Obama, Making Homes Affordable

[Obsessed]

IWith that being said, I think your post is right on. I started with First Franklin as an underwriter to be bought out by National City bank then Merrill Lynch. We wrote sub-prime loans only. The last 6 months we were open we started with Alt-A business. At least 90% of the loans we did were interest only ARMS. Average credit score was maybe 610. I know my hand was forced more times than I could count to approve a loan that was not good. One time in particular I wanted to walk out. I was forced to compete a loan for a gentlemen who sent in fake employment verification. Ask me how did I know. The man worked in the same Ford plant my husband did. My husband worked up until the last half Wednesday the plant was opened, later it was leveled. My borrower still worked there though. He just happened to get the wrong underwriter. I was not allowed to deny his loan since my knowledge was from personal knowledge. If you lived in St. Louis you knew, it was on the news and in every paper. I still had to do the loan. I am sure it defaulted shortly after.

Fake employment verification? The guy should have gone for a "stated income" loan. Yes, it's just what it sounds like, and there were a lot of them for a while.

 

[razorrookie]

Also, you cannot blame Obama for this. He has to clean up, but the real problems mostly trace back to rhe repeal of Glass-Steagall in the Clinton administration. Before you lump Clinton, remember that there was a Republican Congress at the time. The repeal lasted through the Bush administration and a Democratic Congress. I don't see any clean hands around here, no matter what side of the fence you're on.

How to fix the mess? You got me. I don't see any good options. We're not through this yet, either. So far, only subprime melted down. Commercial is going under at the moment. Option-ARM and Alt-A are going to go radioactive in late 2011 through 2012. That's going to drag down prime. Oh, and corporate bonds are going to roll over around then, too.

Well said sir, better than my apathetic fingers could say it.

 

[OldSchoolYoungin]

Another lawyer here. No, I'm not licensed in Missouri and cannot give you legal advice. However, I practiced bankruptcy for a bit and I would strongly recommend visiting a bankruptcy attorney. Even if you don't intend to file, someone who deals in bankruptcy will know how to handle the situation.

Don't be afraid of default. I'm not saying you should (again, talk to a lawyer), but default is an option very few consider while it often has the most attractive consequences. I can't say if that's right for you, but be sure to ask your lawyer about how default would play out compared to continuing payments, bankruptcy, etc.

The reality is that the marke will not recover. Everything is still grossly overvalued in most of the country. The way to tell if a property is overvalued is whether rent would cover the mortgage and taxes, with a bit of profit. If rents are far below the mortgage, watch out. The difference is that rent is a measure of what people can actually pay while a mortgage is a measure of how much you can borrow. With all the tricky and shady loans, the amount that could be borrowed decoupled from reality. Everyone loved it. Banks got fatter fees, homeowners could take out equity for fancy cars and vacations, and so on. But all bubbles eventually burst.

The problem now is that we're still not quite living in the real world. Part of this is because banks lend based on their assets. If that asset base shrinks, so does the amount they can loan. If the ratio goes underwater, the bank gets taken over by the FDIC. This is why they gamed FASB into dumping mark-to-market. In other words, you used to have to value assets at market rates. Now you are free to just make up numbers for assets. Yeah, they really did that. So almost every bank now has fake numbers and would probably be insolvent if their assets were valued correctly.

Add to that the bizarre shadow inventory of real property and the fiat money. Something like 70%-80% of foreclosed/delinquent property is being held off the market. This has been used to "demonstrate" that things are "recovering" and to squeeze some price gains in a market here and there. But it's not. A $400k house in a so-so neighborhood in LA just doesn't fly, even if it's off a peak value of $650k, because the same place sold for $130k 12 years ago. Salaries have stayed flat for some time - the boom was from using creative mortgages and people drawing down home equity to purchase goods. There wasn't any real economic expansion at all.

Also, you cannot blame Obama for this. He has to clean up, but the real problems mostly trace back to rhe repeal of Glass-Steagall in the Clinton administration. Before you lump Clinton, remember that there was a Republican Congress at the time. The repeal lasted through the Bush administration and a Democratic Congress. I don't see any clean hands around here, no matter what side of the fence you're on.

How to fix the mess? You got me. I don't see any good options. We're not through this yet, either. So far, only subprime melted down. Commercial is going under at the moment. Option-ARM and Alt-A are going to go radioactive in late 2011 through 2012. That's going to drag down prime. Oh, and corporate bonds are going to roll over around then, too.

I don't know what will happen. But it sure doesn't look good. Nothing will improve until real property reaches *normal* valuation (check the Case-Schiller index for a shot of reality) and bank assets are based on real-world measures.

^ This.

 

[Wendy]

Fake employment verification? The guy should have gone for a "stated income" loan. Yes, it's just what it sounds like, and there were a lot of them for a while.

We charged a higher interest rate for stated programs. All it took was a fussy loan officer to call our branch manager and everything would be "fixed". Big companies want their big money.

 

[patrisVII]

We can't blame Obama for creating the mess of course, but we can and absolutely should blame him and the current congress for prolonging and worsening the situation.

More cheap money and more government absorption of financial risk and/or unproductive ventures is NOT the way to end the current problem or prevent a recurrence.

Full disclosure: I support neither party and I will make no secret that I do despise almost everything Obama stands for as a Democratic Politician, but I would have expected the exact same policies from a McCain administration (well maybe not exactly the same, because the Democratic congress would have been screaming to the heavens about the dangers of huge deficits if McCain were POTUS - think back to the change in Republican budget rhetoric from Clinton to Bush).

 

[razorrookie]

+1, sad but true that we're so jaded about our political system/admistrators.

 

[jazzman]

We can't blame Obama for creating the mess of course, but we can and absolutely should blame him and the current congress for prolonging and worsening the situation.

More cheap money and more government absorption of financial risk and/or unproductive ventures is NOT the way to end the current problem or prevent a recurrence.

If you're talking about the bailout, in general, I think it's too soon to tell. And since we can't go back in time and try to deal with the crisis by doing nothing, we probably will never know whether doing nothing would have been better. But let's not forget that the first bailout came from ole whatsisname who preceded President Obama, along with help from our geniuses in Congress and their pals on Wall Street. Plenty of blame (or praise) to go around. And there's some possibility that the crisis is waning now.