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...
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Originally posted by Shamus View PostAntimony,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.
Thanks, thats the one
Originally posted by gunnut View PostSo 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...
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
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Originally posted by gunnut View PostSo 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...
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.
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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
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Originally posted by Ray View PostAm 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.
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
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Originally posted by rj1 View PostRead further and see screenshot here: Mish's Global Economic Trend Analysis: Evidence of "Walking Away" In WaMu Mortgage Pool
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
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Originally posted by antimony View PostSir,
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
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
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Originally posted by Ray View PostThanks.
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.
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
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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!!
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Originally posted by bolo121 View PostWow! 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."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
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Originally posted by rj1 View PostOr, 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.
Originally posted by rj1 View PostThis 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.
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.
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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!
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Originally posted by Exarecr View PostBottom 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!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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