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Eugene.
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November 5, 2008 at 3:52 PM #300068November 5, 2008 at 3:52 PM #299648
ucodegen
ParticipantThe blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:
In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
November 5, 2008 at 3:52 PM #300005ParticipantThe blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:
In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
November 5, 2008 at 3:52 PM #300016ParticipantThe blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:
In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
November 5, 2008 at 3:52 PM #300030ParticipantThe blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:
In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
November 5, 2008 at 3:52 PM #300078ParticipantThe blame on the CRA is entirely misplaced, as Barry articulates much better than I ever could have:
In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
November 5, 2008 at 4:08 PM #299662Eugene
Participant[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.
I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.
[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]
Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.
[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]
In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.
November 5, 2008 at 4:08 PM #300020Participant[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.
I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.
[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]
Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.
[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]
In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.
November 5, 2008 at 4:08 PM #300031Participant[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.
I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.
[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]
Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.
[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]
In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.
November 5, 2008 at 4:08 PM #300046Participant[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.
I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.
[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]
Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.
[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]
In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.
November 5, 2008 at 4:08 PM #300093Participant[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.
I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.
[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]
Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.
[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]
In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.
November 5, 2008 at 4:37 PM #299707an
Participant[quote=esmith]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.[/quote]
I know some people who bought their first house in the 80s. They tell me back then, it was very hard to find a loan if you put down less than 20% and it was nearly impossible to get a loan if you put down less than 10%. That’s what they told me of their experience back then, so I tend to believe them since they were on the borrowing side of the equation. They could be wrong and you didn’t need more than 3% down, but I wouldn’t know for sure, since I don’t have a time machine. What we can talk about is what to do now. Your argument is to not require 20% down because it’s hard. My argument is, it’s doable if you put your mind to it. Why are you so against asking people to put more skin in the game?November 5, 2008 at 4:37 PM #300064Participant[quote=esmith]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.[/quote]
I know some people who bought their first house in the 80s. They tell me back then, it was very hard to find a loan if you put down less than 20% and it was nearly impossible to get a loan if you put down less than 10%. That’s what they told me of their experience back then, so I tend to believe them since they were on the borrowing side of the equation. They could be wrong and you didn’t need more than 3% down, but I wouldn’t know for sure, since I don’t have a time machine. What we can talk about is what to do now. Your argument is to not require 20% down because it’s hard. My argument is, it’s doable if you put your mind to it. Why are you so against asking people to put more skin in the game?November 5, 2008 at 4:37 PM #300074Participant[quote=esmith]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.[/quote]
I know some people who bought their first house in the 80s. They tell me back then, it was very hard to find a loan if you put down less than 20% and it was nearly impossible to get a loan if you put down less than 10%. That’s what they told me of their experience back then, so I tend to believe them since they were on the borrowing side of the equation. They could be wrong and you didn’t need more than 3% down, but I wouldn’t know for sure, since I don’t have a time machine. What we can talk about is what to do now. Your argument is to not require 20% down because it’s hard. My argument is, it’s doable if you put your mind to it. Why are you so against asking people to put more skin in the game?November 5, 2008 at 4:37 PM #300090Participant[quote=esmith]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.
The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.[/quote]
I know some people who bought their first house in the 80s. They tell me back then, it was very hard to find a loan if you put down less than 20% and it was nearly impossible to get a loan if you put down less than 10%. That’s what they told me of their experience back then, so I tend to believe them since they were on the borrowing side of the equation. They could be wrong and you didn’t need more than 3% down, but I wouldn’t know for sure, since I don’t have a time machine. What we can talk about is what to do now. Your argument is to not require 20% down because it’s hard. My argument is, it’s doable if you put your mind to it. Why are you so against asking people to put more skin in the game? -
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