This will be a multi-part post. Many of you have heard bits and pieces of this in the past. My aim here to put it into a more complete narrative. Feel free to jump in with questions or comments if this interests you, but please understand I will not respond to anything until I have completed the story.
First and foremost this is a problem of oversupply. With the new mortgage underwriting guidelines we simply Donnie have enough qualified home buyers to support the current level of pricing for residential real estate. Some local markets are worse than others, but the aggregate effect is that we have way more supply than demand.
If you accept this simple assumption then the next logical step is to say that current pricing is unsustainable and that attempts to prop up home prices by the government will be nothing more than highly expensive boondoggles that are doomed to fail even before they start.
The only way to deal with this problem is to let the bad loans fail, have the REOs run-through the system and deal with the new normal on the other side. Lower home values and fewer home buyers who are all qualified by banks without government threat or inducements.
20 years ago we had a relatively well functioning home mortgage market. Lots of people originated mortgages but more than 95% were eventually sold to Fannie Mae. So everyone originated under Fannie Mae guidelines unless they wanted to hold the loan for years. And these few exceptions paid a much higher interest rate since they weren't nearly as liquid of an investment.
Back then Fannie Mae didn't buy jumbo loans so people didn't buy really big homes with other people's money. Fannie Mae didn't buy rural property of large acreage loans so once again people didn't finance those purchases with other people's money either. Ditto for rental properties, second homes and vacation homes. Also Fannie Mae didn't buy your loan if your loan to value ratio was over 80, your debt to income ratio was over 40, your FICO was under 680 or you didn't fully document your income.
Net result is that only qualified borrowers were financing the purchase of a home with other people's money. Sure a few went bad even though the numbers were very low, but wince the borrower put 20% down the lenders generally didn't lose money even when they had to do a short sale.
Everything was stable. Everything was operating along proven lines. The risk was quantifiable.
You have me so far.....keep going... ::) ::)
Quote from: Solars Toy on October 16, 2010, 07:31:37 AM
You have me so far.....keep going... ::) ::)
As you do I. Good job so far.
I'm going to explain a lot of things about securitizations over the next few posts, but the most important thing to understand is that securitizations were able to distort the housing market by providing an alternate secondary market for mortgages. One that had no meaningful regulation and no competent oversight. Until that time Fannie Mae dictated the terms of what were acceptable residential lending standards by virtue of the fact they provided the sole meaningful avenue to long term financing for this sort of activity.
I'm old enough to remember when "standard financing" meant 20% down and excellent credit. First time homebuyers often had to save for years, or borrow money from their parents ( or sometimes receive a wedding gift of ) a downpayment for a very modest home that they could afford to pay for.
While I'm not advocating a return to such tight restirctions on qualifying for "the American Dream", When you have that much skin in the game, you tend to make whatever sacrifices you have to make in order to pay your mortgage!
In those days there were very few foreclosures and nobody ever seemed to go bankrupt for a variety of reasons; not the least of which was the social stigma attached to such "failures" in our communities!
Quote from: Dan on October 16, 2010, 08:06:29 AM
I'm going to explain a lot of things about securitizations over the next few posts, but the most important thing to understand is that securitizations were able to distort the housing market by providing an alternate secondary market for mortgages. One that had no meaningful regulation and no competent oversight. Until that time Fannie Mae dictated the terms of what were acceptable residential lending standards by virtue of the fact they provided the sole meaningful avenue to long term financing for this sort of activity.
I remember my parents buying their first new home in 59, the payments were $95.00 per month, over the next 40 years, they paid religiously, and over that time, their payments went to different institutions, they had been bought and sold as packages of say 1oo other home buyers.
This worked quite well over the decades, because no one wanted to lose their home/investment, so they all paid.
So buying these mortgages as a package was a good investment/retirement.
Then enters the left, they changed the rules, I know I don't need to explain this to anyone, the whole system fell apart, and all thanks to greedy leftists with an agenda, and agenda that did not have Americas best interest at heart.
I think Dan is about to explain what happened.
In 59(I was nine years old), the minimum wage was raised to a dollar an hour. I can remember being over at a friend's house (sometime aroud then) and him showing me his Dad's paycheck stub. His Dad was the General Manager of Wilson Sporting Goods and made the unhead of amount of $140/week!
For many, many years, the majority of our Dads (because most Moms were not working outside the homes) made minimum wage or close to it, bringing home maybe $60/week for sixty hours of work (time and a half for hours worked over 40, was also unheard of).
Quote from: wally on October 16, 2010, 08:37:29 AM
In 59(I was nine years old), the minimum wage was raised to a dollar an hour. I can remember being over at a friend's house (sometime aroud then) and him showing me his Dad's paycheck stub. His Dad was the General Manager of Wilson Sporting Goods and made the unhead of amount of $140/week!
For many, many years, the majority of our Dads (because most Moms were not working outside the homes) made minimum wage or close to it, bringing home maybe $60/week for sixty hours of work (time and a half for hours worked over 40, was also unheard of).
Yep, I remember my dad making around three bucks an hour and he worked as a lineman for SMUD the local power company, that was good money.
He could have gone out and worked as an electrician and earned $7.00 per hr at the time, a field that paid very well.
But look at the trade field, from plumber to electrician and framer, they have been stolen by the illegal, with the full support of the left.
When placed into perspective, it becomes very obvious just who the real enemy of the people are, and they speak fluent English...
My friend who's Dad made $140 a week would be today referered to by some as one of those greedy capitalists who made his fortune by the exploitation of poor folks. I doubt that is true. All I really know for sure is that this friend of mine grew up without a Dad for most of his life, because his Dad had a heart attack and died very young.
I think in those days, just as in these days, if one wants to succeed in life one drives oneself very hard. Although it may not seem so to those under him/her, nobody who succeeds drives those under them any harder than they drive themselves! Sometimes, being driven to grasp hold of the brass ring, proves to be a fatal affliction!
Sorry for the delay. I'm back. Before I go any further I want to go over some definitions of terms I will be discussing later and also recommend you guys look for books on Amazon.com for an author named Frank Fabozi if you really want to know the theory behind securitizations. Fabozi was the godfather of securitizations and everyone I know learned from the principals this man laid out.
What is a securitization? It is a special purpose business entity organized as either a trust or a partnership. Although truth be told I never saw a securitization organized as a partnership. The securitization will have it's own federal ID number and file tax returns, pay taxes, etc.
If you think of the securitization as a business, that is what helped me conceptualize the terms back when I did this stuff, then lets look at it from an accounting standpoint. The balance sheet is simple. The mortgages owned by the trust are the asset. The bonds outstanding against the trust are it's liability. And any form of credit support whether we are talking about overcollateralization or loss reserve accounts are the defacto equity since they would go to the issuer if the securitization were unraveled. The income statement is a bit more tricky, but not too much. The interest collected on the mortgages is your revenue. The interest paid on the bonds is your cost of goods sold. And the various fees are your overhead. Servicing fees, bond administration fees, MBIA insurance, etc. And any mortgage interest collected net of the bond interest and net of the fees is called excess interest. This last one is the equivalent of income.
A mortgage originator is someone who loans money to the borrower. Some lenders directly financed with borrowers in what was called a retail shop and others bought from mortgage brokers who were called correspondents. I don't know why they used these terms. They were just terms of common useage.
The mortgage issuer is the one who sold the loans into the security. They would also be the one who owned all the excess interest earned over the life of a security.
Servicing Fee is the monthly fee paid to a third party administrator to "service" the loans in the pool. This includes everything from processing payments to collection calls to title and escrow work, etc. Generally this fee will range between 0.4-0.75% of the principal balance.
Bond Administration Fee is the monthly fee paid to a third party administrator, usually the depository bank who determines how much cash goes to the various bondholders and third party administrators.
Credit Insurance Wrap – MBIA was the insurance company we used, but it was their job to guarantee payment in case the underlying loans in the deal did not perform. These things were always set up in a way to where the wheels had to fall off in an inconceivable way before these guys got tapped, but it was a key point towards getting the right investment grade rating from the credit agencies. I never heard of a MBIA claim even being filed until the summer of 2008. Shortly before the collapse. And I knew what was coming when I heard MBIA defaulted on their credit obligations. That was the beginning of the end.
Definitions continued
The credit agencies I remember were Moodys, Fitch and S&P. I was their job to assign a credit rating to each class of bond. Typically the bonds would be broken out in tranches. Some would be AAA. Some would be AA. Some would be A. And some would be B. All of these indicated a different level of quality and certainty of repayment and the interest rates charged were primarily based upon these ratings. So from an execution standpoint, you wanted the highest percentage of your bonds possible to be rated AAA since that resulted in the lowest possible aggregate rate on your bonds.
Underwriters were the guys most typically cast as villains when people talk about this stuff. Bearn Stearns, Lehman, Merrill, Deutsche Bank, Morgan Stanley, and others. They were the ones who would sell the bonds on the open market and the got a sweet underwriting fee for doing it. Kinda like the way a home seller will pay a realtor to sell their home. It was the easiest money out there for investment banks and they all got hooked on it like crack cocaine. Eventually that addiction led them down some really stupid paths that led to the downfall of many of these firms. But it all started with chasing the easy money and downplaying the risk.
Execution of a securitization goes something like this. Solar is the loan issuer. He has 1,000 mortgages with an average balance of 100,000 per mortgage. In aggregate we are talking about 100,000,000 worth of mortgages. He puts them in a trust called Solar Lending 2010-01. Then Bert, the investment bank, sells 100,000,000 worth of bonds on the open market. 75,000,000 are AAA, 15,000,000 are AA, 5,000,000 are A and 5,000,000 are B class bonds. Shooterman is a life insurance company who is restricted in terms of the investments he can utilize, but he can buy AAA bonds and he really likes securitized bonds because the less certain timing of repayment results in a bigger spread than you would typically see in AAA bonds. So Bert sells some of the Solar 2010-01 AAA bonds to Shooterman life insurance. Then Taxed comes into the picture since he runs a pension fund with similar restrictions. So he buys some AAA bonds from Bert too. And finally Wally comes along with a managed fund and buys some of the riskier stuff with the higher interest rates because he feels he understands the risk and should make out like a bandit. And so on and so forth. At the end of the day Solar Lending gets 100,000,000 from the bondholders and frees up the capital to go make more loans. Bert takes a 1.5 million dollar fee for putting a buyer with a seller. And here comes the real kicker....continued.
Now Solar Lending gets to book a 14 million dollar gain on the accrued income forecasted in it's pricing model. Basically they take the forecasted excess interest in the cash flow model for each month over the projected life of the securitization and then they bring them back to a current value using some discount rate (time value of money). Then they book this amount as accrued income and offset it with something called a residual asset. Then things get even crazier. Bert Investment Capital has access to all the cash they will ever want and they really want to keep the sweet underwriting income coming in. So as a sweetner to keep Solar Lending in the fold, then loan Solar Lending 50 cents on the dollar against this accrued income quantified by the residual asset. And that's how Solar Lending is able to pay for his 14 story office building, sponsor ship of a nascar team, 3 private jets and the operations of his company.
At this point if you're thinking, Dan this is crazy, then you are exactly right. Bert Investment Capital just lent Solar Lending 7 million dollars on an asset that is nothing more than a computer generated model's estimate of what future cash flows will be. And this number is highly uncertain for 2 big reasons. First is prepayments and second is defaults. If people pay off their mortgages sooner than anticipated then you collect less interest over the life of the deal and the excess interest is reduced dramatically. Hence the residual asset is reduced dramatically. Ditto with defaults although the mechanics are a little different. We used to do monthly reports called impairment testing where basically we would match the forecasted rates of prepayments and defaults with the actual numbers in the security and determine if our residual asset was gaining or losing ground.
This skewed set of mechanics led to a series of booms and busts that characterized any lending environment touched by securitizations. The first I remember was the subprime auto busts of the early 90s. See if you can google anything on a lender called Mercury Financial that did subprime auto back in the early 90s if you want a real life example. Then came the lenders of the mid 90s. Tons got cleaned out in the 97 Russia Banking Crisis. And then around 2000 the whole thing just sorta turbo charged and we left stupid and started approaching absurd at warp speed.
Like I said at the beginning, back around 1990 the mortgage lending environment was sane, proven and reliable and dependent upon time-honored and time-proven methods. Then in the early to mid 90s securitizations led to a lot of stupidity. Initially lenders diverged from Fannie Mae underwriting guidelines in 2 directions. You had subprime lenders and you had nonconforming lenders.
Subprime lenders are people with bad credit. They are also people with lousy debt ratios but back in the 90s people didn't always track debt ratios very well. If Fannie Mae didn't want your loan with a FICO under 680, the a lender like Saxxon would take you as low as 620. Then 600. Finally some of these guys went under 580.
Nonconforming lenders tried to pass themselves off as a safer bet. They would go after the same borrowers that Fannie Mae wanted, but they would sell them deals that Fannie Mae would not. Jumbo loans are an example. Also high loan to value ratio loans were a rage for a while. You could get a second or even a first loan that was 125% the value of your home. Now you may pay 14% on the 125 LTV second lien, but then you could roll in your credit card debt and your medical bills. Many billions upon billions of mortgages were financed this way.
Like I said, initially these were the only two major divergences and these were bad enough. Neither divergence was sustainable long term, but if you kept a strong rate of growth in your production and continually did bigger and bigger securitizations then you could delay the piper for several years before you blew up. And yes, this is a form of a ponzi scheme.
But then things got much worse than just making stupid loans. Then someone decided they could make even more money by making monumentally more stupid loans. Around the later 90s the refinance boom started and real estate price appreciation really started to boom. And lenders, in an ever greater effort to retain their loans and steal refinance loans from competitors were under ever greater pressure to continually ease the requirements for a loan. The real point of crossing the Rubicon came when someone said "Hey, instead of making them prove their income, let.s just take their word for it. That'll make the process go much quicker". And when one guy did it, then they all had to ether do it or get out of business. And that brilliant idea was followed up with subprime, no money down loans. Loans to illegal aliens with no tax ID #, zero money down loans on rental properties and about every other stupid idea you could possibly imagine.
This all led to huge amounts of money flooding into the housing market. All of a sudden a lot more people could afford to buy a house and a lot more people could afford to buy a much bigger house than before. None of this was based upon economic reality, but this artificially increased demand led to soaring home price appreciation and a new construction boom. And as I said, none of it was either real or sustainable. But it was a hell of a ride for a few years until the bottom fell out. Securitizations are gone and they most likely aren't coming back for the foreseeable future. So they days of easy money are over.
Now we are in a situation where credit policies are more conservative and underwriting standards are much tougher again. Those mean bastards are actually making me prove the income numbers I claim now with tax returns and pay stubs. And that took loads of people out of the market. Thereby dropping demand like a stone.
Now with demand much lower the new equilibrium point means we are way overbuilt for demand and prices aren't sustainable at their current levels. Yes the government gimmicks can delay the inevitable for a while at great expense to the taxpayer, but prices will eventually drop to their natural equilibrium point. Over time, supply and demand is stronger than government. It just is. Sorry.
And it is this understanding that leads me to believe that all homebuyer subsidies intended to ease this crisis are a waste and will not yield a lasting benefit.
If you guys have any questions or would like me to go into greater detail about any of this stuff the just let me know and I'll do my best to accommodate.
Damn. The poor schmucks like myself that played by the rules, even paying off our home early, are now getting the wienie up the gazoo. Dan, you've made it pretty easy, even for this old fart, to follow. Good job.
Great thread Dan.
Quote from: wally on October 16, 2010, 08:10:28 AM
I'm old enough to remember when "standard financing" meant 20% down and excellent credit. First time homebuyers often had to save for years, or borrow money from their parents ( or sometimes receive a wedding gift of ) a downpayment for a very modest home that they could afford to pay for.
While I'm not advocating a return to such tight restirctions on qualifying for "the American Dream", When you have that much skin in the game, you tend to make whatever sacrifices you have to make in order to pay your mortgage!
In those days there were very few foreclosures and nobody ever seemed to go bankrupt for a variety of reasons; not the least of which was the social stigma attached to such "failures" in our communities!
That is the way it should be. If people are buying homes left and right on credit, then the demand cranks up, construction kicks in, and voilà! Instant bubble. If people paid cash for their properties, that keeps inflated demand and credit in check.
I tell people all the time they need to buy their homes in cash.
The words "devil" and "bank" can always be used interchangeably.
Quote from: taxed on October 16, 2010, 01:00:59 PM
That is the way it should be. If people are buying homes left and right on credit, then the demand cranks up, construction kicks in, and voilà! Instant bubble. If people paid cash for their properties, that keeps inflated demand and credit in check.
I tell people all the time they need to buy their homes in cash.
The words "devil" and "bank" can always be used interchangeably.
Thats ludicrous taxed, 90% or more americans cant pay cash for a house.
Im with wally my first house and only because of a VA loan I just made the qualifiers...I had to have 5 yrs with one employer and excellent credit and x down and closing costs...and the house was truly a "STARTER". My wife and I saved for a long time to get in and buy furniture and have fixup money etc etc.
Then 6 yrs ago my Brother in Law a real leach bum in every respect of the terms...wants to move to fla near us...he had gone bankrupt didnt have a nickle..I said to my wife he will qualify for a house on the moon not here...well damnit...they not only approved him but rolled closing costs and an extra 5 grand into his mortgage, so he could move here.
Right now to just refinance you have to meet stricter qualifications than wally and I had to back then.....so the pendulum swings all the way left then all the way right
Quote from: zip on October 16, 2010, 01:13:30 PM
Thats ludicrous taxed, 90% or more americans cant pay cash for a house.
There is nothing wrong with leasing. Also, saving for something special would make people more responsible. When you really want something, you may cut down on some frivolous expenses and save instead. Far more people can save for a home than you give credit for Zip, IF they are responsible and stay under their means.
Quote
Im with wally my first house and only because of a VA loan I just made the qualifiers...I had to have 5 yrs with one employer and excellent credit and x down and closing costs...and the house was truly a "STARTER". My wife and I saved for a long time to get in and buy furniture and have fixup money etc etc.
Then 6 yrs ago my Brother in Law a real leach bum in every respect of the terms...wants to move to fla near us...he had gone bankrupt didnt have a nickle..I said to my wife he will qualify for a house on the moon not here...well damnit...they not only approved him but rolled closing costs and an extra 5 grand into his mortgage, so he could move here.
Right now to just refinance you have to meet stricter qualifications than wally and I had to back then.....so the pendulum swings all the way left then all the way right
Zip, I am not saying _if_ you have a mortgage and can afford it and are responsible that it's a bad thing. I am saying people should buy their homes in cash. We would be a better society from it.
Quote from: taxed on October 16, 2010, 01:30:07 PM
There is nothing wrong with leasing. Also, saving for something special would make people more responsible. When you really want something, you may cut down on some frivolous expenses and save instead. Far more people can save for a home than you give credit for Zip, IF they are responsible and stay under their means.
Zip, I am not saying _if_ you have a mortgage and can afford it and are responsible that it's a bad thing. I am saying people should buy their homes in cash. We would be a better society from it.
Yeah, Heaven forbid someone sacrifice a little.
I went without pretty much everything for several years, and saved every freakin penny, I bought an old motorhome and lived on a ranch that I worked for, no cable, phone, or any other piece of technology, I had a TV and that was it.
I bought my 10 acres of raw land with my savings and built my own home all by myself.
There were times I could only afford two or three 2x4s, but eventually, with a lot of sacrifice, the house is built, and I owe nothing to no one.
Too many people think they have to have it all right now, the BMW, boat Plasma TV, cable TV, the list is endless.
It's all about sacrifice, as you said, they tend to appreciate it when they work for it, like Zip and his wife did.
It may not be pretty, but when you earn it, it's a Castle. 8)
Quote from: Solar on October 16, 2010, 01:55:18 PM
Yeah, Heaven forbid someone sacrifice a little.
I went without pretty much everything for several years, and saved every freakin penny, I bought an old motorhome and lived on a ranch that I worked for, no cable, phone, or any other piece of technology, I had a TV and that was it.
I bought my 10 acres of raw land with my savings and built my own home all by myself.
There were times I could only afford two or three 2x4s, but eventually, with a lot of sacrifice, the house is built, and I owe nothing to no one.
Too many people think they have to have it all right now, the BMW, boat Plasma TV, cable TV, the list is endless.
It's all about sacrifice, as you said, they tend to appreciate it when they work for it, like Zip and his wife did.
It may not be pretty, but when you earn it, it's a Castle. 8)
So, so true. And moreso today, if someone has a job that they feel will be there, the deals on everything are crazy. There is no excuse, especially now, why people can't own a house, or a car, outright.
One of the multiple problems leading to the collapse of the mortgage market...
As US Secretary of Housing, Andrew Cuomo set Federal Housing Goals that required FannieMae and FreddieMac to purchase hundreds of millions of dollars of bad sub-prime mortgages.
IT WAS CUOMO who lowered lending standards.
IT WAS CUOMO who eliminated down payments.
IT WAS CUOMO who offered 105 percent financing.
IT WAS CUOMO who pushed sub-prime mortgages containing a two percent increase in interest rates, guaranteeing they would crash.
IT WAS CUOMO who cost taxpayers $2.4 trillion and the value of our 401k's when the sub-prime mortgage market collapsed.
As The Village Voice correctly reported in 2008: Cuomo "turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded 'kickbacks' to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why."
When the ultra-liberal Village Voice blames Cuomo for lighting the fuse on the sub-prime mortgage meltdown, even mainstream media reporters sit up and listen:
http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/ (http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/)
Quote from: taxed on October 16, 2010, 02:06:05 PM
So, so true. And moreso today, if someone has a job that they feel will be there, the deals on everything are crazy. There is no excuse, especially now, why people can't own a house, or a car, outright.
Right now, an entrepreneur can write his own ticket.
He only has to find a good location, and a building half full with tenants, and the land lord will bend over backward to get the space occupied.
In my case when I opened my first health club, the land lord fronted me eighteen grand for equipment, so long as I could make rent.
In today's economy, all someone has to do is show up and prove they can breathe, and the landlord will put you in business.
If I was younger, I'd be opening all kinds of different business.
Quote from: Solar on October 16, 2010, 02:12:36 PM
Right now, an entrepreneur can write his own ticket.
He only has to find a good location, and a building half full with tenants, and the land lord will bend over backward to get the space occupied.
In my case when I opened my first health club, the land lord fronted me eighteen grand for equipment, so long as I could make rent.
In today's economy, all someone has to do is show up and prove they can breathe, and the landlord will put you in business.
If I was younger, I'd be opening all kinds of different business.
Man, there is so much I want to do.
Quote from: taxed on October 16, 2010, 02:19:25 PM
Man, there is so much I want to do.
Now is your best chance, and without any up front cost to you.
Find someone willing to front the Capital that wants to be a silent partner, and get a landlord willing to forgo any rent for a year, and you're in.
I know a year sounds ridiculous, but most of the vacancies out there, won't be filled foe at least a couple of years.
An empty space is a bad for business, and all the other business in the facility suffer right along, because there is less draw, so they have less clientele, and the land lord knows this, he knows it's only a matter of time before another folds up shop, and the strain increases.
You are in the sweet spot at the moment, take advantage of it.
Quote from: Solar on October 16, 2010, 03:05:27 PM
Now is your best chance, and without any up front cost to you.
Find someone willing to front the Capital that wants to be a silent partner, and get a landlord willing to forgo any rent for a year, and you're in.
I know a year sounds ridiculous, but most of the vacancies out there, won't be filled foe at least a couple of years.
An empty space is a bad for business, and all the other business in the facility suffer right along, because there is less draw, so they have less clientele, and the land lord knows this, he knows it's only a matter of time before another folds up shop, and the strain increases.
You are in the sweet spot at the moment, take advantage of it.
Money isn't my problem, it's time. I have too many projects right now. I will be buying heavy commercial late next year.
Great point guys. Even if you can't afford to pay cash for the full balance you can still buy a modest home that you can quickly pay off. There is nothing wrong with buying a 80,000 house and paying it off in 5 or 6 years. Then trade up as you accumulate more cash.
Living gets pretty cheap when you don't gave a mortgage payment.
Back to the original point, what's most overbuilt are the upper mid range homes. In my area they are the $225-350K homes. Above that and people can pay cash. Below that and a lot of people can still qualify. But in that sweet spot mentioned above, there is a real weakness in many housing markets across the country. Now the amounts might vary from market to market, but you guys get the general idea.
Great stuff.....
Billy
Thanks guys. If you have any more questions on this subject then just let me know.
Quote from: taxed on October 16, 2010, 01:30:07 PM
There is nothing wrong with leasing. Also, saving for something special would make people more responsible. When you really want something, you may cut down on some frivolous expenses and save instead. Far more people can save for a home than you give credit for Zip, IF they are responsible and stay under their means.
Zip, I am not saying _if_ you have a mortgage and can afford it and are responsible that it's a bad thing. I am saying people should buy their homes in cash. We would be a better society from it.
I agree cash would be better...but let me give you a true scenario to demonstrate what I mean.
A police sgt with 10 yrs experience and a High School teacher in NJ together make around 160k give or take...before taxs...they have two kids...the average house in jersey before the crash went for like 275k thats a half decent 2000sq ft house...with the kids expenses insurance...AFTER taxs...how long would it take to save 275k plus...and they both have what would be considered decent jobs.
Great job, Dan. You know your stuff.
I would add Goldman Sachs to that list of investment banks, only because they received a multi-billion dollar bailout from the federal government, and they are the most powerful investment bank left in the USA. Many of the others you mentioned went under or were forcibly merged.
I will also add that the "mortgage-backed securities" you talked about were packaged up by the THOUSANDS and sold overseas as "safe investments" to foreign entities, who in turn lost their asses and continue to lose their asses.
This situation isn't all about American investment banks and American investors. It involves investors around the world who have lost BILLIONS of dollars by believing the lies and other crap they were told.
Heads need to roll, PERIOD. These lending practices are so outrageous, preposterous, and unbelievable that it boggles the mind.
I have serious doubts that this country is going to recover from the dirty deeds of the entities that you mentioned, Dan.
Quote from: zip on October 16, 2010, 09:23:00 PM
I agree cash would be better...but let me give you a true scenario to demonstrate what I mean.
A police sgt with 10 yrs experience and a High School teacher in NJ together make around 160k give or take...before taxs...they have two kids...the average house in jersey before the crash went for like 275k thats a half decent 2000sq ft house...with the kids expenses insurance...AFTER taxs...how long would it take to save 275k plus...and they both have what would be considered decent jobs.
Don't buy a $275k house.
That was easy....
Dan, excellent info. we need a library for posts like this one.