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Thread: Reasons for Joe Sixpack to have a happy Thanksgiving ...

  1. #1
    Banned Melonie's Avatar
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    Default Reasons for Joe Sixpack to have a happy Thanksgiving ...

    from an investor BBS ...

    "-California strong-arms the mortgage industry to allow the homedebtors to keep paying the "teaser" rate on their loans {forcing the lenders / stockholders to eat the difference - sic}

    -Europe regulators suspend the trading of their version of MBS

    -Fannie and Freddie (stealth operators of the U.S. government) pulling delinquent loans from the pool and offering the deadbeats a workout {refi to fixed rate / writedown - sic}.

    -The FDIC also putting the heat on mortgage lending industry to offer to keep teaser rates on millions of bad loans made to slackers.

    -The "Super SIV" bailout of the Big Boy Banks now underway.

    -The various "Save the Sheeple" acts working their way through congress. {barring banks from foreclosing etc. - sic}

    -The FHLB $164 billion dollar injection of loans into Countrywide and other near-bankrupt lenders and originators (and yes, FHLB is ALSO a stealth appendage of the government)

    -The Fed cranking up its acceptance of MBS as "collateral" for loans of additional electronic fiatscos {Fed window accepting toxic 'subprime' paper in exchange for dollars at face value - sic}

    -The proposed "SecureLoan2" program involving the FHA to allow them to re-write more bad subprime loans into bad FHA/Ginnie backed loans.

    -The various state and local programs to offer assistance to homedebtors in the form of debt moratoriums down payment assistance and even grass-cutting and maintenance services on foreclosed homes to keep property "values" up."


    The $64 trillion dollar question of course is who ultimately winds up paying for these Thanksgiving 'turkey's ? The answer of course is the US taxpayer and bank stockholders.

    The next question is why anybody who 'thinks like a criminal' would continue to make their mortgage payment if new federal / state laws guarantee that their house can't be foreclosed on ? Seriously, if Joe Sixpack's credit rating is already shot, what difference would it make ?

    The next question is why any bank would ever write a future mortgage at anywhere near today's mortgage interest rates if new federal / state laws barring foreclosure result in future mortgages being equivalent to de-facto 'unsecured' loans. After all the banks can no longer claim the value of the house as collateral because they can't foreclose and resell it if the loan defaults ?

    the last question is who in America could possibly afford to undertake a future mortgage at credit card like 'unsecured' interest rates ?


    IMHO all of these 'save my house' laws will set in motion unintended consequences. While present homeowners who were allowed to buy houses in the past that they could not afford will be allowed to keep those houses indefinitely as a result of these new laws, these new laws will also virtually guarantee that anybody who does not already own a house won't be able to buy one in the future ! On the flip side, these new laws will also virtually guarantee that new and existing homes cannot be sold due to lack of qualified buyers and/or future financing.

    These 'save my house' laws will ultimately cause the destruction of the homebuilding and real estate industries, as well as dealing a huge hit to banks by officially rendering the writing of future mortgages (and trading of resulting Mortgage Backed Securities) as a high risk low reward business segment. And I don't even want to think of the potential trickle-down effects on retirement funds / state-local gov't budgets ...

    What the hell are these politicians thinking ? Yeah Yeah I know ... they're thinking exactly the same thing that they were thinking 10 years ago when they first mandated that HUD pressure Fannie Mae and Freddie Mac to start writing shaky mortgages to would-be 'minority' urban homeowners, and when they first mandated that banks must lend X percentage of total mortgage loan dollars for properties in urban areas that were formerly 'red-lined', regardless of the fact that the would-be homeowners involved could not actually afford these mortgages !

    ~
    Last edited by Melonie; 11-22-2007 at 02:53 AM.

  2. #2
    God/dess Deogol's Avatar
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    Default Re: Reasons for Joe Sixpack to have a happy Thanksgiving ...

    I am not so worried about HUD mortgaging shaky 'minority' would be home owners.

    It's funding of the idiots who get a second or third mortgage for a new car, trip, big screen tv, etc. So called "liberating of equity" which is the first value to fall in a bust!

    It's funding of people who buy houses costing 5x (and more) household income. Finally banks are indirectly telling sellers "no, your home isn't worth that much" with revised lending standards.

    I suspect there is a whole lot of standard of living revising coming down the line for people who have to spend every dollar they got in their pocket (which is unfortunately, most of the American population.)

    I am very much looking forward to Christmas sales and what is going to happen there.

    The trickle down effect to local government? They will simply raise taxes. Already some places have seen property taxes raised even during the housing bust as well sales tax increases (and cigarette tax increase, and new taxes on ... heck Maryland recently began a service/VAT on technology companies.)

    Sorry to say it, but this is about to become a three front war on the average citizen - outsourcing of jobs, credit crunch, and taxes from the government empowered to take from you.

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    Banned Melonie's Avatar
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    Default Re: Reasons for Joe Sixpack to have a happy Thanksgiving ...

    I am not so worried about HUD mortgaging shaky 'minority' would be home owners.
    my reference was to the arguable true cause of the 'housing bubble' of the 00's ... The HUD directive issued in the 90's that Fannie and Freddie must lower their creditworthiness standards and accept mortgages from urban 'minority' homeowners, plus a change in banking law which forced local banks to provide X dollars worth of mortgage loan dollars in the 'territory' they served under the guise of a 'public service'. Both of these official directives effectively forced these mortgage lenders to write mortgages that were too 'shaky' to gain approval under self-imposed Fannie / Freddie / local bank creditworthiness standards. Soon after these new mandates were enacted, some clever finance expert figured out a means for local banks to pass on the 'high risk' implicit in their forced 'community service' mortgage loans that could not be made to meet Freddie / Fannie standards to a private secondary market - thus CDO's !

    The 'tin foil hat' crowd would tell you that today's 'subprime' mortgage crisis, as well as the related CDO crisis that has spread through investment banks and hedge funds, are actually both a direct result of well intentioned but real-world misguided laws originated in the 90's to increase the percentage of minority home ownership. Almost as soon as the HUD program and 'community service' bank directive were put in force, an anti-discrimination lawsuit resulted in a court decision that these programs could not be limited to the originally intended 'minorities', and must be made available to poor white urban residents who couldn't afford to own a home as well as the poor black/hispanic urban residents who couldn't afford to own a home towards which the HUD program and 'community service' bank directive were originally targeted. This court decision expanded the scope of 'subprime' home mortgages by a factor of 4 or so, which later resulted in a 4 times larger problem of 'subprime' mortgage loan defaults.


    I suspect there is a whole lot of standard of living revising coming down the line for people who have to spend every dollar they got in their pocket (which is unfortunately, most of the American population.)
    This is an absolute certainty. Ultimately, the pay rate thus standard of living for 'unskilled labor' will equalize on a global basis. The question for the USA is to what degree gov't policy will continue to transfer wealth from the middle class i.e. 'skilled labor' to subsidize the standard of living of 'unskilled labor'. At some point, this transfer of wealth will become self-defeating as the standard of living of 'unskilled labor' is subsidized to essentially the same level that the standard of living that the after tax earnings of 'skilled labor' is able to buy. The more that state and local governments attempt to increase income taxes and property taxes, the the more likely this situation becomes.


    The trickle down effect to local government? They will simply raise taxes. Already some places have seen property taxes raised even during the housing bust as well sales tax increases (and cigarette tax increase, and new taxes on ... heck Maryland recently began a service/VAT on technology companies.)
    yup ... New Jersey is attempting to do about the same. However this wasn't really my point. If mortgage financing becomes virtually unavailable to the vast majority of would-be buyers, this will of course absolutely trash real estate market values as desparation sales will eventually set marginal pricing. This will translate into huge reductions in assessed values thus huge reductions in property tax revenue, which will be quickly followed by huge increases in property tax rates in order to recoup that revenue.

    To make matters worse, a lot of local gov'ts, local school systems, civil service retirement funds etc. invested in CDO's in the pursuit of 'too good to be true' returns. Thus these local gov't slush funds will be taking losses right along with the investment banks and hedge funds. Future tax revenue will need to increase enough to cover these losses too !


    Sorry to say it, but this is about to become a three front war on the average citizen - outsourcing of jobs, credit crunch, and taxes from the government empowered to take from you.
    this is obviously a war that the average citizen cannot win. The question of 'moral hazard' then arises ... in the sense that some average citizens are going to look at their de-facto standard of living after working their asses off 60 hours a week for an after-tax standard of living that isn't much different than their unemployed, social welfare benefit collecting neighbor, and decide that it simply isn't worth killing themselves with work anymore ! Ironically, the higher that food and energy costs rise, the more the equivalent cash value of social welfare subsidized food and energy programs are 'worth' ... and the more money can be saved by no longer commuting 60+ miles from an increasingly expensive suburban residence to an urban job. As tax revenues fall, and as available credit to states and cities is cut off, the only place this can wind up is America becoming a third world country in terms of living standards.

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