Dammit. I'm sick and tired of the VICTIMS being blamed for the economic crisis.

[rateyes]

It wasn't mortgages being taken out that caused this crisis. It was the unregulated buying and selling of credit default swaps. The fuckers loaned money on intentionally inflated prices on homes with terms that looked good up front but allowed to change over time.

Then, using credit default swaps, these fuckers placed bets that the mortgages would fail. And, then they rigged the economic system to INSURE that they failed so that they could collect on their "bets." But, they weren't really "bets." The game was fixed. They were using loaded dice.

Wall Street scammed people out of their homes, and made a fucking fortune by causing misery---putting people out of work, jacking up mortgage payments, etc.

Now, the Repukes are trying to blame it on the law that makes it easier for the working class to get loans. Assholes.

As far as I'm concerned, the thieves that scammed the American people can go to hell. Go straight to hell. Do not pass go. Do not collect $200.

Motherfuckers.

[w8liftinglady]

1. exactly-I was accused by a local Repub of having my head in the sand

for blaming Gramm and his cronies for a lot of this crisis.

[MadMaddie]

2. I heard about some study the other day that said something like 65%

of the homeowners stuck in these balloon loans qualified for standard fixed rate loans. The mortgage industry pushed them into these bad loans with lies and bigger profit margin in their minds.

No, I blame the fucking industry for this.

No bailout package for the corporations.

[FreakinDJ]

10. can you share that link

I've been looking to find that for myself

[MadMaddie]

18. I heard it on Rachael Maddows or Thom Hartman show I think

I have been looking for the information site. I will keep looking it's out there somewhere I will send it to you.

[rainbow4321]

29. Tell that to Palin..she is blaming homeowners' "poor decision making"

Saying they should notbe "rewarded" for THEIR poor decisions!

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4091150&mesg_id=4091150

[dana_b]

3. do not pass GO, do not collect $700 BILLION dollars! n/t

[kirby]

4. If you think every homeowner is a victim, then you are distorting history...

While, I do not believe the crap about 'poor minorities' are to blame, I do believe that this is a very complex problem. People who continued to buy overpriced houses and then kept refinancing over and over to cash out equity like an ATM machine are partly to blame.

Yes, Credit Default Swaps was a nightmare in the making and shares a lot of blame. But people buying houses that were 50-100% overpriced on teaser adjustable rates with no money down was a major cause of the issue.

[PSPS]

Yours is the most succinct and accurate description I've seen on DU

However, you left out another component: The HELOC's these pea-brains took out between the re-financings! After all, what good is that over-priced bungalow with newly installed uranium counter tops without a hummer and mercedes (or two) in the driveway?

[kirby]

22. Home Equity Line of Credit (HELOC) and Alt-A are evil...

You are absolutely correct. A lot of people took out HELOC as second and/or third mortgages based on simply getting a reappraisal of their bubble inflated house. I know this, I've got relatives who did this several times. Each time rolling all the 'fees' and 'closing costs' back into the loan so each time they own more and more. HELOCs are tied to the prime rate and can change much more wildy than a regular adjustable mortgage rate. Most HELOCs dont have upper interest rate caps either, unlike ARMs.

The Alt-A loans which allow someone to get a loan without income verification or to pay interest only became popular too. It allowed someone to impulsively grab that 'dream house' knowing they could not afford it, but hoping things would get better in the future years when the rates/terms of the loan reset. Alt-A have become popular in the past few years and I dont think those have started to fail yet like the subprime. Alt-A is the next disaster in the pipeline.

I do think we need strong consumer protections against these loan. They simply should not be available. The dumbest thing is that home interest rates have been at historical lows. So anyone with common sense knows that the adjustable loans are only going to go up.

[liberalmuse]

5. How hard is it to say, 'Pre-da-tor-y Len-ders'?

And I guess I'm ignorant, because I didn't really know people were trading worthless pieces of paper and betting on bad loans until the crisis. Wow, wtf kind of cynical capitalism is this? And some who knew this wonder why the system is in a state of collapse?

[bluedeminredstate]

6. Nice rant.

Of course you are absolutely right and it just sucks all the way around. The fact that the victims will be punished while the perps get a stupendous free gift from the US Treasury is enough to make you want to throw something large out the window - like the TV that broadcasts repug talking heads all day long.

[FreakinDJ]

7. Thanks for speaking the Truth

even on this board we keep hearing "I don't want to Bail out the Speculators" (meaning Home owners)

Didn't George Bush direct regulators NOT to interfer with his ownership society

[On the Road]

8. If a Homeowner Takes Out a Bad Loan,

he or she is responsible for the personal consequences of his or her actions.

If a million homeowners make the same bad decision, it's a fault of the lender for not screening them properly, selling them en masse under false pretenses, and ultimately putting the entire credit market at risk.

[FreakinDJ]

14. like if the "Broker LIES to them"

Already Law Firms are directing their attention to these "Misrepresented Home Loans" with HUGE results

That is what a big part of this bailout is going to cover is the "Litigated Loses" not covered by Default Swaps

[screembloodymurder]

9. Since it's our fault, I think we should stand up like men and take the blame.

Give us what we got coming. No bailout!

[rateyes]

13. Good point.

[FreakinDJ]

16. AGREED

[Kutjara]

11. It's a classic "kite" con.

One of the oldest con tricks in the book is the "kite" scheme, in which the con man sets up a shell company, opens a series of bank accounts in the company's name, puts a little money into one of them, and then makes the money circulate around all the accounts. After a while, each of the banks in the circle think the "company" is a thriving business (since it's got "income" and "expenses"), and start lending it money. The con man then sends this borrowed money flying around the circle, too. The banks think the company is growing, so they lend it even more money. And so on until the pot grows big enough for the con man to withdraw and disappear.

For much of the past decade, our whole economy has been a kite scheme on a grand scale. Money has been whizzing around exotic financial products, unsupported by real economic growth. With each circuit around the financial system, the pot has grown larger and larger, until now we're left with not only a few trillion dollars of bad loans, but $62 trillion of Credit Default Swaps and God only knows how much more in other derivatives.

What we've been watching during the past few weeks is the first few con men taking their money and walking away. Just wait until the guys holding the $62 trillion decide to cash in.

[rateyes]

17. Congress should pass a law (when Obama is elected and it won't get vetoed)

that make all credit default swaps null and void.

[redqueen]

12. Is it Reagan babies? Cause I'm seeing it in my peers and it's making me sick.

The first people rolled out for blame are consumers. Not just homes, but credit cards, and lifestyle in general.

People seem unwilling to see how one precipitated even the POSSIBILITY of the other.

Honestly I'm extremely pissed with these people. How $&#%&#$(@ STUPID do you have to be to buy that RUSH LIMBAUGH-GRADE BULLSHIT!

Sorry. Seriously pissed.

[Greyhound]

15. Everybody knew that these loans were fraudulent and they also knew

that someone would end up holding the bag, they just thought it wouldn't be them.

This bailout, for bailout it is no matter how tortured a spin they try to hide it under (the bullshit excuses and fraudulent, often made up, figures they are flooding the debate with), is nothing more than securing the obscene profits these companies extracted.

Blaming the victims is an effective, time-honored, strategy. Until it stops working it will continue.

[creeksneakers2]

19. I suspect house flipping speculators

are more involved than we've been told. I remember reading at the height of the housing market, one in four sales was to a speculator.

[Snarkoleptic]

27. When I ran a major wholesale operation, we'd frequently have

investors buying 4-5 homes at a time. It was not uncommon to see applications for people who owned 50-60 homes.
Many times they were involved in 'buy homes with no money down and get cash-back at closing' schemes.
Settlement agents aren't often fingered for involvement, but lots of the fraud couldn't have been done without their cooperation.

[Irish Girl]

20. ...

I'm shocked and amazed how the mainstream media keeps lying to us. The subprime mortgages didn't cause this, although they were certainly a trigger. What wiped out Wall Street in a almost a day was an enormously dangerous derivatives bubble exploding. (for those who don't know what derivatives are, they're essentially bets.. gambling.) These guys were acting like casinos and gambling with money they didn't even have! When a 'too big to fail' institution has only a billion in assets and yet TRILLIONS in derivatives, you know something is seriously god damn wrong. These criminals rode this pony until it died underneath them.

[iamjoy]

21. Well, They Do Have Some Responsibility

I mean, let's face it, they were eager to own a house (or a more expensive home) and didn't think they could afford it. Some one comes along with a creative mortgage scheme that makes them think their dreams will come true so the home buyer grabs it. They did't read the fine print of the contract and were too trusting of the mortgage broker who reassured them it would be okay and the real estate agent who was convinced and convincing that home prices could only go up.

But see, wanting a nice home for your family is normal - especially when rents are so high mortgage payments seem reasonable by comparison. Taking a bad mortgage deal was foolish of them. But you know, I think all of those motivations are very human and understable (and don't we all make mistakes).

Don't misunderstand me, I think by far most of the blame rests with the mortgage companies coming up with these bad deals and the government not providing more oversight, but that doesn't mean that some of these people in this situation have no responsibility for getting there.

My husband came to me talking about how e could get an interest only mortgage or ARM and I said "Hell, no." But I know people who did that and their motivations seemed good at the time. They're managing to keep their home (they couldn't sell it), but it's a real challenge for them and they had to make a lot of other sacrifices. Also, my friend went back to a high stress job against doctor's advice.

Responsibility and blame are different things. If you don't lock the door to your house and someone takes your stuff, you're partially responsible. But the person who took your stuff is still to blame. At worst, you were careless or foolish (or maybe naive). The thief was completely wrong.

[knitter4democracy]

23. I completely agree. If it were only mortgages, we'd survive it all just fine.

If all those banks were in trouble purely and solely because of giving out mortgages that were too risky and were defaulted on, we'd be fine. Most banks built in enough safeguards, just in case.

It's the bundling of all those mortgages into "securities" (misnomer if I've ever seen one) and selling off of the debts and then betting on the debts defaulting that's gotten everyone into trouble.

In other words, it's not the fault of someone who went into the bank and took the best deal they offered because it was what they could afford at the time. It's the fault of brokerage houses and banks for making a huge mess of things.

[Snarkoleptic]

25. I've been in the industry for 22-years and here's my take.

The chain of blame-

The Federal Reserve...for lax monitary policy (in hopes of having the housing sector spur the economy)

Wall Street...for their greed in greenlighting a mindbending expansion of exotic products (esp. in subprime and Alt-A)

Bond Rating Firms...who were asleep at the switch and consistently mis-rated CDO's and MBS's as 'investment grade'

Lenders...for responding to Wall Streets open floodgate by reducing underwriting standards to a cursory overview

Investors...for using the lenders easy money to play a risky game of specualtion in real estate

Borrowers...many buyers lied about their income, job history, and intent to occupy the property (Lenders turned a blind eye to this as well)


There are bad apples in any industry, but the overwhelming percentage of brokers are decent, moral people who look out for their clients best interests.

Mortgage brokers perform a valuable service and can use wholesale 'backchannels' to get a less expensive, more suitable loan than most local banks.

As a mortgage broker, I specialize in mortgage planning and go beyond the loan application to find out what the borrowers short and long term goals are.

Try getting solid mortgage planning advice and a competitive rate from the clip-on tie-wearing industry newby $25K/year loan clerk at the bank.

[kirby]

30. You (mortgage brokers) are part of the problem...

Mortgage brokers are a 'middle man' who takes a piece of the pie and adds very little value. In the past, that 'clip-on tie wearing industry newby' at the local bank was actually concerned about the ability of the potential borrower to repay because it affected their reserves.

Mortgage brokers thrive on volume! Getting people to refinance over and over increases that volume. Coming up with 'creating planning advice' is mainly how can I pair you with someone who will underwrite you regardless of your ability to pay. I blame your so-called industry as well.

[Snarkoleptic]

31. Painting with a broad brush, Kirby! I'm not part of the problem.

Allow me to enlighten you.
Banks want nothing more than to use their retail channels to corner the market from A-Z.
When they are the only game in town, the borrower has fewer options and they control rates, programs, fees, etc.

Bank loan officers can only offer what their bank-employer has a risk appetite for.
This often results in borrowers being placed into whatever the bank offers(think square peg, round hole).
When the only tool you have is a hammer, everything looks like a nail!
Some banks have an appetite for commercial loans, some like construction loans, some like Fannie Mae, some like Freddie Mac, some like FHA, some specialize in first time home-buyers, etc.

Here's where reputable brokers add value.
We save the borrower money and find the lender whose appetite most closely matches the borrower's profile.
Brokers have access to wholesale back-channels with major lenders, which is why I will ALWAYS beat bank retail pricing on rate, fees, and APR. If a bank employs 100 loan officers, they are paying them a salary, benefits, and maintaining desk space for them even when rates go up and few loans are written. A broker OTOH is a hired-gun who brings the bank a complete package and is only paid after jumping through all of the hoops.

As for the bank loan officer being "concerned about the ability of the potential borrower to repay because it affected their reserves", most banks securitize and sell their loans on the secondary market. The fact of the matter is that securitization and
"whole loan sales" create liquidity, but promotes risk since the lender is not stuck collecting payments when the risk is transferred.

Thanks for assuming that I add no value, lack morals, and don't have the customer's best interest in mind.
Your post is cynical, accusatory, and lacks understanding of the fundamental issues confronting the industry.

The banks are a great option if you like shopping at the company store.

[kirby]

32. IMO, you give mortgage brokerage industry too much credit...

I agree that the mortgage brokers have access to more underwriters. But in general that is the only real value added. You do know that the mortgage/banking industry did just fine before securitization was invented (not too long ago). Securitization really grew out of the last crisis (S&L bailout). The Resolution Trust Corp needed some way to sell/liquidate the S&L assets and securitization really grew.

I still believe the only value added by mortgage brokers is that they have access to some extra websites/software to submit loan information to get multiple rate bids. Yes, it lowers rates, but it could be done without the mortgage broker 'gatekeeper'.

As I said before, brokers get paid on volume, not salary. That creates the incentive to get people to refinance over and over. While you criticize banks, there have been plenty of examples of mortgage brokers getting illegal kickbacks to steer borrowers to specific lenders. That limits choices and doesnt result in the best deal either. It is pretty common for misleading advertising by mortgage brokers too. They quote rates that look really low, but then add in extra points or fees or require you use some higher priced settlement company that negates the savings, etc.

There are good and bad apples in every industry. But mortgage brokers earning 6-figure salaries for punching some numbers into a computer just doesn't seem like a good system to me. Of course when real estate is in a bubble people don't care about giving everyone a slice of action.

Just my opinion...

[Snarkoleptic]

33. You're still stereotyping....

Lots of scumbags entered the arena in 2004-2006 because there was big money to be made.
The industry has shed over 180,000 jobs in the past 2 years and the get-rich-quick noobs have returned to selling used cars.
I am delighted that the shakeout has forced these people out of the sector as they gave the pros a bad name.

The fact that we brokers are paid on volume is exactly why we work harder.
During times of peak volume, I worked 70-hours a week for a solid year.
Once again, an experienced broker will ALWAYS beat a bank on rate, fees, and APR.
How is this not adding value?

As for your statement that brokers earn 6-fig's for punching some numbers into a computer, try getting your bank loan officer to meet at your kitchen table at 8:00 in the evening. I've found myself at 10:00 PM on a Friday in a rough neighborhood because of my committment to closing a loan (and yes...getting paid). You will never see a 9-5 bank LO at the downtown social security office getting a borrower-authorized award letter.

[knitter4democracy]

34. Up here in Michigan, most foreclosures weren't speculators.

Our home prices weren't going up that much during the bubble. People losing their homes now are hard-working Americans who lost their jobs and can't find anything to replace their income to the same level or who did but have to drive a long ways to get to that job and now have gas and higher food prices doing them in.

I'm sick and tired of seeing people here say that it's all because of borrowers trying to flip homes. That's not what's going on here, and I would argue, not through much of the country, just the most pricey markets.

You're right, though, in that everyone at the top who was supposed to make sure everything was legit and safe dropped the ball. I just don't think they should get rewarded for that.

[patrice]

24. Subsidizing Drug Pushers and letting them operate on every street corner uninhibited by

any controls and then 100% blaming the addicts for being addicted is out of touch with the financial realities of our lives.

A DRUG metaphor is not far from the TRUTH.

$$$$$ and Property ARE what define the VALUE of our LIVES. So are people to be solely blamed if they succumed to the visceral attractions of "acquiring" more VALUE, not only in their own eyes, but also in the eyes of their friends and associates?

[Fla Dem]

26. I live on the Florida East Coast. Building new units...SF Homes and Condos exploded in the late 90

through to the late 2000's. Hell they were still breaking ground on new developments in early 2007. Never mind buying older homes and fixing them up to flip, people went crazy buying condo units before they were even finished. There wasn't even any models yet, people were buying based on floor plans. New condo developments had signs that said "sold out" before they even broke ground. In some cases, UNFINISHED UNITS WERE RESOLD BEFORE THEY WERE FINISHED. Many were bought by realtors and speculators. They artificially drove up the prices. Their sole purpose to flip at a higher price than they bought. Unfortunately, there became such a glut of these homes for sale, people couldn't unload them. Prices became too high for regular people to buy. If they did, they are now stuck with a home/condo worth less than their mortgage. In one condo development, (one of the ones sold out before ground was even broken,) they have to impose a special assessment on the remaining owners because so many are in foreclosure, they can't collect enough condo fees to keep the place up.

Don't even try to tell me this is the result of opening up the housing market to lower income people. This whole mess is caused in large part by speculation and deregulation. Nothing more and nothing less.

[knitter4democracy]

35. That kind of thing didn't happen everywhere, though.

I never saw that kind of crap up here in Michigan--never even heard of it. Heck, most new housing developments still have huge empty spaces because they couldn't sell all of the lots, let alone get people to build on them.

[TahitiNut]

28. When the wealthy bet on failure, failure is guaranteed.

:shrug: Scorched earth predatory capitalism is running the show.

[iiibbb]

36. Every player bears some of the blame... finger pointing is useless.

If had to rank them...

1) Real-estate industry causing the bubble... brokers who talked people into riskier loans and situations... home appraisers... house flippers.

2) Wall-street for burying the risk and lobbying congress to create these conditions.

3) Bush Administration and Republican congress who had 6 years of total control to regulate this mess, but pave the way instead (under influence of lobbyists)

4) Borrowers who got in over their heads by stretching themselves in order to get into riskier situations (i.e. using an ARM to get into a house that you wouldn't have gotten into under a 30-yr mortgage). Yes they were talked into it, but in some ways they allowed themselves to be talked into it. If something sounds too good to be true, it probably is. Ultimately it is your own responsibility to understand to the contracts you enter. You should always be asking "how can this deal blow up in my face".

5) Clinton for the push by sponsoring the programs. This is mostly token blame. I think it was admirable to try to get lower-income people into home ownership, and who could foretell how the program would be distorted... but I would be remiss not to put him in here. He could've asked "how can this blow up in our face"

[live love laugh]

37. In Bizzaroworld, the victims are blamed for everything--remember Katrina? n/t