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eavesdropperParticipant
[quote=UCGal][quote=eavesdropper][quote=bearishgurl][quote=UCGal]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?[/quote]
I don’t think the personel at the retail outlets of the banks are the cause – they’re the symptoms. What triggered the lower underwriting standards was the money being generated by writing loans, selling them to the secondary market, bundling them into mortgage backed securities and selling them as investment grade vehicles… Profits were taken at every step – and they wanted more mortgages to feed the MBS beast… pretty soon you barely needed a pulse to get a loan and downpayments… pppht… who needs that. There was little risk to the banks originating the loans since they were sold off as soon as they were written and the borrower only had to make payments for the first 2 years… so underwriting standards looked for 2 years worth of solvency on a 30 year loan.
The khaki/polo clad folks at the bank were a symptom, not the cause. The underwriting standards were lowered by the corporate officers, not the clerks in comfortable attire.[/quote]
UCGal, exactly what I meant, even if I phrased it poorly. I meant no harm or insult to the khaki-clad friendly folk at the banks (actually, they seem to be very nice people). What I was trying to say was perhaps it was when the senior management of the financial institutions decided that their primary (dare I say “only”) goal was to create, market, and sell low-overhead products to the masses. With cheap money available to them courtesy of the Federal Reserve, their message changed from “save for a rainy day” (or kids’ college, or retirement, or a house) to the siren call of “You can have it NOW!” I listened to a lot of classical radio while at work back in the 90s, and I remember being disturbed by the incredible increase in bank advertising, almost all of it having to do with home equity loans. Those ads were alternated with commercials from luxury automobile companies and dealerships, jewelry stores, and high end electronics retailers, almost always with some variation of the line “Never has it been more affordable…” The financial institutions got astounding results for their advertising dollars, and as customers for loans began flooding bank branches, major philosophical shifts were inevitable, and these institutions shed their traditional “responsible stewards of your money” roles and responsibilities, and went after the “real” money to be made in selling loans, thus creating the personnel changes I mentioned. You’re absolutely right: the khaki-clad staff were just a symptom of the fever that had seized senior management.
Problem was that no one at the banks thought to tell the general public that they should be paying a lot more attention to their own money, and perhaps they should also enroll in the MBA curriculum at Wharton or Harvard, because, lord knows, that’s not what we do here at Bank of America and Wachovia anymore.
Believe me, I’m not making excuses for the hundreds of thousands of borrowers out there who are saying that they thought the bank would have warned them if they were taking a larger mortgage than they could afford. Aside from clear-cut cases of predatory lending, most people should have known that they couldn’t afford an $850,000 house on a $70,000 household income. But the while the banks were clearly engaging in the aggressive marketing of loans in the complete absence of responsible lending practices and banking standards, they still presented themselves to the public as sincere, knowledgeable, and skilled stewards of their money.
In truth, the financial institutions had shifted their focus completely, from making profits via sound financial management practices to making astronomical profits from the changing housing market. The guys who had the financial brains and education should have recognized the beginnings of the boom for what it was, but were instead blinded by the money to be had. At that point it became necessary to shed personnel who were skilled in fiscal management and replace them with those who could create new products when conditions that had created earlier boom markets became unsustainable (interest-only mortgages and negative amortization loans are two of them that come to mind) and those who could sell them.
There’s plenty of blame to go around in this mess. But the financial wizards are the ones that were supposed to know better. At least that’s what they told us for as long back as I can remember.
eavesdropperParticipant[quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?
eavesdropperParticipant[quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?
eavesdropperParticipant[quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?
eavesdropperParticipant[quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?
eavesdropperParticipant[quote=bearishgurl][quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.[/quote]
I don’t know, bg. Do you think it has anything to do with the fact that about 10 or 15 years ago, banks stopped hiring rather forbidding-looking pinstripe-suited people actually educated/trained in finance, accounting, and risk management, and replaced them all with friendly and approachable 22 year-olds, clad in polo shirts and khakis, who had proven track records in…..SALES?
eavesdropperParticipant[quote=sdrealtor]Was having a conversation with an attorney today and here is the problem with walking away. Whether it is legal, moral, ethical or whatever it can come back to haunt you in the future.
If you are an attorney, someone who needs a security clearance, someone who works in the financial industry, someone who will handle finances for a company, someone who holds a position of trust or many other careers a foreclosure will show up on your credit report and there are 20 year reports that can be pulled.
No matter how you view it, try explaining to the HR rep what a “stand-up” guy or gal you are when this is on your record. No matter how good you can position it, would you expect to be viewed in the same light as an equally “stand-up” guy or gal who doesnt have that mark on their credit report?
There are no guarantees and it can easily amount to career suicide. I cant imagine anyone walking away and expecting it to be a free pass forever. Sooner or later it can easily come back and bite them on the ass in a way far more damaging than being underwater.[/quote]
Your post reflects what I’ve been wondering, sdr. Even prior to the bust, employers were running credit checks on prospective employees; it’s a cinch that they’re doing so now. Even in cases of foreclosure where the borrower simply ran out of funds to pay the mortgage, employers are using that as an excuse not to hire someone. I can’t imagine how someone who walks away from a mortgage obligation when he/she is not in any financial distress will circumvent the credit report and manage to procure a security clearance or job offer. In addition, I can’t see the moneylenders sitting by and not taking action on walk-away borrowers; hell, they screwed us royally when they were fat, happy, and making money hand over fist during the first 6 or 7 years of this decade, and it’s a fairly good bet that the events of the last couple years haven’t caused them to re-examine their motives and practices, and put a kindler, gentler loan default policy into place.
No, I think that borrowers who walk away from properties for which they can continue to make payments are risking a lifelong “deadbeat” reputation that not only will make it impossible for them to gain credit, but also bar them from security clearances, attractive employment offers, and other opportunities. To paraphrase Captain Renault in Casablanca: “I’m afraid that the bankers will insist”.
Note that I am not commenting on the decision to stay or walk away. As made very evident on this thread, that’s a very personal choice based on individual viewpoint. But the thought of what the extremely powerful lending community will do to those who do walk scares the hell out of me. And anyone who thinks that the government will step in and prevent them from taking draconian measures need only look at congressional and agency response to banking missteps over the past 25 years.
eavesdropperParticipant[quote=sdrealtor]Was having a conversation with an attorney today and here is the problem with walking away. Whether it is legal, moral, ethical or whatever it can come back to haunt you in the future.
If you are an attorney, someone who needs a security clearance, someone who works in the financial industry, someone who will handle finances for a company, someone who holds a position of trust or many other careers a foreclosure will show up on your credit report and there are 20 year reports that can be pulled.
No matter how you view it, try explaining to the HR rep what a “stand-up” guy or gal you are when this is on your record. No matter how good you can position it, would you expect to be viewed in the same light as an equally “stand-up” guy or gal who doesnt have that mark on their credit report?
There are no guarantees and it can easily amount to career suicide. I cant imagine anyone walking away and expecting it to be a free pass forever. Sooner or later it can easily come back and bite them on the ass in a way far more damaging than being underwater.[/quote]
Your post reflects what I’ve been wondering, sdr. Even prior to the bust, employers were running credit checks on prospective employees; it’s a cinch that they’re doing so now. Even in cases of foreclosure where the borrower simply ran out of funds to pay the mortgage, employers are using that as an excuse not to hire someone. I can’t imagine how someone who walks away from a mortgage obligation when he/she is not in any financial distress will circumvent the credit report and manage to procure a security clearance or job offer. In addition, I can’t see the moneylenders sitting by and not taking action on walk-away borrowers; hell, they screwed us royally when they were fat, happy, and making money hand over fist during the first 6 or 7 years of this decade, and it’s a fairly good bet that the events of the last couple years haven’t caused them to re-examine their motives and practices, and put a kindler, gentler loan default policy into place.
No, I think that borrowers who walk away from properties for which they can continue to make payments are risking a lifelong “deadbeat” reputation that not only will make it impossible for them to gain credit, but also bar them from security clearances, attractive employment offers, and other opportunities. To paraphrase Captain Renault in Casablanca: “I’m afraid that the bankers will insist”.
Note that I am not commenting on the decision to stay or walk away. As made very evident on this thread, that’s a very personal choice based on individual viewpoint. But the thought of what the extremely powerful lending community will do to those who do walk scares the hell out of me. And anyone who thinks that the government will step in and prevent them from taking draconian measures need only look at congressional and agency response to banking missteps over the past 25 years.
eavesdropperParticipant[quote=sdrealtor]Was having a conversation with an attorney today and here is the problem with walking away. Whether it is legal, moral, ethical or whatever it can come back to haunt you in the future.
If you are an attorney, someone who needs a security clearance, someone who works in the financial industry, someone who will handle finances for a company, someone who holds a position of trust or many other careers a foreclosure will show up on your credit report and there are 20 year reports that can be pulled.
No matter how you view it, try explaining to the HR rep what a “stand-up” guy or gal you are when this is on your record. No matter how good you can position it, would you expect to be viewed in the same light as an equally “stand-up” guy or gal who doesnt have that mark on their credit report?
There are no guarantees and it can easily amount to career suicide. I cant imagine anyone walking away and expecting it to be a free pass forever. Sooner or later it can easily come back and bite them on the ass in a way far more damaging than being underwater.[/quote]
Your post reflects what I’ve been wondering, sdr. Even prior to the bust, employers were running credit checks on prospective employees; it’s a cinch that they’re doing so now. Even in cases of foreclosure where the borrower simply ran out of funds to pay the mortgage, employers are using that as an excuse not to hire someone. I can’t imagine how someone who walks away from a mortgage obligation when he/she is not in any financial distress will circumvent the credit report and manage to procure a security clearance or job offer. In addition, I can’t see the moneylenders sitting by and not taking action on walk-away borrowers; hell, they screwed us royally when they were fat, happy, and making money hand over fist during the first 6 or 7 years of this decade, and it’s a fairly good bet that the events of the last couple years haven’t caused them to re-examine their motives and practices, and put a kindler, gentler loan default policy into place.
No, I think that borrowers who walk away from properties for which they can continue to make payments are risking a lifelong “deadbeat” reputation that not only will make it impossible for them to gain credit, but also bar them from security clearances, attractive employment offers, and other opportunities. To paraphrase Captain Renault in Casablanca: “I’m afraid that the bankers will insist”.
Note that I am not commenting on the decision to stay or walk away. As made very evident on this thread, that’s a very personal choice based on individual viewpoint. But the thought of what the extremely powerful lending community will do to those who do walk scares the hell out of me. And anyone who thinks that the government will step in and prevent them from taking draconian measures need only look at congressional and agency response to banking missteps over the past 25 years.
eavesdropperParticipant[quote=sdrealtor]Was having a conversation with an attorney today and here is the problem with walking away. Whether it is legal, moral, ethical or whatever it can come back to haunt you in the future.
If you are an attorney, someone who needs a security clearance, someone who works in the financial industry, someone who will handle finances for a company, someone who holds a position of trust or many other careers a foreclosure will show up on your credit report and there are 20 year reports that can be pulled.
No matter how you view it, try explaining to the HR rep what a “stand-up” guy or gal you are when this is on your record. No matter how good you can position it, would you expect to be viewed in the same light as an equally “stand-up” guy or gal who doesnt have that mark on their credit report?
There are no guarantees and it can easily amount to career suicide. I cant imagine anyone walking away and expecting it to be a free pass forever. Sooner or later it can easily come back and bite them on the ass in a way far more damaging than being underwater.[/quote]
Your post reflects what I’ve been wondering, sdr. Even prior to the bust, employers were running credit checks on prospective employees; it’s a cinch that they’re doing so now. Even in cases of foreclosure where the borrower simply ran out of funds to pay the mortgage, employers are using that as an excuse not to hire someone. I can’t imagine how someone who walks away from a mortgage obligation when he/she is not in any financial distress will circumvent the credit report and manage to procure a security clearance or job offer. In addition, I can’t see the moneylenders sitting by and not taking action on walk-away borrowers; hell, they screwed us royally when they were fat, happy, and making money hand over fist during the first 6 or 7 years of this decade, and it’s a fairly good bet that the events of the last couple years haven’t caused them to re-examine their motives and practices, and put a kindler, gentler loan default policy into place.
No, I think that borrowers who walk away from properties for which they can continue to make payments are risking a lifelong “deadbeat” reputation that not only will make it impossible for them to gain credit, but also bar them from security clearances, attractive employment offers, and other opportunities. To paraphrase Captain Renault in Casablanca: “I’m afraid that the bankers will insist”.
Note that I am not commenting on the decision to stay or walk away. As made very evident on this thread, that’s a very personal choice based on individual viewpoint. But the thought of what the extremely powerful lending community will do to those who do walk scares the hell out of me. And anyone who thinks that the government will step in and prevent them from taking draconian measures need only look at congressional and agency response to banking missteps over the past 25 years.
eavesdropperParticipant[quote=sdrealtor]Was having a conversation with an attorney today and here is the problem with walking away. Whether it is legal, moral, ethical or whatever it can come back to haunt you in the future.
If you are an attorney, someone who needs a security clearance, someone who works in the financial industry, someone who will handle finances for a company, someone who holds a position of trust or many other careers a foreclosure will show up on your credit report and there are 20 year reports that can be pulled.
No matter how you view it, try explaining to the HR rep what a “stand-up” guy or gal you are when this is on your record. No matter how good you can position it, would you expect to be viewed in the same light as an equally “stand-up” guy or gal who doesnt have that mark on their credit report?
There are no guarantees and it can easily amount to career suicide. I cant imagine anyone walking away and expecting it to be a free pass forever. Sooner or later it can easily come back and bite them on the ass in a way far more damaging than being underwater.[/quote]
Your post reflects what I’ve been wondering, sdr. Even prior to the bust, employers were running credit checks on prospective employees; it’s a cinch that they’re doing so now. Even in cases of foreclosure where the borrower simply ran out of funds to pay the mortgage, employers are using that as an excuse not to hire someone. I can’t imagine how someone who walks away from a mortgage obligation when he/she is not in any financial distress will circumvent the credit report and manage to procure a security clearance or job offer. In addition, I can’t see the moneylenders sitting by and not taking action on walk-away borrowers; hell, they screwed us royally when they were fat, happy, and making money hand over fist during the first 6 or 7 years of this decade, and it’s a fairly good bet that the events of the last couple years haven’t caused them to re-examine their motives and practices, and put a kindler, gentler loan default policy into place.
No, I think that borrowers who walk away from properties for which they can continue to make payments are risking a lifelong “deadbeat” reputation that not only will make it impossible for them to gain credit, but also bar them from security clearances, attractive employment offers, and other opportunities. To paraphrase Captain Renault in Casablanca: “I’m afraid that the bankers will insist”.
Note that I am not commenting on the decision to stay or walk away. As made very evident on this thread, that’s a very personal choice based on individual viewpoint. But the thought of what the extremely powerful lending community will do to those who do walk scares the hell out of me. And anyone who thinks that the government will step in and prevent them from taking draconian measures need only look at congressional and agency response to banking missteps over the past 25 years.
eavesdropperParticipant[quote=flu]I’ll give you another true short story, about one of my friends.
Both of his parents were utterly complete misers. The saved every penny, penny pinched, to the point that they didn’t enjoy any of it. When asked, they use to say, they needed to save like misers, for the future…
Then his mom died…His father remarried someone half his age. Though she wasn’t necessarily a gold-digging spend-like-there’s-no-tomorrow, she obviously needed to be well kept. A year later, his dad died too. Guess were most of that hard earned/saved money went?
Morale of the story. If you pass away, chances are your spouse will remarry. Why should you make it easy for your spouse’s future significant other to enjoy what you should have enjoyed yourself?
Think about it.[/quote]
Geez, that’s depressing. Like I wasn’t already all set to slit my wrists over Scaredy’s “going off the air” announcement….
eavesdropperParticipant[quote=flu]I’ll give you another true short story, about one of my friends.
Both of his parents were utterly complete misers. The saved every penny, penny pinched, to the point that they didn’t enjoy any of it. When asked, they use to say, they needed to save like misers, for the future…
Then his mom died…His father remarried someone half his age. Though she wasn’t necessarily a gold-digging spend-like-there’s-no-tomorrow, she obviously needed to be well kept. A year later, his dad died too. Guess were most of that hard earned/saved money went?
Morale of the story. If you pass away, chances are your spouse will remarry. Why should you make it easy for your spouse’s future significant other to enjoy what you should have enjoyed yourself?
Think about it.[/quote]
Geez, that’s depressing. Like I wasn’t already all set to slit my wrists over Scaredy’s “going off the air” announcement….
eavesdropperParticipant[quote=flu]I’ll give you another true short story, about one of my friends.
Both of his parents were utterly complete misers. The saved every penny, penny pinched, to the point that they didn’t enjoy any of it. When asked, they use to say, they needed to save like misers, for the future…
Then his mom died…His father remarried someone half his age. Though she wasn’t necessarily a gold-digging spend-like-there’s-no-tomorrow, she obviously needed to be well kept. A year later, his dad died too. Guess were most of that hard earned/saved money went?
Morale of the story. If you pass away, chances are your spouse will remarry. Why should you make it easy for your spouse’s future significant other to enjoy what you should have enjoyed yourself?
Think about it.[/quote]
Geez, that’s depressing. Like I wasn’t already all set to slit my wrists over Scaredy’s “going off the air” announcement….
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