why is there not outrage?

[Anonymous]

Anonymous wrote:

Anonymous wrote:
I have something called integrity-look it up.

Thanks for the advice. However, in my experience people with real integrity don't go round boasting about it, and they certainly don't feel the need to attack others to justify their own decisions.

[Anonymous]

Tell me where to report him in Loudoun County. I will do it today.

Probably the DAR (Dulles Association of Realtors) and the NVAR (Northern Virginia Association of Realtors)

Contact Info for DAR http://www.dullesarea.net/index/contact.html

Contact info for NVAR http://www.nvar.com/standards/stdseth.lasso

I'm the Realtor PP - these are professional associations, NOT licensing boards. If your neighbor isn't a member, which he doesn't have to be, they're irrelevant.

I'm not licensed in VA and my company's intranet is not cooperating right now so I can't get you the definite link, but I would start with Virginia's Department of Professional & Occupational Regulation, http://www.dpor.virginia.gov - check Services for Consumers, then Filing a Complaint, or tr Compliance & Investigations. You should also notify his broker if you can make an anonymous complaint, but he may be a broker himself.

[Anonymous]

Anonymous wrote:

So the root cause of this mess wasn't people buying houses they couldn't afford, it was financial companies providing loans when they didn't care whether they could be repaid or not.

right, because the financial companies were going to sell it off to Wall Street anyway and get the foul assets off their balance sheets lickity split.

[Anonymous]

In my mind, the greatest fault lay with the investment banks and the AIGs, who never once considered the ramifications of systemic risk.

The fellow who knew he couldn't pay that mortgage once the rates adjusted. Where does he fit in? If he expected (relied on) the house to appreciate in value to refinance under better terms and that didn't happen, forget about the whole mortgage backed security issue, was he at fault? Maybe. But without systemic risk, it would have been one guy who had his house foreclosed on him. There is the punishment. You don't pay, you lose your house. Nobody's mad at you. He's certainly not responsible for everyone else buying houses they can't afford.

But the Lehman Brothers and AIGs and the CDO shops who packaged and repackaged these subprime mortgages. It is unrealistic to believe that an entire industry of financial experts could have neglected to include systemic risk in the model (especially since the systemic risk was a function of a mere [and one could say predicted] fall in housing prices).

[Anonymous]

Anonymous wrote:

Anonymous wrote:
We put down 10% on our home when we bought in 2004. We couldn't have gotten in any other way. I'm not saying people who don't put down 20% are scammers or caused the problems based on not putting down 20%. Like you, we underbought even in the face of realtors trying to show us houses that were $200K more than we could afford.

Aah, okay, got it. Sorry.

I admit I get frustrated with both banks and the person's who bought homes they couldn't afford. When we bought our home in 2006, our realtor tried like hell to get us to buy a larger, more expensive house, almost 250K more than our house. We clearly could afford much more than what we were willing to pay for a house, but stuck to our guns, knowing life can change on a dime. It just made sense to us, you never know if you might lose a salary or get ill. We also put down 50% so that our monthly payment could be paid by one of us.

I know someone who bought a house with a no doc loan, 80/20 loan, an arm and buying a house they clearly couldn't afford. They just had to have that huge house but are completely house poor, not even being able to afford an additional car payment. If one of them lost their job, they would be under water. I wouldn't be able to sleep at night if I had to live with that.

[Anonymous]

I agree, but the consequence of their bad decision is normally just foreclosure, not an economy wide recession. I just don't think you can direct your anger at people who never qualified for a loan before and perhaps were in some state of euphoria. There were thousands of well paid MBAs and PhDs working in these investment companies which bundled these shaky loans and sold them on the market. How is it you don't have downside risk somewhere in that model?

[Anonymous]

Anonymous wrote:I agree, but the consequence of their bad decision is normally just foreclosure, not an economy wide recession. I just don't think you can direct your anger at people who never qualified for a loan before and perhaps were in some state of euphoria. There were thousands of well paid MBAs and PhDs working in these investment companies which bundled these shaky loans and sold them on the market. How is it you don't have downside risk somewhere in that model?

I think they were aware of the systemic risk but deliberately swept it under the carpet. If you can clear a few million in a couple of years, what do you care if the whole company (and system) goes down a few years later? You just make enough hay when the sun shines. This is the result of the crazy compensation arrangements for CEOs and the "stars" who worked on these securitizations.

[Anonymous]

"I don't condone lying in order to get another home - these people should be punished - but I can certainly understand why people walk away from a house with negative equity. Buying a house and taking out a mortgage are not totally separate decisions. In a sense is really the bank that is buying the house until you can pay of the mortgage. The problem was that the banks/mortgage companies took huge risks by providing loans without 20 percent or more in downpayments. The mortgage companies/banks didn't care because they were bundling the mortgages up and selling them on. But the ponzi scheme that kept this all working was not so much about everyone being able to continue paying their mortgages but the appreciating home values, which meant if the banks had to foreclose they would get their money back.

So the root cause of this mess wasn't people buying houses they couldn't afford, it was financial companies providing loans when they didn't care whether they could be repaid or not."

This is a good point. I doubt anyone realistically thought that someone who could not qualify for a basic fixed rate loan would all of a sudden in 3 years be able to pay double or triple payments or that someone who could put nothing down could save up enough for an even bigger balloon payment. The lenders and mortage companies that repackaged these were counting on people not being able to pay and the housing appreciation covering the loan. It was a great way for all the middle providers who packaged and resold these loans to make money from nothing. The investors who bought them were also cuonting on housing appreciation and the interest payments were simply extra profit.

Home owners were banking on this also and figured that they would simply sell when the ARM adjusted or balloon payment came due and then walk away with a few hundred thousand.

[Anonymous]

Exactly. There were already penalties in place for the ignorance of the guy who couldn't pay the mortgage in 3 years. I hardly think you can be outraged at him. We are not bailing him out. He already lost the house. We are bailing out the Banks who are now stuck with that house. Tthat's a little hand waving and I do know that some effort is being made to allow people to refinance and keep their houses, but in the big picture, this whole bailout package was not instigated by a bunch of subprime borrowers losing their houses. It was instigated by a credit crisis when banks and investment companies determined THEY had lost billions of dollars.

[Anonymous]

Re: buying a house well below your means...

For anyone who hasn't read The Two Income Trap by Elizabeth Warren, I highly recommend it. She does a fascinating analysis of the increasing incidence of bankruptcy and who's most vulnerable to it. One of her main arguments is that two income couples who build their financial lives--and especially buy a house-- in a way that requires both of their incomes is unexpectedly vulnerable because there is no reserve wage earner in the family to make up the difference if one earner can't work for some reason (layoff, medical problem, etc.)

It's a little counter-intuitive, perhaps at first, because two-earner couples seem to be more secure because you don't have all your "career eggs" in one basket. But if they can get by on only one income, then between the two of them, they are likely more able to cobble together enough income if there is a major job loss. In essence, they only need to replace the amount of one salary, which they can do in a variety of ways-- one good job, each a part-time or lesser paid job, etc.

Not sure if I explained that very well. It's a great book, and Warren also gives a great explanation for how/why this happens, what's changed in our economy, schools/housing market, and daily life to make this a more common situation. (I.e. she mentions how when she was a young mother, she remembers just laying her baby down on the back seat of her little Volkswagon, a common practice. Now we have better safety for children in cars, but the need for carseats leads families to buy bigger, more expensive cars that they would have 30 years ago.)

Gives you a lot to think about.

[Anonymous]

I don't get the tug of war over assigning blame - Wall Street vs. Main Street or Joe Homeowner. From my vantage point - a homeowner who was totally clueless about finances and so did everything as conservatively as possible - both bear some responsibility for the mess we're in. From my very limited understanding of financial instruments involved, it seems that banks and financial services companies and insurance companies screwed up royally - and are screwing us all in the process. But I don't absolve all the people who chose these risky loans and bought houses well beyond their means. It didn't take any financial sophistication to see that house prices would not go up forever, that jobs could be lost, that adjustable rates were by definition subject to unpredictability, and that "owning" a house without putting any cash on the table or even paying into the principal was not really owning anything at all. Both homeowners and financial companies were complicit in the scam, and maybe the government is most negligent because some kind of oversight could have addressed this before it became a crisis. I lived in Houston during the Enron implosion, and it feels like that all over again, just on a bigger scale.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The bosses of Freddie and Fannie made $24 million last year in salaries and bonuses. At Lehman, Chief Executive Officer Richard Fuld pulled down nearly $270 million over the past five years.

These people were gambling with other peoples money and taking all the upside.

At the end of the day they get to keep their ill-gotten gain.

Yet most of you people reserve all your outrage for those whose lose their homes?

Look at what has happened to your pension funds and investments: gambled away by Wall Street. These people knew exactly what they were doing, unlike many homeowners who bought into something they couldn't afford.

And let's not forget the AIG folks who had the $440,000 retreat after getting bailed out. The CEO received a $5 million bonus in 2007, "even as the company lost $5 billion in the 4th quarter of that year." Are you kidding me? A $5 million bonus?

There is enough fault on all sides, unfortunately.

[Anonymous]

I reserve my wrath for the educated and greedy Wall Street investment brokers who knowingly gambled my money and lost (ps, they did not lose...they received fat salaries while they worked deal after deal). The people who bought above their means...well, there was a reason they were considered subprime borrowers.