Wall Street Housing Grab

[sandorski]

So I have a question. Who gave a 20-something with $15k in cash a loan for $850k.

IMO they should be on the hook for the $350k. They vouched for him being able to handle the asset.

It wasn't that long ago that one would need 10% Cash Down Payment for a Mortgage. I think this is a perfect example of how Wages and the Cost of Living have become grossly out of sync. Certain things have become cheap like small appliances and electronics, but Housing, something we actually Need, has become ridiculously expensive. Although radical, the Singaporean policy of Public Ownership of all Real Estate/Housing makes a good case for itself, at least to make things affordable.

 

[[DHT]Osiris]

It wasn't that long ago that one would need 10% Cash Down Payment for a Mortgage. I think this is a perfect example of how Wages and the Cost of Living have become grossly out of sync. Certain things have become cheap like small appliances and electronics, but Housing, something we actually Need, has become ridiculously expensive. Although radical, the Singaporean policy of Public Ownership of all Real Estate/Housing makes a good case for itself, at least to make things affordable.

Indeed, someone making a 'normal wage' nowadays can never save up enough 15-20k for an average home. I was 'lucky' enough to sell my soul to the govt, so I got a nice VA loan with no down payments. I was also 'smart' enough to get a car far more expensive than I could 'afford' that i put double payments on for two years. That gave me enough credit to actually get a decent VA loan.

 

[Bitek]

So I have a question. Who gave a 20-something with $15k in cash a loan for $850k.

IMO they should be on the hook for the $350k. They vouched for him being able to handle the asset.

When I bought my houses (2) in my 20s, I didn't just take whatever the bank offered me.

Why? Because I'm not a fucking idiot.
(Well, at least not for this... )

I actually planned my purchase based on my affordability, within a larger financial plan. (Mandatory savings, 401k contributions, savings for maintenance costs, protections in case of job loss.)

Made +50% on owning my first place, but I too had to buy the second house during same period (by selling first) and knew it was bubble money. How? Following the news and being educated, and not greedy.

So I put the bubble money we made into the 2nd house down payment (not remodels, vacations, toys), but did not even buy up to what we could afford, instead a bought a reasonable townhome (low maint costs) because we knew prices were running up and did not want to sink ourselves in an expensive house/boat anchor, as we were planning for kids.

Only years later did we move into a an affordable house of reasonable size and ability to maintain.

Once child care was over and kids were in elem school.

Once we built up careers and savings further.

We still lost a bit on the second place bought at height of the bubble, but loses were low, and more than paid for by the original bubble money.

We still have never dropped big or even med money on a remodel. Mostly diy stuff.

Is my kitchen outdated? F yes, but we need to save the money for college and retirement.
Priorities.

 

[ShookKnight]

Wall Street always was and will always be out of control.

Margin Call is a perfect example of how even when a firm has royally fucked things up, they just don't care. They care if they get caught or look bad trying to dump toxic mistakes. And, if you successfully infect a market with your garbage, to lower your own firm's exposure, you will get millions in bonuses... for fucking over everyone else in your industry, you are rewarded.

No, it's not Liberal Lies to paint the big bad investment firm as an awful Crapitalist Boogie Man... it's the truth; Wall Street is pure evil.

 

[Jhhnn]

So I have a question. Who gave a 20-something with $15k in cash a loan for $850k.

IMO they should be on the hook for the $350k. They vouched for him being able to handle the asset.

They followed the guidelines set by securitizers, the people who bundle loans into securities. If I hold 1000 mortgages, they're actually shown as liabilities on the books. If I & everybody else bundle them as bonds, I'll buy yours & you buy mine & we can all lie to each other & call them assets. We can all use them as collateral in the repo market to hold up our cashflows until nobody wants them & they become unpriceable. The only way liquidity was restored was thru unprecedented efforts by the FRB.

There was also a lot of double dealing, like this-

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

The hedge fund helped create mortgage-based securities, pushed for risky things to go inside them and then bet against the investments, resulting in billions in losses for investors and ultimately making the financial crisis worse. It’s a story of the perverse incentives and reckless behavior that…

www.propublica.org

Not to mention the ineptitude of greed-

This Bailout Made Bernanke Angrier than Anything Else in the Recession

The AIG bailout was $182 billion. But when the Treasury sold off AIG in 2012, taxpayers made a $23 billion profit.

www.thebalance.com

 

[[DHT]Osiris]

They followed the guidelines set by securitizers, the people who bundle loans into securities. If I hold 1000 mortgages, they're actually shown as liabilities on the books. If I & everybody else bundle them as bonds, I'll buy yours & you buy mine & we can all lie to each other & call them assets. We can all use them as collateral in the repo market to hold up our cashflows until nobody wants them & they become unpriceable. The only way liquidity was restored was thru unprecedented efforts by the FRB.

There was also a lot of double dealing, like this-

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

The hedge fund helped create mortgage-based securities, pushed for risky things to go inside them and then bet against the investments, resulting in billions in losses for investors and ultimately making the financial crisis worse. It’s a story of the perverse incentives and reckless behavior that…

www.propublica.org

Not to mention the ineptitude of greed-

This Bailout Made Bernanke Angrier than Anything Else in the Recession

The AIG bailout was $182 billion. But when the Treasury sold off AIG in 2012, taxpayers made a $23 billion profit.

www.thebalance.com

Exactly my point, those that benefited from the greed should have held the potato at the end. Unfortunately it was all subsidized because otherwise bad things would have happened to the people that had all the money at the end of the game.

 

[s0me0nesmind1]

So I have a question. Who gave a 20-something with $15k in cash a loan for $850k.

IMO they should be on the hook for the $350k. They vouched for him being able to handle the asset.

I would guess an FHA loan.

With such a low down payment, it's likely he had to be on Mortgage insurance - so the bank probably lost nothing.

I do overall agree that expecting competent people to read shit. I also expect people to pay their bills that they agreed to.

 

[[DHT]Osiris]

I also expect people to pay their bills that they agreed to.

You have to be careful with that one. I agree in principal, but if an 'expert' tells an ignorant person they can afford a thing, they're likely to believe that expert. Yes, responsibility falls on the person being ignorant, but responsibility also falls on the fraudster (that's exactly what they are).

 

[cytg111]

This happens everywhere lately, not just the US.
Soon it will be so that the people that makes the city go round wont have the means to actually live in the city.

 

[s0me0nesmind1]

You have to be careful with that one. I agree in principal, but if an 'expert' tells an ignorant person they can afford a thing, they're likely to believe that expert. Yes, responsibility falls on the person being ignorant, but responsibility also falls on the fraudster (that's exactly what they are).

I agree - but like Bitek indicates - this guy SOUNDS like a fucking moron.

Buying a beater home that is also $850k in a HCOL area? That's on you.
Taking what money/loans you DO have and instead of having a safety net you renovate? That's on you.
Having Children full knowing that you can estimate their costs (clothing, food, daycare)? That's on you.

I'm tired of the "banks and evil corporations are to blame for everything". Evil bank or not - all of these were decisions that anyone could have stopped and said "Wait, what the FUCK am I doing here?"

Even "shady" loans (that don't seem to be the case here) that people have complained about, with the amount of disclosures I don't understand how someone can sign a variable interest rate and not understand what they are getting themselves into. I will also defend variable interest rates because I have had one and it was hands down a damn good decision. They have their place sometimes.

 

[Bitek]

I would guess an FHA loan.

With such a low down payment, it's likely he had to be on Mortgage insurance - so the bank probably lost nothing.

I do overall agree that expecting competent people to read shit. I also expect people to pay their bills that they agreed to.

My first home we got an FHA with 3% down.
Lived with parents for a year after college to save up.

Easier to save 3% when house prices are lower, but we also bought a cheap townhome as a starter. Worked out extremely well for wife and I.

 

[thilanliyan]

My first home we got an FHA with 3% down.
Lived with parents for a year after college to save up.

Easier to save 3% when house prices are lower, but we also bought a cheap townhome as a starter. Worked out extremely well for wife and I.

It's definitely become harder for people to save for their first home. In Toronto where I live for example, house/condo prices have skyrocketed in the last ~5yrs, increasing much faster than wages.

Even if living at home with parents, trying to save the minimum 5% is difficult as it's a constantly moving (ie. increasing) target.

 

[Bitek]

It's definitely become harder for people to save for their first home. In Toronto where I live for example, house/condo prices have skyrocketed in the last ~5yrs, increasing much faster than wages.

Even if living at home with parents, trying to save the minimum 5% is difficult as it's a constantly moving (ie. increasing) target.

It can be hard. Implied in my story is that I had dual incomes with my wife. We also graduated at a time where college wasn't so expensive so we weren't saddled with debt (obviously not everyone goes to college tho.)

We also worked hard, and saved up all the money we could to do it. Worked overtime where we could, kept driving the beaters from college, no fancy trips, no big fancy wedding. Save save save.

It was a cheap place we bought too, so 3% wasn't that much money (was at the time to us, but not compared to us now.) Was a cheaper place in a not so great neighborhood. Affordable, but not scary, but did have a few dirt bag neighbors. Just needed a place to get started, build equity, and get the tax advantages. Build up to the nicer places when you can afford them.

However, I do def agree there needs to be good regulations on the loan practices so irresponsible buyers like in the OP can't bid up housing prices beyond what wages can support by getting outrageous loans and blowing it on houses they have no business buying.

Otoh, the bank ain't your mama, you have to be responsible for what you are getting yourself into.
You can't regulate stupidity out of the world.

All the other dumb decisions he made after the initial home loan was all on him.

 

[BUTCH1]

This is also similar to how wall st. $$ has been behind buying trailer park properties in the last 10 years, these people cannot readily move, (it cost's thousands to move the trailer to another park) and hit them with lot rent increases and slamming them with fee's on top. Captive audience is easily abused.

 

[mect]

We always like to blame the poor for their situation, try to make it their fault. However, the data doesn't support it.

 

[s0me0nesmind1]

We always like to blame the poor for their situation, try to make it their fault. However, the data doesn't support it.

Folks like you are simply the soft bigotry of low expectations.

Afterall, people are just FAR too stupid to understand simple things like multiplication of an interest rate... adding and subtracting expenses... and let's not forget title/payday loan places.


Get off the stupid pedestal of trying to defend morons by subconsciously calling them morons. It doesn't fix the situation and it doesn't fix the underlying cause.

 

[Vic]

Couple things: I'm not sure where the $350k being discussed here is coming from, California is a non-recourse state for purchase money mortgages. And the second part of the article is pretty damned tragic.

 

[Fenixgoon]

Folks like you are simply the soft bigotry of low expectations.

Afterall, people are just FAR too stupid to understand simple things like multiplication of an interest rate... adding and subtracting expenses... and let's not forget title/payday loan places.


Get off the stupid pedestal of trying to defend morons by subconsciously calling them morons. It doesn't fix the situation and it doesn't fix the underlying cause.

You realize it's called the cycle of poverty for a reason, right?

 

[s0me0nesmind1]

You realize it's called the cycle of poverty for a reason, right?

You do realize you're proving my point, right?

You're telling people they are incapable of learning. It's really that simple.

 

[Fenixgoon]

You do realize you're proving my point, right?

You're telling people they are incapable of learning. It's really that simple.

or there are systemic inequities that prevent people from getting out of poverty in the first place, despite their best efforts.

your explanation is not the only one. and there's far more data to support the systemic and cyclic nature of poverty than the theory that people are stupid.

 

[Bitek]

You realize it's called the cycle of poverty for a reason, right?

It's real, but at times mixed up with the vortex of stupidity:

From article:
"The house was $840,000. He put down $15,000 and sank the rest of his savings into a $250,000 bedroom addition and kitchen remodel, reasoning that this would increase the home’s value."

This is mind blowingly stupid. Darwin award levels of dumb. I'm trying to sympathize, but I just can't.

My parents both grew up poor, so did my wife's, but they didn't act so stupidly and they got out.

Any 30yo who buys a $850k house and had enough cash for $250k kitchen and bedroom isn't poor. He was greedy, lavish and dumb AF and got eaten by wolves.

 

[Jaskalas]

IDK how socialism is going to fix that,

My policy would act like a... protective barrier standing between our people and the predators.

• Basic Income.
• Federal Home Loan.

UBI would automatically pay into the loan program, ergo you cannot be evicted for non payment. Moreover, it'd be a public non profit entity. Cheap loan given the absolute zero risk to the lender.

 

[Bitek]

Let's not walk past the part that this couple were both assholes who sued each other for sole custody in the divorce instead of working out a joint agreement.

Dumb motherfker went to far to get his inheritance early to further fund his legal efforts.

Money would have been nice for the mortgage on the house you are all in on and can't afford... Let alone consider selling and moving...

Hopefully they have some money left for their children's counseling.

 

[Vic]

You do realize you're proving my point, right?

You're telling people they are incapable of learning. It's really that simple.

This seems pretty stupid. I agree with some of what you said here, particularly about the not-so-poor guy who squandered what he had through a series of poor decisions. However, while arguing against exploitation and oppression of human beings may sometimes be blindly idealistic, it is not nearly as simple as telling people they are incapable of learning. And in fairness, they likely believe that you, and those with like minds, are trying to take away the tools these people need in order to learn. Such as access to a quality education, or to fair and equal protection of the laws.
Not-so-poor guy IMO deserved to lose his house. He could have paid the mortgage but didn't. What he did not deserve was to spend the next 10 years being exploited by the corporate landlord that bought his house.

 

[mect]

Folks like you are simply the soft bigotry of low expectations.

Afterall, people are just FAR too stupid to understand simple things like multiplication of an interest rate... adding and subtracting expenses... and let's not forget title/payday loan places.


Get off the stupid pedestal of trying to defend morons by subconsciously calling them morons. It doesn't fix the situation and it doesn't fix the underlying cause.

Its funny that you are trying to portray the person as stupid that has facts and data supporting their position. Seems like the stupid person is the one that trusts his gut instincts over the facts. You do realize people have actually studied this problem, right? You do realize that countries with strong safety nets see far better results bringing people out of poverty, right? You do realize that socialist economies such as Sweden have significantly higher rates of social mobility, right. But hey, lets keep telling people who can't afford boots to pick themselves up by their own bootstraps.

A person that drowns from being thrown into a stormy ocean after just being taught to swim doesn't die by fault of being a bad swimmer, but by fault of stupid people who are hell bent on their perspective of teaching swimming being right despite mountains of data to the contrary.

You can project your own bigotry on others, but the reflection still reveals who you are.