your loan - at least the basics like whether it's fixed or adjustable, when the fixed period ends, etc.

It just blows my mind how people can be so dumb with their money. :(

I agree. Those ads were IMO intentionally deceptive as means to advertise a "Pay Option ARM."
And yeah, the sad thing is that people can be so dumb with the money. And that so many banks and loan officers can be so dumb with matching their clients to the products they need.
For example, a negative amortization ARM ("pay option ARM") can be the perfect product for some borrowers... and the absolute worst for others. It all depends on the borrowers' needs.
The problem there IMO is in large part the "rate and fee" mentality of mortgage shoppers, as though that's all that matters when shopping for a loan.
 

Linflas

Lifer
Jan 30, 2001
15,395
78
91
Originally posted by: mugs
Originally posted by: Vic
Originally posted by: compuwiz1
The mortgage industry fscked themselves on this deal. Blame it on subprime borrowers all you want, but subprime does not always mean "bad credit".

A person with great credit, but cannot prove their income, might be classified as "subprime". A person with great credit, but who does not meet "traditional' lending terms, might be classified as "subprime".

When you have agressive sellers, as well as lenders working in a vertical real estate market, like California, as an example, was, a couple years ago. These buyers are racing to buy a home, on much evidence that the market will get away from them, if they do not buy now. The lenders came up with all these 80/20 loans, ARM's, Stated Income, etc, to entice people, and really sucker people, into believing they could afford homes, they would not be able to afford.

If the above is not bad enough, some of these lenders would re-contact customers, after $30 or $40k, further appreciation, and offer NO UP FRONT FEE refinances, with cash back. I have a friend who got hounded by the same lender for a refinance 4 times.
Can anyone say, PREDATORY LENDING? You can't believe how polished the sales pitches that went with it were.

Aggressive marketing is not predatory lending. Deceptive marketing is predatory lending. There is a difference.

I recall seeing ads for Quicken Loans. They were advertising ridiculously low monthly payments on loans. But if you read the fine print, it was an introductory rate of 2% or something like that, and it adjusts after the first 6 months. :Q I think the ads were intentionally deceptive, but on the other hand I think you'd have to be an idiot to not read and understand the terms of your loan - at least the basics like whether it's fixed or adjustable, when the fixed period ends, etc.

It just blows my mind how people can be so dumb with their money. :(

The proper way for the market to deal with this is for the ignorant people who took out these loans and the companies that were dumb enough to make the laons suffer the consequences of their actions rather than being bailed out by the government.
 

mrzed

Senior member
Jan 29, 2001
811
0
0
Originally posted by: Vic
Originally posted by: mrzed

Who loses? Who is bailed out? Not the poor person because they don't actually own anything. It is the lender, who owns $400,000 of bad debt that is being bailed out.

I agree in part with your point, that irresponsible lending practices are to blame and the lenders should (and no doubt will) take the brunt. I disagree with your emotional claim however of the "poor person" buying a $400k home with 0% down. Subprime lending is still subject to the same disclosure laws and regulations as all other residential lending. The borrower still has to sign at closing until their arm falls off. If a person can sign documents 200 times without bothering themselves to read or understand what they signed, I have no sympathy for them.

I was using poor person somewhat facetiously, as this thread has been all about the potential bailout of the poor, whereas I think the proposed bailout would be for the over-extended (and stupid, to some degree), and the institutions greedy and shortsighted enough to lend to them.

I have only slightly more sympathy for the debtors than the lenders in this circumstance. Both should know better, but for the first, it is their responsibility, for the second, it is also their job. In absolute terms, I have little sympathy for either.
 

mugs

Lifer
Apr 29, 2003
48,920
46
91
Originally posted by: mrzed
Originally posted by: Vic
Originally posted by: mrzed

Who loses? Who is bailed out? Not the poor person because they don't actually own anything. It is the lender, who owns $400,000 of bad debt that is being bailed out.

I agree in part with your point, that irresponsible lending practices are to blame and the lenders should (and no doubt will) take the brunt. I disagree with your emotional claim however of the "poor person" buying a $400k home with 0% down. Subprime lending is still subject to the same disclosure laws and regulations as all other residential lending. The borrower still has to sign at closing until their arm falls off. If a person can sign documents 200 times without bothering themselves to read or understand what they signed, I have no sympathy for them.

I was using poor person somewhat facetiously, as this thread has been all about the potential bailout of the poor, whereas I think the proposed bailout would be for the over-extended (and stupid, to some degree), and the institutions greedy and shortsighted enough to lend to them.

I have only slightly more sympathy for the debtors than the lenders in this circumstance. Both should know better, but for the first, it is their responsibility, for the second, it is also their job. In absolute terms, I have little sympathy for either.


Only a few people mentioned poor people. I don't know about others, but I assumed most of the people with these mortgages are middle class.
 

yuppiejr

Golden Member
Jul 31, 2002
1,317
0
0
This is just the beginning of the wealth redistribution that our friendly house and senate majority are going to bring to the American taxpayer. First we forced lenders to offer products to risky borrowers to avoid discrimination suits... and now these people are defaulting on their loans (suprise!)... and they want to bail these people and their lenders out?!?

Let the market adjust itself, lots of defaults will help slow the rising housing market prices, flush the deadbeat borrowers out AND kill off the bottom feeder lenders. There are already government programs to help first time/low income home buyers via Fanny Mae and the FHA.