[quote=bearishgurl] Don’t know if it was the chicken or the egg which came first but the unscrupulous loan brokerages fueled price escalation and price escalation fueled more unscrupulous loan brokerages. Selling off mortgages immediately upon origination played a HUGE PART in this as well. This is my .02, based upon the situation I am seeing homeowners in now.
eavesdropper, I don’t really see how origination of mortgage loans can be returned to the ways of the “good-old days” (if that’s what they were). What few lenders are left now seem to be going so overboard the other way (in the loan-application process), so we can all pay for their past lending mistakes, even if we don’t deserve to be treated like that :={[/quote]
BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. It’s frustrating as hell for me every time I hear someone opine that “none of this would have happened had it not been for the CRA” or “It’s all the fault of Barney Franks and Chris Dodds” (that one really pisses me off because it’s patently impossible for 2 members of Congress to find their way out of a paper bag, much less mastermind the worst financial meltdown in history. But if you’re going to insist that they did, you can at least get their names right. It’s not like they’re difficult names, duh!)
The one that really gets my blood going, however, is “The banks were doing their jobs, but they were FORCED to lend money to people who couldn’t afford houses”. Shit, man, those banks couldn’t write those mortgages fast enough. They were dragging people in off the street, and when it was unavoidably clear that they didn’t have the financial wherewithal for another round of financing, the banks got creative with their products (e.g., interest-only and neg am). I swear, it was like one of those “find the hidden object” pictures when we were kids, except it was looking at all this unbelievable crap going down, and wondering when the “smart” people in charge were finally going to see the flashing red neon “DANGER” sign.
As you can see, I wrote a rather lengthy response to UCGal clarifying my earlier response to your post. I agree that we will probably never return to the days of yore with regard to loan origination. But, frankly, I don’t see that any real changes have been mandated by the government. I think the only reason you don’t have these fly-by-night, drive-in-window mortgage “lenders” is, simply, that there’s not enough money to go around. Houses are falling in value, so there’s not the insanely-paced buying and selling that was going on, not to mention home equity lending. I figure that the big banks are doing their own policing (of a sort) in order to keep their own piece of mortgage lending turf safe from poachers.
I don’t know what’s happening in California, but here in DC there’s lots of lending still going on to underqualified buyers. In fact, I fully expect another wave of foreclosures in 2011-2012 on post-bust mortgages. In the interest of spurring the economy and lighting a fire under the moribund housing market, and with the help of federal and state homebuying assistance programs, a lot of very young first-time buyers with shaky financial foundations got (and are still getting) loans. One problem is that 2nd or 3rd time homebuyers, who might have been interested in trading up, were prevented from doing so by an inability to sell their houses. So many of the banks were left with the “kids” as customers.
My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.
