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  • #61
    So without sub-prime mortgages, people who could have qualified for conventional loans would have gone to the conventional loans rather than sub-prime, which eventually blew up...
    "Only Nixon can go to China." -- Old Vulcan proverb.

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    • #62
      Originally posted by Shamus View Post
      Antimony,I found this in the Wall Street Jounal Real Estate Archives.

      Subprime Debacle Traps
      Even Very Credit-Worthy
      by Rick Brooks and Ruth Simon
      From The Wall Street Journal Online
      December 04, 2007

      One common assumption about the subprime mortgage crisis is that it revolves around borrowers with sketchy credit who couldn't have bought a home without paying punitively high interest rates. But it turns out that plenty of people with seemingly good credit are also caught in the subprime trap.

      An analysis for The Wall Street Journal of more than $2.5 trillion in subprime loans made since 2000 shows that as the number of subprime loans mushroomed, an increasing proportion of them went to people with credit scores high enough to often qualify for conventional loans with far better terms.

      In 2005, the peak year of the subprime boom, the study says that borrowers with such credit scores got more than half -- 55% -- of all subprime mortgages that were ultimately packaged into securities for sale to investors, as most subprime loans are. The study by First American LoanPerformance, a San Francisco research firm, says the proportion rose even higher by the end of 2006, to 61%. The figure was just 41% in 2000, according to the study. Even a significant number of borrowers with top-notch credit signed up for expensive subprime loans, the firm's analysis found.

      Shamus,

      Thanks, thats the one

      Originally posted by gunnut View Post
      So without sub-prime mortgages, people who could have qualified for conventional loans would have gone to the conventional loans rather than sub-prime, which eventually blew up...
      Pushing a borrower towards subprime would mean extra fees and other nasty terms and conditions. When I was banker I used to have a fees target, separate from my interest targets. A "less than honest" lender would definitely push a borrower (who does not know any better) towards such a loan, probably by stoking the borrowers fear that he/ she would nnot be eligible for a normal loan.

      High fees on top of a high interest can definitely push a borrower over the edge.

      By the way, shame on the borrower's too, for going beyond their means to buy more expensive homes.

      And shame on the regulators for not doing their job of protecting depositors and taxpayers interest
      "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

      Comment


      • #63
        Originally posted by gunnut View Post
        So without sub-prime mortgages, people who could have qualified for conventional loans would have gone to the conventional loans rather than sub-prime, which eventually blew up...
        Or, the people that did subprime and could not qualify for conventional would have never gotten a mortgage to buy a house to begin with, removing buyers from the system, and the bubble would have popped earlier and at a lower and less harmful price level.

        This is not just a subprime problem. I've seen some mortgage-backed security pools; prime, Alt-A, and subprime, all have delinquet mortgages. A WaMu employee passed on the performance data of an Alt-A pool to one blogger. The pool has an average FICO score of 705 and a foreclosure rate of more than 13%, and this was back in February, 8 months after the pool's mortgages were issued in May 2007.

        Read further and see screenshot here: Mish's Global Economic Trend Analysis: Evidence of "Walking Away" In WaMu Mortgage Pool

        Let's do the math.

        The total pool size is $513,969,100.
        $476,069,000 was rated AAA.
        92.6% of this cesspool was rated AAA.
        Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!
        Last edited by rj1; 16 Sep 08,, 04:34.

        Comment


        • #64
          Am I to understand that there is no regulatory agency over financial institutions?

          Why have govt at all if it allows a free for all in the name of capitalism?

          This is nothing short of financial anarchy.


          "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

          I don't have to attend every argument I'm invited to.

          HAKUNA MATATA

          Comment


          • #65
            @RJ1

            If you have any good books, regarding the discussion at hand. Feel free to let us know.

            I know this is ongoing crisis, but if any book names comes to mind or good reference (I prefer books), please do post away.

            Thanks in advance

            Comment


            • #66
              Originally posted by Ray View Post
              Am I to understand that there is no regulatory agency over financial institutions?

              Why have govt at all if it allows a free for all in the name of capitalism?

              This is nothing short of financial anarchy.
              Sir,

              The USA has a very fragmented Banking and Financial sector with regulatory authorities both at the Federal and state levels. Apart from financial regularion (reserve ratios, prudential lending norms, KYC norms and so on), the USA also has "social" regulations like HMDA and Equal Credit Opportunity regulations. This sometimes may result in conflicting goals for financial insitutions.

              From the regulatory institution point of view there is Federal Deposit Insurance Corporation or FDIC, which insures bank deposits. There there is the Federal Reserve Board (like our RBI), the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (for thrifts, a peculiar type of financial institution focussing on savings and home loans). There is also the National Credit Union Administration, which administers Credit Unions (analogous to our cooperative banks).

              The wiki website will give you a general idea

              Bank regulation in the United States - Wikipedia, the free encyclopedia

              As I said, I think someone was sleeping on their job
              "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

              Comment


              • #67
                Originally posted by rj1 View Post
                RJ1
                Great find.
                It validates the WSJ theory. Also, anything to do with WaMu is of great interest to me
                "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

                Comment


                • #68
                  Originally posted by antimony View Post
                  Sir,

                  The USA has a very fragmented Banking and Financial sector with regulatory authorities both at the Federal and state levels. Apart from financial regularion (reserve ratios, prudential lending norms, KYC norms and so on), the USA also has "social" regulations like HMDA and Equal Credit Opportunity regulations. This sometimes may result in conflicting goals for financial insitutions.

                  From the regulatory institution point of view there is Federal Deposit Insurance Corporation or FDIC, which insures bank deposits. There there is the Federal Reserve Board (like our RBI), the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (for thrifts, a peculiar type of financial institution focussing on savings and home loans). There is also the National Credit Union Administration, which administers Credit Unions (analogous to our cooperative banks).

                  The wiki website will give you a general idea

                  Bank regulation in the United States - Wikipedia, the free encyclopedia

                  As I said, I think someone was sleeping on their job
                  Thanks.

                  Rub so giyasi Bhang pi kar! :))

                  I have very little knowledge of all this and so your link will be helpful.

                  The keeling over of Merril Lynch, Lehman Brothers and maybe AIG has made Indian finances go into a tizzy!

                  It must be real serious since the news on TV is solely devoted to this and the frontpages of newspapers have five column thick on this issue.


                  "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

                  I don't have to attend every argument I'm invited to.

                  HAKUNA MATATA

                  Comment


                  • #69
                    Originally posted by Ray View Post
                    Thanks.

                    Rub so giyasi Bhang pi kar! :))

                    I have very little knowledge of all this and so your link will be helpful.

                    The keeling over of Merril Lynch, Lehman Brothers and maybe AIG has made Indian finances go into a tizzy!

                    It must be real serious since the news on TV is solely devoted to this and the frontpages of newspapers have five column thick on this issue.
                    All this is on top of an easing of oil prices, so you can imagine the way the market perceives this.

                    It is a crucial time for the Indian IT companies too. On one hand they risk losing business wholesale if one their key clients (Merryll Lynch, for e.g.) keels over. On the other hand, the US banks are trying to shift a lot of their IT stuff offshore, so if any Indian IT player is in the right place at the right time then they may stand to gain a lot
                    "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

                    Comment


                    • #70
                      Wow! For once i actually predicted something correctly.
                      Way back in the mists of time i said that after Bear the sharks were circling Lehman.
                      This seems to be both threat and opportunity for Indian COs.
                      If they can weather the loss of clients due to this downturn, they may be able to pick up business when American companies start cost cutting and restructuring as a response to lean times.
                      For Gallifrey! For Victory! For the end of time itself!!

                      Comment


                      • #71
                        Originally posted by bolo121 View Post
                        Wow! For once i actually predicted something correctly.
                        Way back in the mists of time i said that after Bear the sharks were circling Lehman.
                        This seems to be both threat and opportunity for Indian COs.
                        If they can weather the loss of clients due to this downturn, they may be able to pick up business when American companies start cost cutting and restructuring as a response to lean times.
                        They already are ;)
                        "Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God?" ~ Epicurus

                        Comment


                        • #72
                          Oh? Do tell.
                          For Gallifrey! For Victory! For the end of time itself!!

                          Comment


                          • #73
                            Originally posted by rj1 View Post
                            Or, the people that did subprime and could not qualify for conventional would have never gotten a mortgage to buy a house to begin with, removing buyers from the system, and the bubble would have popped earlier and at a lower and less harmful price level.
                            No, without sub-prime, there would have been fewer buyers to begin with. Fewer buyers mean smaller exchange volume, less price hike, and smaller bubble, which may not burst or burst as bad.

                            Originally posted by rj1 View Post
                            This is not just a subprime problem. I've seen some mortgage-backed security pools; prime, Alt-A, and subprime, all have delinquet mortgages. A WaMu employee passed on the performance data of an Alt-A pool to one blogger. The pool has an average FICO score of 705 and a foreclosure rate of more than 13%, and this was back in February, 8 months after the pool's mortgages were issued in May 2007.
                            Sub-prime started the upward trend and people wanted to get in to get on the gravy train. Prime and sub-prime all borrowed beyond their means to try to catch the wave. The lenders are only too happy to oblige. The governments are even pushing this because every time a house exchanges hands, it's re-assessed and usually property tax goes up.

                            Everyone was greedy and it all started from the push to get everyone a house. Started in the late 1990s and Bush/Greenspan only exacerbated the problem.
                            "Only Nixon can go to China." -- Old Vulcan proverb.

                            Comment


                            • #74
                              Bottom line here folks.......greed. I watched a program on one of the numerous business sites where a middle aged man and his"not quite well" financial state of affairs were voluntarily exposed and shocking does not adequately cover the results.. The man worked as a security guard at a common factory making 10 bucks an hour,and incredibly, was given a mortgage on a $500,000 dollar house!

                              Comment


                              • #75
                                Originally posted by Exarecr View Post
                                Bottom line here folks.......greed. I watched a program on one of the numerous business sites where a middle aged man and his"not quite well" financial state of affairs were voluntarily exposed and shocking does not adequately cover the results.. The man worked as a security guard at a common factory making 10 bucks an hour,and incredibly, was given a mortgage on a $500,000 dollar house!
                                Yep.....
                                Welcome, you step into a forum of the flash bang, chew toy hell, and shove it down your throat brutal honesty. OoE

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