As they should be. They invested in a bank making dumbass loans. It's called taking responsibiltiy for the investments you make and the loans you offer.
where is this coming from. the people who are getting hurt are the mortgage company employees who lost their jobs who ultimately hold responsibility for the loans they extend.
It's nice to see you making some actual posts that have substance. I don't entirely agree with you, but do to a certain extent. Yes, people should have been more careful taking out loans when buying homes. We refinanced and got a 10 year fixed rate mortgage for 5%, and I know some folks who got even better than that, but we are college educated and know some friends that have a deep knowledge of this stuff. Most people don't. A big part of the problem is that potential home buyers were encouraged to "go for it" by some of the lenders in the industry. What could have, and should have prevented a heck of a lot of what's happening now (and I think it'll get much worse, before things turn around) is the lack of government regulation of this aspect of the lending industry. The government dropped the ball. It should have been much harder for lenders to offer these kinds of rate deals, and it should have been a requirement that the potential consequences and just what you were doing were spelled out in language a high school graduate could understand. Your average person is going to look at what they consider reams of paper, not make heads or tails of it, and encouraged by the lender that "they qualify," sign on the dotted line. I don't know why it takes a major financial collapse, which we may be in danger of, to bring about fundamental changes. Anyone remember savings and loans? D&D. Impeach Dildo and His Battery.
major beat me to it. I guess if you have a job and make a lot of money you have no responsibility. it is a lenders responsibility to themself, to their company, and to their borrower to make loans that people can afford. that's what they get paid to do. some poor joe blow working a construction job probably doesn't even understand what a variable rate loan is
I got it. I get it. I do. I just don't think people are fully aware of what it is they're signing. In fact, I know it because I've seen it over and over again. I suppose we could suggest society underwrite the cost of attorneys to review documents like these for people who can't understand them on their own. But I've represented banks where the loan officers themselves didn't understand all the terms of the loan. The argument back is, "well then you shouldn't sign at all!" But come on...you and I both know that's unrealistic. Most loan officers are very well aware when they're working with people who do not understand the terms of the agreement they're signing. And because their incentive is to close and cross their fingers, they don't generally care. That's the practical reality behind all of this.
Great point. Because practically speaking, the consumer is told it's best to go visit lenders first to see how much house they can afford before buying. If the loan officers are coming back suggesting they can afford more than they really can...well...that's the genesis of the problem.
I just wanted to add a few things to what you said. first, there is no thinking that the subprime lenders and homebuilders were taking advantage of these people. they were taking advantage of them without question. they made some good money off of it at first but now their greed is rightfully coming back to smash them. like beazer homes is under investigation by the SEC, IRS, HUD, and FBI basically for its lending practices. they've already fired a CFO for shredding documents. I guarantee you they weren't the only ones. second, there will be homebuilder bankruptcies. don't pay attention to their stocks rallying the past few days. they are spiking up because everyone and their mother is short those stocks. it's an extremely crowded trade which makes the stocks volatile when shorts panic out. further, in my few years as a trader I have never seen a more scared market that reacts so violently to rumors. granted, I understand buying should be done when people are panicked but this isn't the bottom yet. just by looking at the history of credit markets from what I have heard and read I feel their is going to have to be a massive blow up before this is over. I don't know who it will be but all signs are pointing that way.
I knew a group of guys that worked for New Century Mortgage, which was one of the companies that went bust, and they all were making some serious money several years ago. All of them were making $100k+, and I know one that made over $400k one year. This sub-prime mortgage industry was in fact just like boiler room. It didn't matter how poor someone was they could get them into a loan, and all they had to do was sell them on owning a house.
Here is my experience. I know all about rates and everything ahead of the purchase and bought a new construction on a 30 year fixed (5.85%) and 20% down. I did not come close to the max house I could afford like many people are doing, oh the house is plenty big (actually huge) for me and my wife. But after increase in property tax for the last three years and increase in utility cost. I am looking at 20-30% increase for the various payment related to the home, if someone had borrowed close to their max ceiling, this could easily make them go under. There are cost you would never have thought about when you were making your first home purchase, so the % rate bank used to check how much you can borrow is way to high in my opion.
exactly, I just read an article about bear stearns the other day. They bought into some subprime company a few years ago. The exec that recommended the purchase described it as a sweat shop where they checked their ethics at the door. They didn't care, that mortgage was going to get bundled and sold off anyways. Not anymore.
people made a killing selling mortgages just four years ago. the bank I worked at funded several independent mortgage companies. the bank I worked at also owned 20% of a mortgage company that made a killing for the bank. but the bank sold the mortgage company because it figured a downturn in the housing market. they probably sold two years too soon but i'm sure they are happy now.
How could anyone not go with a fixed when it was so low just a few years back? under 6% for just about anyone. My parents paid like 9% when they bought their home, 8% is still not bad rate by historical standard but so many people just over bought the amount of home they could afford.
I know, my parents got a 6% rate in 1980 after their friends were losing out on 12% rates. 6% used to be a great home rate, i don't understand what changed. the market has been really whacky in the past few years
its difficult to protect stupid people (or ignorant) from being taken advantage of. lets hope people learned their lesson and realize what they are getting into before they sign
