Home › Forums › Financial Markets/Economics › The View From Inside a Depression
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October 20, 2009 at 1:40 AM #472089October 20, 2009 at 1:43 AM #471259
ucodegen
ParticipantYes, you can let housing become overvalued by ten trillion dollars, and lend against the overvaluation by another few trillion, and the problem is the “infection” of letting the values come back down to earth.
This is what down payments were originally for.. the event of a decline in the value of the property. This is why the traditional Fannie/Freddie product was a 80%LTV maximum (20% down, 80% financed). The down prevents a ‘cascade’ of defaults because the value of the house exceeds the outstanding loan even if house prices drop a bit.
October 20, 2009 at 1:43 AM #471441ParticipantYes, you can let housing become overvalued by ten trillion dollars, and lend against the overvaluation by another few trillion, and the problem is the “infection” of letting the values come back down to earth.
This is what down payments were originally for.. the event of a decline in the value of the property. This is why the traditional Fannie/Freddie product was a 80%LTV maximum (20% down, 80% financed). The down prevents a ‘cascade’ of defaults because the value of the house exceeds the outstanding loan even if house prices drop a bit.
October 20, 2009 at 1:43 AM #471801ParticipantYes, you can let housing become overvalued by ten trillion dollars, and lend against the overvaluation by another few trillion, and the problem is the “infection” of letting the values come back down to earth.
This is what down payments were originally for.. the event of a decline in the value of the property. This is why the traditional Fannie/Freddie product was a 80%LTV maximum (20% down, 80% financed). The down prevents a ‘cascade’ of defaults because the value of the house exceeds the outstanding loan even if house prices drop a bit.
October 20, 2009 at 1:43 AM #471879ParticipantYes, you can let housing become overvalued by ten trillion dollars, and lend against the overvaluation by another few trillion, and the problem is the “infection” of letting the values come back down to earth.
This is what down payments were originally for.. the event of a decline in the value of the property. This is why the traditional Fannie/Freddie product was a 80%LTV maximum (20% down, 80% financed). The down prevents a ‘cascade’ of defaults because the value of the house exceeds the outstanding loan even if house prices drop a bit.
October 20, 2009 at 1:43 AM #472099ParticipantYes, you can let housing become overvalued by ten trillion dollars, and lend against the overvaluation by another few trillion, and the problem is the “infection” of letting the values come back down to earth.
This is what down payments were originally for.. the event of a decline in the value of the property. This is why the traditional Fannie/Freddie product was a 80%LTV maximum (20% down, 80% financed). The down prevents a ‘cascade’ of defaults because the value of the house exceeds the outstanding loan even if house prices drop a bit.
October 20, 2009 at 1:58 AM #471264ParticipantThe bailout schemes were supposed to help restore the “intrinsic” values of the securities.
Actually it was to insure proper capitalization ratios so that banks would not have to immediately liquidate assets that were under attack.
It would like a neighbor’s house going into foreclosure, and another neighbor selling his house because of unemployment. Pretty soon, you can’t refinance your house because you no longer have equity. Then you can’t send your daughter to college or buy a new car, etc…
Unless you are trying to use the house as an HELOC ATM, there would be no need to refi your own house. Part of the problem was that HELOC ATM was in overdrive and people shaped their lives around it. This is why many of the people who went through the Great Depression are not having a problem (they didn’t equity-out at every possible chance), while those that didn’t go through the Great Depression didn’t have any equity left. They lived off their house appreciation.
October 20, 2009 at 1:58 AM #471446ParticipantThe bailout schemes were supposed to help restore the “intrinsic” values of the securities.
Actually it was to insure proper capitalization ratios so that banks would not have to immediately liquidate assets that were under attack.
It would like a neighbor’s house going into foreclosure, and another neighbor selling his house because of unemployment. Pretty soon, you can’t refinance your house because you no longer have equity. Then you can’t send your daughter to college or buy a new car, etc…
Unless you are trying to use the house as an HELOC ATM, there would be no need to refi your own house. Part of the problem was that HELOC ATM was in overdrive and people shaped their lives around it. This is why many of the people who went through the Great Depression are not having a problem (they didn’t equity-out at every possible chance), while those that didn’t go through the Great Depression didn’t have any equity left. They lived off their house appreciation.
October 20, 2009 at 1:58 AM #471807ParticipantThe bailout schemes were supposed to help restore the “intrinsic” values of the securities.
Actually it was to insure proper capitalization ratios so that banks would not have to immediately liquidate assets that were under attack.
It would like a neighbor’s house going into foreclosure, and another neighbor selling his house because of unemployment. Pretty soon, you can’t refinance your house because you no longer have equity. Then you can’t send your daughter to college or buy a new car, etc…
Unless you are trying to use the house as an HELOC ATM, there would be no need to refi your own house. Part of the problem was that HELOC ATM was in overdrive and people shaped their lives around it. This is why many of the people who went through the Great Depression are not having a problem (they didn’t equity-out at every possible chance), while those that didn’t go through the Great Depression didn’t have any equity left. They lived off their house appreciation.
October 20, 2009 at 1:58 AM #471884ParticipantThe bailout schemes were supposed to help restore the “intrinsic” values of the securities.
Actually it was to insure proper capitalization ratios so that banks would not have to immediately liquidate assets that were under attack.
It would like a neighbor’s house going into foreclosure, and another neighbor selling his house because of unemployment. Pretty soon, you can’t refinance your house because you no longer have equity. Then you can’t send your daughter to college or buy a new car, etc…
Unless you are trying to use the house as an HELOC ATM, there would be no need to refi your own house. Part of the problem was that HELOC ATM was in overdrive and people shaped their lives around it. This is why many of the people who went through the Great Depression are not having a problem (they didn’t equity-out at every possible chance), while those that didn’t go through the Great Depression didn’t have any equity left. They lived off their house appreciation.
October 20, 2009 at 1:58 AM #472104ParticipantThe bailout schemes were supposed to help restore the “intrinsic” values of the securities.
Actually it was to insure proper capitalization ratios so that banks would not have to immediately liquidate assets that were under attack.
It would like a neighbor’s house going into foreclosure, and another neighbor selling his house because of unemployment. Pretty soon, you can’t refinance your house because you no longer have equity. Then you can’t send your daughter to college or buy a new car, etc…
Unless you are trying to use the house as an HELOC ATM, there would be no need to refi your own house. Part of the problem was that HELOC ATM was in overdrive and people shaped their lives around it. This is why many of the people who went through the Great Depression are not having a problem (they didn’t equity-out at every possible chance), while those that didn’t go through the Great Depression didn’t have any equity left. They lived off their house appreciation.
October 20, 2009 at 5:18 AM #471274ralphfurley
Participant[quote=Arraya]http://www.youtube.com/watch?v=pFMgwL-Tq4s&feature=player_embedded[/quote]
Keiser has a way of putting stuff out there…
“Why not give Osama Bin Laden a bonus for the great work he did on 9/11? That’s the same thing as giving JP Morgan a bonus or Goldman Sacs a bonus. They are all terrorists. They are all destroying the economy. One uses derivatives… one uses airplanes…”
—@ 5:50—
http://www.youtube.com/watch?v=tbAqqLkiUkg&feature=relatedOctober 20, 2009 at 5:18 AM #471456Participant[quote=Arraya]http://www.youtube.com/watch?v=pFMgwL-Tq4s&feature=player_embedded[/quote]
Keiser has a way of putting stuff out there…
“Why not give Osama Bin Laden a bonus for the great work he did on 9/11? That’s the same thing as giving JP Morgan a bonus or Goldman Sacs a bonus. They are all terrorists. They are all destroying the economy. One uses derivatives… one uses airplanes…”
—@ 5:50—
http://www.youtube.com/watch?v=tbAqqLkiUkg&feature=relatedOctober 20, 2009 at 5:18 AM #471817Participant[quote=Arraya]http://www.youtube.com/watch?v=pFMgwL-Tq4s&feature=player_embedded[/quote]
Keiser has a way of putting stuff out there…
“Why not give Osama Bin Laden a bonus for the great work he did on 9/11? That’s the same thing as giving JP Morgan a bonus or Goldman Sacs a bonus. They are all terrorists. They are all destroying the economy. One uses derivatives… one uses airplanes…”
—@ 5:50—
http://www.youtube.com/watch?v=tbAqqLkiUkg&feature=relatedOctober 20, 2009 at 5:18 AM #471894Participant[quote=Arraya]http://www.youtube.com/watch?v=pFMgwL-Tq4s&feature=player_embedded[/quote]
Keiser has a way of putting stuff out there…
“Why not give Osama Bin Laden a bonus for the great work he did on 9/11? That’s the same thing as giving JP Morgan a bonus or Goldman Sacs a bonus. They are all terrorists. They are all destroying the economy. One uses derivatives… one uses airplanes…”
—@ 5:50—
http://www.youtube.com/watch?v=tbAqqLkiUkg&feature=related -
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