You cannot have it both ways

[sdrealtor]

If I could say it any better than Chris, Adam (SD R) or Rustico I would but they have it pretty much covered.

Whenever I hear statements like the OP, I always think back to Juraisic park. The fact that you can do something doesnt mean that you should.

[TheBreeze]

Wall said savedbypigs. The lender can protect themselves in multiple ways: they can chop the appraisal, they can go back to demanding 20% down, they can charge a higher interest rate, etc, etc.

I think it is naive to think the housing bubble wouldn’t have happened if loans were recourse. Most homebuyers have no idea what is in the mortgage contract. They just want to buy the most expensive house that the lender will let them buy. It’s the lender’s responsiblity to make sure that the lender is protected.

Mish had a great article on what really enabled the housing bubble the other day. Basically, until sometime in the 1970s, the rating agencies worked for the buyers of loans. Then, the federal government passed some law giving a few rating agencies a monopoly and requiring the seller of the loan to pay them. Well, it took a while, but eventually the rating agenices totally sold out to the folks that were paying them (loan sellers). If they were paid enough, the rating agencies would put a AAA rating on anything.

Several bond funds, pension funds, etc are restricted in what they can buy based on ratings. Because the rating agencies sold out and rated every POS they could get their hands on AAA, the market for this crap balooned. If the ratings agences were still working for the funds, it is unlikely that the MBS market would have supported a housing bubble.

Another change I would like to see is the GSEs only guaranteeing loans where the home buyer puts 20% down. 0-down loans were another “innovation” that helped create the housing bubble.

If the ratings agencies went back to working for the loan buyers and 20%-down loans came back in vogue, we wouldn’t be seeing any housing bubbles for a long, long time.

[TheBreeze]

Wall said savedbypigs. The lender can protect themselves in multiple ways: they can chop the appraisal, they can go back to demanding 20% down, they can charge a higher interest rate, etc, etc.

I think it is naive to think the housing bubble wouldn’t have happened if loans were recourse. Most homebuyers have no idea what is in the mortgage contract. They just want to buy the most expensive house that the lender will let them buy. It’s the lender’s responsiblity to make sure that the lender is protected.

Mish had a great article on what really enabled the housing bubble the other day. Basically, until sometime in the 1970s, the rating agencies worked for the buyers of loans. Then, the federal government passed some law giving a few rating agencies a monopoly and requiring the seller of the loan to pay them. Well, it took a while, but eventually the rating agenices totally sold out to the folks that were paying them (loan sellers). If they were paid enough, the rating agencies would put a AAA rating on anything.

Several bond funds, pension funds, etc are restricted in what they can buy based on ratings. Because the rating agencies sold out and rated every POS they could get their hands on AAA, the market for this crap balooned. If the ratings agences were still working for the funds, it is unlikely that the MBS market would have supported a housing bubble.

Another change I would like to see is the GSEs only guaranteeing loans where the home buyer puts 20% down. 0-down loans were another “innovation” that helped create the housing bubble.

If the ratings agencies went back to working for the loan buyers and 20%-down loans came back in vogue, we wouldn’t be seeing any housing bubbles for a long, long time.

[TheBreeze]

Wall said savedbypigs. The lender can protect themselves in multiple ways: they can chop the appraisal, they can go back to demanding 20% down, they can charge a higher interest rate, etc, etc.

I think it is naive to think the housing bubble wouldn’t have happened if loans were recourse. Most homebuyers have no idea what is in the mortgage contract. They just want to buy the most expensive house that the lender will let them buy. It’s the lender’s responsiblity to make sure that the lender is protected.

Mish had a great article on what really enabled the housing bubble the other day. Basically, until sometime in the 1970s, the rating agencies worked for the buyers of loans. Then, the federal government passed some law giving a few rating agencies a monopoly and requiring the seller of the loan to pay them. Well, it took a while, but eventually the rating agenices totally sold out to the folks that were paying them (loan sellers). If they were paid enough, the rating agencies would put a AAA rating on anything.

Several bond funds, pension funds, etc are restricted in what they can buy based on ratings. Because the rating agencies sold out and rated every POS they could get their hands on AAA, the market for this crap balooned. If the ratings agences were still working for the funds, it is unlikely that the MBS market would have supported a housing bubble.

Another change I would like to see is the GSEs only guaranteeing loans where the home buyer puts 20% down. 0-down loans were another “innovation” that helped create the housing bubble.

If the ratings agencies went back to working for the loan buyers and 20%-down loans came back in vogue, we wouldn’t be seeing any housing bubbles for a long, long time.

[TheBreeze]

Wall said savedbypigs. The lender can protect themselves in multiple ways: they can chop the appraisal, they can go back to demanding 20% down, they can charge a higher interest rate, etc, etc.

I think it is naive to think the housing bubble wouldn’t have happened if loans were recourse. Most homebuyers have no idea what is in the mortgage contract. They just want to buy the most expensive house that the lender will let them buy. It’s the lender’s responsiblity to make sure that the lender is protected.

Mish had a great article on what really enabled the housing bubble the other day. Basically, until sometime in the 1970s, the rating agencies worked for the buyers of loans. Then, the federal government passed some law giving a few rating agencies a monopoly and requiring the seller of the loan to pay them. Well, it took a while, but eventually the rating agenices totally sold out to the folks that were paying them (loan sellers). If they were paid enough, the rating agencies would put a AAA rating on anything.

Several bond funds, pension funds, etc are restricted in what they can buy based on ratings. Because the rating agencies sold out and rated every POS they could get their hands on AAA, the market for this crap balooned. If the ratings agences were still working for the funds, it is unlikely that the MBS market would have supported a housing bubble.

Another change I would like to see is the GSEs only guaranteeing loans where the home buyer puts 20% down. 0-down loans were another “innovation” that helped create the housing bubble.

If the ratings agencies went back to working for the loan buyers and 20%-down loans came back in vogue, we wouldn’t be seeing any housing bubbles for a long, long time.

[TheBreeze]

Wall said savedbypigs. The lender can protect themselves in multiple ways: they can chop the appraisal, they can go back to demanding 20% down, they can charge a higher interest rate, etc, etc.

I think it is naive to think the housing bubble wouldn’t have happened if loans were recourse. Most homebuyers have no idea what is in the mortgage contract. They just want to buy the most expensive house that the lender will let them buy. It’s the lender’s responsiblity to make sure that the lender is protected.

Mish had a great article on what really enabled the housing bubble the other day. Basically, until sometime in the 1970s, the rating agencies worked for the buyers of loans. Then, the federal government passed some law giving a few rating agencies a monopoly and requiring the seller of the loan to pay them. Well, it took a while, but eventually the rating agenices totally sold out to the folks that were paying them (loan sellers). If they were paid enough, the rating agencies would put a AAA rating on anything.

Several bond funds, pension funds, etc are restricted in what they can buy based on ratings. Because the rating agencies sold out and rated every POS they could get their hands on AAA, the market for this crap balooned. If the ratings agences were still working for the funds, it is unlikely that the MBS market would have supported a housing bubble.

Another change I would like to see is the GSEs only guaranteeing loans where the home buyer puts 20% down. 0-down loans were another “innovation” that helped create the housing bubble.

If the ratings agencies went back to working for the loan buyers and 20%-down loans came back in vogue, we wouldn’t be seeing any housing bubbles for a long, long time.

[SD Realtor]

savedbypigs and others,

Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.

However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.

I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.

Geez!

They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.

When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.

SD Realtor

[SD Realtor]

savedbypigs and others,

Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.

However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.

I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.

Geez!

They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.

When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.

SD Realtor

[SD Realtor]

savedbypigs and others,

Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.

However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.

I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.

Geez!

They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.

When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.

SD Realtor

[SD Realtor]

savedbypigs and others,

Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.

However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.

I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.

Geez!

They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.

When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.

SD Realtor

[SD Realtor]

savedbypigs and others,

Fair enough about the intent of the nonrecourse loan. I can easily admit I am (or may be incorrect) about the intent of a non recourse loan.

However inherent in that definition of the nonrecourse loan is the catalyst for creating a mindset that will indeed reduce the obligation that is inherent in owning a home. Look I am an engineer. If one line of code is screwed up in an ASIC design that can cost my company 6 figures. They may have to run a new mask set, it will delay production, it will affect other people. There is a pride that comes with doing the job and being AFRAID of screwing it up. If I didn’t have that fear, if the ramifications were not as they were, I would perform in a sloppier manner.

I know the above is a poor analogy however my point is that the existence of the non recourse loan creates a hierarchy of trust that can and has failed. As noted above it is incumbent upon the creditor to ensure that the collateral protecting the obligation is sufficient.

Geez!

They don’t even have a clue of the net worth of many of these CDO bundles. They run simulations and models to guesstimate it. The ratings agencies, underwriting standards, appraisal processes… the entire structure with which is needed and the LENDERS RELY ON to “ensure the collateral protecting the obligation” has withered in the face of a rampant speculative bubble.

When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.

SD Realtor

[bobby]

“When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.”

the bank WROTE the contract. the bank could simply change the wording. adding more laws isn’t needed.
I thought you’re a realtor.

[bobby]

“When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.”

the bank WROTE the contract. the bank could simply change the wording. adding more laws isn’t needed.
I thought you’re a realtor.

[bobby]

“When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.”

the bank WROTE the contract. the bank could simply change the wording. adding more laws isn’t needed.
I thought you’re a realtor.

[bobby]

“When we have well educated people posting on the internet that they will do much better by simply walking away from the loan, then to me that is a harbinger that perhaps the next time around we need to redesign the process. Yes he is exercising his legal right but maybe the next time around, if that right didn’t exist then maybe he would not have jumped into the game to begin with.”

the bank WROTE the contract. the bank could simply change the wording. adding more laws isn’t needed.
I thought you’re a realtor.

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