You are going to bail-out sub-prime lenders.

[crockett]

Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.

Because the intrest has nothing to do with it..  People were buying houses at "intrest only" that means "nothing" is paid toward the principle. So that means if you get a normal loan a 200k house will cost you roughly $2k a month.

However if you get it intrest only it might only be $900-1200.(estimate). So they say, hey I can buy a 300k house and still only pay less than what a 200k house cost. I can live like the Jones and sell the house at a profit in a year.

That worked out for a lot of people for sometime as the market was going crazy. However it's like playing hot potatoes, you don't want to be the guy left holding the hot potato when there is no one left to take it. That's what is happening now.

The people over bought, because they could buy more house for the same money via intrest only, now they can't refinance because they can't actually afford to pay for the house.

[crockett]

Originally posted by Rolex
Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.

The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.

The Fed and government only care about the big lenders with exposure. The property or borrower is not even considered, except for political media consumption.

The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.

Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.

Exactly.. the govt isn't going to do crapola to help the average Joe whom is losing his house. This bail out will be for big business, the govt could care less about the little guy.

[FrodeMk3]

The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.

What we really need is info on what percentage of existing loans going into default, are held by the credit-worthy.

If there's little left in the way of good-credit borrowers, then what Rolex has stated is most likely true-that gov't. will simply attempt to bail out the Lenders. Of course, how many of those lenders are/could be overseas? Such as Bear-stearns (Out of Germany? Correct me if I'm wrong.)

Also...The money for the bailout is ultimately coming from U.S. Taxpayers. What i'd like to know is, What is the total sum they are discussing?

[Sixpence]

Originally posted by Rolex

Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.

So let me get this straight, some financial genious bought these loans as an investment? There has to be more than meets the eye here, it isn't joe shmoe buying these as a day trader, it's someone responsible with investing someone else's money. Why would they buy these time bombs as an investment? That does not make alot of sense, only an idiot would do that.

The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.

You are losing me here, there is no loan to sell off once it is defaulted, all that is left is the house that has been foreclosed on. No one is paying for the loan anymore, why would someone buy it? And most of these homes were sold overvalue because of the way the loan was written, and with a flooded market why would you want homes to take care of that you can't sell? You know, something about a ten foot pole?

Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.

That's what I have stated. Why the thought is the borrower is being bailed is beyond me.

[Sixpence]

Originally posted by crockett
Because the intrest has nothing to do with it..  People were buying houses at "intrest only" that means "nothing" is paid toward the principle. So that means if you get a normal loan a 200k house will cost you roughly $2k a month.

However if you get it intrest only it might only be $900-1200.(estimate). So they say, hey I can buy a 300k house and still only pay less than what a 200k house cost. I can live like the Jones and sell the house at a profit in a year.

That worked out for a lot of people for sometime as the market was going crazy. However it's like playing hot potatoes, you don't want to be the guy left holding the hot potato when there is no one left to take it. That's what is happening now.

The people over bought, because they could buy more house for the same money via intrest only, now they can't refinance because they can't actually afford to pay for the house.

Well, there were more loans than interest only, like some that started out with teaser rates, then jumped alot higher. They were told they could refinance later, but couldn't because they are sub prime(which is the reason they shouldn't be given the loan in the first place)

But the fact is they were given the loan, so it has to be dealt with, so why not give them the fixed rate so they don't default?

In the case of interest only, they have to get creative, stretch it out to forty years to lower the payment. They were creative enough to get these people into the loans, they can be creative enough to get themselves out of the mess they got themselves into.

If you or I make a bad investment, the government does not bail us out. If they can't fix it let them take the loss

[Ghosth]

Tell the Govt to stay out of it. Le the chips fall where they fall. Housing prices will continue to fall, banks will take most of the loss as they are holding the mortgages. As property values fall, Taxes go down for all of us, instead of doubling every 7 years.

Long term, those same idiots can get into the same house for half what they were paying.

Everyone with a brain in their head knew the bubble was going to burst. Bubbles always do eventually. Banks will lose the most, but its not like peoples money is going to be lost. They've been saying for years that its all FDIC insured. So let the banks take the lost.  So we lose a few banks.

Guess what, next time, they'll be smarter.

Take the punishment out of the equation and no one ever learns anything.
Homeowners don't learn to not buy more house than you can afford. Banks don't learn to lend money with nothing down on inflated prices.

[lazs2]

frode..  do you think the EPA will stop at kalifornia?   I have dealt with em for years...   100 million for a wastewater facility for a town of 20k is nothing to them.. they feel that $150 a month sewer bill is "about right".

If the developer wants to build he has to help the city meet the EPA demands... which will only get worse.   It costs twice as much to do anything where the EPA is concerned...  

What we will get next is $100 a month storm water bills.   Either the developer (and you) pay it up front for the facility or you pay it by the month for a bond...  plus....

No matter how well you treat the water... by the time you finish the plant... it will no longer be in compliance.   New development will have to take a big hit when it starts... and the circle jerk just keeps going.

lazs

[Rolex]

What we really need is info on what percentage of existing loans going into default, are held by the credit-worthy.

Non-subprime defaults will be about 3% this year, up from 0.9% last year. Without any wiggles in the economy, they will go up to 4% next year. I would plan on some significant wiggling, though.

If there's little left in the way of good-credit borrowers, then what Rolex has stated is most likely true-that gov't. will simply attempt to bail out the Lenders. Of course, how many of those lenders are/could be overseas? Such as Bear-stearns (Out of Germany? Correct me if I'm wrong.)

They are not lenders, they were buyers in the ether formerly known as the MBS market.


Also...The money for the bailout is ultimately coming from U.S. Taxpayers. What i'd like to know is, What is the total sum they are discussing?

The total written value of subprime mortgages is  $1.4 trillion. How much is at risk? No one knows, but I'll start the bidding at $300 billlion. That's a nice round number. You could tape $100 bills end to end and have a ribbon of them going to the moon and back... over 50 times. Or a stack of $100 bill extending over 225 miles into space.

That's about $1,000 per person, but it will just be added to the debt your passing on to the kids, so I wouldn't worry about it. That's their problem. The current total debt is about $300,000 per person, so it's only another 0.3% more debt. See? It doesn't sound so bad now.

The easiest solution is to open the border and get more people. Double the population and the debt is only $150,000 per person. Get up to 1 billion people and the debt is only about $70,000 for every man, woman and child.

Subprime defaults will likely add at least 500,000 homes to the already overbuilt market next year.

The large lenders learned their lesson long ago. The lesson was that the Fed will never let them fail, no matter what they do.

[FTDEEP]

stott hit the nail on the head. its the "adjustable rates" they are killing home buyers..not thier bad credit. what starts out as an affordable mortgage soon ballons into a payment thats far beyond the planned budget for the house. and it has a lot to to do with the lenders. thier get rich scheme is coming back to bite them in the ***.
wife and i bought a home. to get the 5.5 interest rate for the major part of the mortgage, they made us take out a second mortgage for the last 10 years on an adjustable rate. same time everyone else was biting. sure it sounded good but of course in 2 months it was allready climbing. we imediately put the 2nd mortgage on a interest free credit card . interest free for one year..remianing balance at end of the year was put on second balnce transfer. within a couple of yearts it was paid off saving thousands.
i dont blame these home owners at all.we all have a dream of owning a house. they were just suckered in. i've heard some lenders goin to jail for these adjutable rate loans. they were gaurenteed to fail.