Mortgages are sold on a secondary market. This is true. However, oftentimes the mortgage company will sell bonds backed by the right to payment from the mortgages. All kinds of institutional investors will purchase the bonds. If a large percentage of the mortgages fail to perform, everybody suffers. The investors suffer. The bond seller suffers because they have bond payments to make and no revenues from which to make it. They either default on the bonds or lose money to make the payments. Fannie and Freddie got into trouble because they purchased a good number of bad loans prior to the bondselling process and then sold bonds on them that got them into trouble. For most people, the entity that they think of as their mortgage company is just a servicer. They get paid either a flat rate or a percentage for servicing the loan (collecting payments, maintaining the escrow account, etc). If the loan falls into default, a default servicer is named. The default servicer will attempt to collect payments, institute foreclosure proceedings, etc. This analysis is greatly simplified. It can be quite complex.
Top be fair, Clinton flattened the curve quite a bit. The debt started jumping again during Bush's first term...and then BLAMMO....look at it now. Not good.
War coupled with a huge increase in non-military discretionary spending coupled with tax cuts...etc etc etc.
Agreed again... which is why McCain has denounced the non-military spending, and is for tax cuts with limitation.
what? Nobody said he paid off the debt. Just that he had a surplus which has to do with not running a deficit.
Thank you for explaining it to me. As you can see I have no expertise in the area. But I thought that they would package some bad mortgages with good ones. Most of them would be good but if you were selling 20 and added 5 stinkers in their you could still charge for selling 25.
Refman, please, pretty please, post more. We may not agree on a lot, but it is great to see you defend your points rationally and without name-calling. You and weslinder should both post much more. Fixed.
you know what's really sad, guys like you and robbie and some of the other more sophisticated investors on this site have been calling this for at least six months. who's running this country?
I am taking the good with the bad - and the bad very nearly wiped out the entire country financially. I don't think people realize how close we came to the abyss last week. My parents had no clue (of course they still have no power in 77018 and are busy clearing branches still so it's obviously understandable. But this thing could have been (and may still be) depression era bad. The FDIC had to get a payday loan last week - it had 40b of cash on hand to insure 1 trillion in deposits.
I'm definitely unsophisticated and terrible at investing but I work for a big financial news company so I just repeat stuff to sound smart.
Looks like you don't like pretty picture. So here is one more. What do you have against US Treasury data? Or facts? Or maybe you forgot something call credit card interest?
I understand, and agree...to a point. To take deregulation as a whole, and talk about it in terms of getting rid of every shred of deregulation is a farce. Letting banks offer more varied financial products is a good thing. Allowing investment firms to wash themselves in bad debt via bond sales and purchases is obviously a recipe for disaster. There are points between full regulation and wild West style deregulation.
That means a lot to me. I really appreciate it. I still believe that You + Me + MadMax + 3 pitchers of beer = solution to all problems.
So what stopped it? A little Federal cash and the rumor...RUMOR!... of a bail out. A bail out that will make no structural changes and do nothing to prevent this from happening again. Once that rumor floated, everyone is (rightly) thinking they won't have to pay the piper for their own mistakes. This whole thing sucks to high heaven.
