[patientrenter]

CA Renter, I’d be very happy with the lenders failing. And you’re right, if that were allowed to occur, then lenders would get more careful, and we’d avoid the next bubble.

We could solve this problem with even one of these possible actions:

1. Let lenders fail

2. Require borrowers to repay

3. Require minimum 20% downpayments in all cases

There are probably more options, but these will do. Unfortunately, none of these actions will be taken.

I still think that borrowers should be responsible for their loans (and lenders too). I can’t imagine letting other people determining for me what I can or cannot borrow and repay. Each party should make their own determination of how far they can go, and the loan should be the lesser of what each comes up with. And if the loan isn’t repaid, it should be a black mark for both. In the case of the lender, the penalty is easy to determine – it’s the loss of the unrepaid loan amount. In the case of the borrower, there should be a large penalty too. I don’t see that large penalty being applied now. I guess I still think the system is lopsided, and borrowers need to be held more accountable.

[patientrenter]

CA Renter, I’d be very happy with the lenders failing. And you’re right, if that were allowed to occur, then lenders would get more careful, and we’d avoid the next bubble.

We could solve this problem with even one of these possible actions:

1. Let lenders fail

2. Require borrowers to repay

3. Require minimum 20% downpayments in all cases

There are probably more options, but these will do. Unfortunately, none of these actions will be taken.

I still think that borrowers should be responsible for their loans (and lenders too). I can’t imagine letting other people determining for me what I can or cannot borrow and repay. Each party should make their own determination of how far they can go, and the loan should be the lesser of what each comes up with. And if the loan isn’t repaid, it should be a black mark for both. In the case of the lender, the penalty is easy to determine – it’s the loss of the unrepaid loan amount. In the case of the borrower, there should be a large penalty too. I don’t see that large penalty being applied now. I guess I still think the system is lopsided, and borrowers need to be held more accountable.

[patientrenter]

CA Renter, I’d be very happy with the lenders failing. And you’re right, if that were allowed to occur, then lenders would get more careful, and we’d avoid the next bubble.

We could solve this problem with even one of these possible actions:

1. Let lenders fail

2. Require borrowers to repay

3. Require minimum 20% downpayments in all cases

There are probably more options, but these will do. Unfortunately, none of these actions will be taken.

I still think that borrowers should be responsible for their loans (and lenders too). I can’t imagine letting other people determining for me what I can or cannot borrow and repay. Each party should make their own determination of how far they can go, and the loan should be the lesser of what each comes up with. And if the loan isn’t repaid, it should be a black mark for both. In the case of the lender, the penalty is easy to determine – it’s the loss of the unrepaid loan amount. In the case of the borrower, there should be a large penalty too. I don’t see that large penalty being applied now. I guess I still think the system is lopsided, and borrowers need to be held more accountable.

[patientrenter]

CA Renter, I’d be very happy with the lenders failing. And you’re right, if that were allowed to occur, then lenders would get more careful, and we’d avoid the next bubble.

We could solve this problem with even one of these possible actions:

1. Let lenders fail

2. Require borrowers to repay

3. Require minimum 20% downpayments in all cases

There are probably more options, but these will do. Unfortunately, none of these actions will be taken.

I still think that borrowers should be responsible for their loans (and lenders too). I can’t imagine letting other people determining for me what I can or cannot borrow and repay. Each party should make their own determination of how far they can go, and the loan should be the lesser of what each comes up with. And if the loan isn’t repaid, it should be a black mark for both. In the case of the lender, the penalty is easy to determine – it’s the loss of the unrepaid loan amount. In the case of the borrower, there should be a large penalty too. I don’t see that large penalty being applied now. I guess I still think the system is lopsided, and borrowers need to be held more accountable.

[patientrenter]

Sigh, analyst, you are repeating, but then so am I.

The fact that the person (“lender”) who makes the lending decision is not the person actually and ultimately providing the money and taking the risk doesn’t mean there is no money being loaned. The real lender is the person whose savings have funded the loan. Economically, all the other people are just agents of that principal. (And yes, a good many of those agents are highly culpable and should be prosecuted.) Saying that the entity we commonly refer to as the “lender” isn’t putting any money at risk is a red herring. It doesn’t mean that there’s no person at the other end of a default taking the loss.

As for the borrower “not getting any money”. This fallacy sums up one of the biggest problems that created this bubble, and that we still have. When someone buys a house, the way that it should work is that they agree to pay the price by a certain date, and they then collect the money from their savings, and perhaps some borrowing. If the transaction were viewed this way, people would never allow a bubble to happen. Instead, people started to feel that a bank was buying the house for them. They didn’t really agree to pay $800,000 for that shack. They got the bank to pay $800,000. They only agreed to pay $2500 a month until they “sold” the house “they” bought for $1.2 million.

This mental attitude, that you are not actually agreeing to pay the purchase price, and the money just flies directly from the bank to the seller, is a key reason the bubble inflated, and is still a problem today. People need to be brought back to earth, and reminded that if they agree to pay $800,00 for something, they are supposed to pay it. If they borrow the money, then that’s a loan, and it needs to be repaid on time and with the agreed interest. It is two transactions that we have allowed to become hopelessly muddled.

My own personal suggestion to break this pattern would be to require that interest on home loans in excess of 2 x (65 – Buyer age)% of the home’s value be nondedictible. In other words, make people pay a lot of their own money when they buy. Then instead of feeling that they are an onlooker in some transaction between a bank and a seller, buyer would become real buyers again, and real borrowers, and real repayers of the loans.

[patientrenter]

Sigh, analyst, you are repeating, but then so am I.

The fact that the person (“lender”) who makes the lending decision is not the person actually and ultimately providing the money and taking the risk doesn’t mean there is no money being loaned. The real lender is the person whose savings have funded the loan. Economically, all the other people are just agents of that principal. (And yes, a good many of those agents are highly culpable and should be prosecuted.) Saying that the entity we commonly refer to as the “lender” isn’t putting any money at risk is a red herring. It doesn’t mean that there’s no person at the other end of a default taking the loss.

As for the borrower “not getting any money”. This fallacy sums up one of the biggest problems that created this bubble, and that we still have. When someone buys a house, the way that it should work is that they agree to pay the price by a certain date, and they then collect the money from their savings, and perhaps some borrowing. If the transaction were viewed this way, people would never allow a bubble to happen. Instead, people started to feel that a bank was buying the house for them. They didn’t really agree to pay $800,000 for that shack. They got the bank to pay $800,000. They only agreed to pay $2500 a month until they “sold” the house “they” bought for $1.2 million.

This mental attitude, that you are not actually agreeing to pay the purchase price, and the money just flies directly from the bank to the seller, is a key reason the bubble inflated, and is still a problem today. People need to be brought back to earth, and reminded that if they agree to pay $800,00 for something, they are supposed to pay it. If they borrow the money, then that’s a loan, and it needs to be repaid on time and with the agreed interest. It is two transactions that we have allowed to become hopelessly muddled.

My own personal suggestion to break this pattern would be to require that interest on home loans in excess of 2 x (65 – Buyer age)% of the home’s value be nondedictible. In other words, make people pay a lot of their own money when they buy. Then instead of feeling that they are an onlooker in some transaction between a bank and a seller, buyer would become real buyers again, and real borrowers, and real repayers of the loans.

[patientrenter]

Sigh, analyst, you are repeating, but then so am I.

The fact that the person (“lender”) who makes the lending decision is not the person actually and ultimately providing the money and taking the risk doesn’t mean there is no money being loaned. The real lender is the person whose savings have funded the loan. Economically, all the other people are just agents of that principal. (And yes, a good many of those agents are highly culpable and should be prosecuted.) Saying that the entity we commonly refer to as the “lender” isn’t putting any money at risk is a red herring. It doesn’t mean that there’s no person at the other end of a default taking the loss.

As for the borrower “not getting any money”. This fallacy sums up one of the biggest problems that created this bubble, and that we still have. When someone buys a house, the way that it should work is that they agree to pay the price by a certain date, and they then collect the money from their savings, and perhaps some borrowing. If the transaction were viewed this way, people would never allow a bubble to happen. Instead, people started to feel that a bank was buying the house for them. They didn’t really agree to pay $800,000 for that shack. They got the bank to pay $800,000. They only agreed to pay $2500 a month until they “sold” the house “they” bought for $1.2 million.

This mental attitude, that you are not actually agreeing to pay the purchase price, and the money just flies directly from the bank to the seller, is a key reason the bubble inflated, and is still a problem today. People need to be brought back to earth, and reminded that if they agree to pay $800,00 for something, they are supposed to pay it. If they borrow the money, then that’s a loan, and it needs to be repaid on time and with the agreed interest. It is two transactions that we have allowed to become hopelessly muddled.

My own personal suggestion to break this pattern would be to require that interest on home loans in excess of 2 x (65 – Buyer age)% of the home’s value be nondedictible. In other words, make people pay a lot of their own money when they buy. Then instead of feeling that they are an onlooker in some transaction between a bank and a seller, buyer would become real buyers again, and real borrowers, and real repayers of the loans.

[patientrenter]

Sigh, analyst, you are repeating, but then so am I.

The fact that the person (“lender”) who makes the lending decision is not the person actually and ultimately providing the money and taking the risk doesn’t mean there is no money being loaned. The real lender is the person whose savings have funded the loan. Economically, all the other people are just agents of that principal. (And yes, a good many of those agents are highly culpable and should be prosecuted.) Saying that the entity we commonly refer to as the “lender” isn’t putting any money at risk is a red herring. It doesn’t mean that there’s no person at the other end of a default taking the loss.

As for the borrower “not getting any money”. This fallacy sums up one of the biggest problems that created this bubble, and that we still have. When someone buys a house, the way that it should work is that they agree to pay the price by a certain date, and they then collect the money from their savings, and perhaps some borrowing. If the transaction were viewed this way, people would never allow a bubble to happen. Instead, people started to feel that a bank was buying the house for them. They didn’t really agree to pay $800,000 for that shack. They got the bank to pay $800,000. They only agreed to pay $2500 a month until they “sold” the house “they” bought for $1.2 million.

This mental attitude, that you are not actually agreeing to pay the purchase price, and the money just flies directly from the bank to the seller, is a key reason the bubble inflated, and is still a problem today. People need to be brought back to earth, and reminded that if they agree to pay $800,00 for something, they are supposed to pay it. If they borrow the money, then that’s a loan, and it needs to be repaid on time and with the agreed interest. It is two transactions that we have allowed to become hopelessly muddled.

My own personal suggestion to break this pattern would be to require that interest on home loans in excess of 2 x (65 – Buyer age)% of the home’s value be nondedictible. In other words, make people pay a lot of their own money when they buy. Then instead of feeling that they are an onlooker in some transaction between a bank and a seller, buyer would become real buyers again, and real borrowers, and real repayers of the loans.

[patientrenter]

Sigh, analyst, you are repeating, but then so am I.

The fact that the person (“lender”) who makes the lending decision is not the person actually and ultimately providing the money and taking the risk doesn’t mean there is no money being loaned. The real lender is the person whose savings have funded the loan. Economically, all the other people are just agents of that principal. (And yes, a good many of those agents are highly culpable and should be prosecuted.) Saying that the entity we commonly refer to as the “lender” isn’t putting any money at risk is a red herring. It doesn’t mean that there’s no person at the other end of a default taking the loss.

As for the borrower “not getting any money”. This fallacy sums up one of the biggest problems that created this bubble, and that we still have. When someone buys a house, the way that it should work is that they agree to pay the price by a certain date, and they then collect the money from their savings, and perhaps some borrowing. If the transaction were viewed this way, people would never allow a bubble to happen. Instead, people started to feel that a bank was buying the house for them. They didn’t really agree to pay $800,000 for that shack. They got the bank to pay $800,000. They only agreed to pay $2500 a month until they “sold” the house “they” bought for $1.2 million.

This mental attitude, that you are not actually agreeing to pay the purchase price, and the money just flies directly from the bank to the seller, is a key reason the bubble inflated, and is still a problem today. People need to be brought back to earth, and reminded that if they agree to pay $800,00 for something, they are supposed to pay it. If they borrow the money, then that’s a loan, and it needs to be repaid on time and with the agreed interest. It is two transactions that we have allowed to become hopelessly muddled.

My own personal suggestion to break this pattern would be to require that interest on home loans in excess of 2 x (65 – Buyer age)% of the home’s value be nondedictible. In other words, make people pay a lot of their own money when they buy. Then instead of feeling that they are an onlooker in some transaction between a bank and a seller, buyer would become real buyers again, and real borrowers, and real repayers of the loans.

[patientrenter]

[quote=Russell]

PR, Theoretically, even if banks are successful at getting permission from the federal government to take all the money they see, they won’t blow a bubble with a ponzi scheme in a non-recourse state and across the nation in order to take it. Lots of people should go to jail for creating a public nuisance if nothing else. I am not talking about the little fish who did take the fog a mirror get a loan policy the lenders aggressively and without duress promoted.

The idea that the banks or their enablers who are now fixing the problem deserve any empathy really rubs me the wrong way. Poor banky wanky. Not that I condone all of the of the particular things FB’s do but the banks get what the deserve. I mean, in theory they could.Possibly they could? Yeah right.[/quote]

I certainly don’t have much empathy for the bankers. As you point out, what many of them did should be a criminal offense (and might even be prosecutable, if the pols had enough spine to enforce the laws in that direction). I’d love to see the people who directed that crappy mortgages get AAA ratings go the slammer for 15 years. And the folks who ran the lenders that were shoveling liar loans to the investment community. Etc.

But just because all those people were doing bad things – really bad things – doesn’t give borrowers a free pass. Nor does it give voters a free pass. We aren’t exactly pounding down the doors of our Congressman to remove all the loan and price and tax and other supports for a bloated housing sector. In fact, we rather like those things. So when a few individuals end up doing our dirty work for us, we can blame them when things go wrong, but we are at least as much to blame. When everyone wanted to be able to buy, with almost none of their money, an asset that was virtually guaranteed to make them rich, they weren’t complaining about Angelo Mozilo. If he hadn’t done what what he did, someone else would have. We created the environment, and a few people came forward to serve up what we asked for.

Not all of us, but most….

And allowing borrowers to punish the banks now sounds like fun – just retribution and all. But the problem is that almost all banks are economically insolvent. All that’s holding them up is money from taxpayers, or the promise of money from taxpayers. So when we whack the banks, we’re not whacking the bankers, we’re whacking the taxpayers. That’s your neighbors.

[patientrenter]

[quote=Russell]

PR, Theoretically, even if banks are successful at getting permission from the federal government to take all the money they see, they won’t blow a bubble with a ponzi scheme in a non-recourse state and across the nation in order to take it. Lots of people should go to jail for creating a public nuisance if nothing else. I am not talking about the little fish who did take the fog a mirror get a loan policy the lenders aggressively and without duress promoted.

The idea that the banks or their enablers who are now fixing the problem deserve any empathy really rubs me the wrong way. Poor banky wanky. Not that I condone all of the of the particular things FB’s do but the banks get what the deserve. I mean, in theory they could.Possibly they could? Yeah right.[/quote]

I certainly don’t have much empathy for the bankers. As you point out, what many of them did should be a criminal offense (and might even be prosecutable, if the pols had enough spine to enforce the laws in that direction). I’d love to see the people who directed that crappy mortgages get AAA ratings go the slammer for 15 years. And the folks who ran the lenders that were shoveling liar loans to the investment community. Etc.

But just because all those people were doing bad things – really bad things – doesn’t give borrowers a free pass. Nor does it give voters a free pass. We aren’t exactly pounding down the doors of our Congressman to remove all the loan and price and tax and other supports for a bloated housing sector. In fact, we rather like those things. So when a few individuals end up doing our dirty work for us, we can blame them when things go wrong, but we are at least as much to blame. When everyone wanted to be able to buy, with almost none of their money, an asset that was virtually guaranteed to make them rich, they weren’t complaining about Angelo Mozilo. If he hadn’t done what what he did, someone else would have. We created the environment, and a few people came forward to serve up what we asked for.

Not all of us, but most….

And allowing borrowers to punish the banks now sounds like fun – just retribution and all. But the problem is that almost all banks are economically insolvent. All that’s holding them up is money from taxpayers, or the promise of money from taxpayers. So when we whack the banks, we’re not whacking the bankers, we’re whacking the taxpayers. That’s your neighbors.

[patientrenter]

[quote=Russell]

PR, Theoretically, even if banks are successful at getting permission from the federal government to take all the money they see, they won’t blow a bubble with a ponzi scheme in a non-recourse state and across the nation in order to take it. Lots of people should go to jail for creating a public nuisance if nothing else. I am not talking about the little fish who did take the fog a mirror get a loan policy the lenders aggressively and without duress promoted.

The idea that the banks or their enablers who are now fixing the problem deserve any empathy really rubs me the wrong way. Poor banky wanky. Not that I condone all of the of the particular things FB’s do but the banks get what the deserve. I mean, in theory they could.Possibly they could? Yeah right.[/quote]

I certainly don’t have much empathy for the bankers. As you point out, what many of them did should be a criminal offense (and might even be prosecutable, if the pols had enough spine to enforce the laws in that direction). I’d love to see the people who directed that crappy mortgages get AAA ratings go the slammer for 15 years. And the folks who ran the lenders that were shoveling liar loans to the investment community. Etc.

But just because all those people were doing bad things – really bad things – doesn’t give borrowers a free pass. Nor does it give voters a free pass. We aren’t exactly pounding down the doors of our Congressman to remove all the loan and price and tax and other supports for a bloated housing sector. In fact, we rather like those things. So when a few individuals end up doing our dirty work for us, we can blame them when things go wrong, but we are at least as much to blame. When everyone wanted to be able to buy, with almost none of their money, an asset that was virtually guaranteed to make them rich, they weren’t complaining about Angelo Mozilo. If he hadn’t done what what he did, someone else would have. We created the environment, and a few people came forward to serve up what we asked for.

Not all of us, but most….

And allowing borrowers to punish the banks now sounds like fun – just retribution and all. But the problem is that almost all banks are economically insolvent. All that’s holding them up is money from taxpayers, or the promise of money from taxpayers. So when we whack the banks, we’re not whacking the bankers, we’re whacking the taxpayers. That’s your neighbors.

[patientrenter]

[quote=Russell]

PR, Theoretically, even if banks are successful at getting permission from the federal government to take all the money they see, they won’t blow a bubble with a ponzi scheme in a non-recourse state and across the nation in order to take it. Lots of people should go to jail for creating a public nuisance if nothing else. I am not talking about the little fish who did take the fog a mirror get a loan policy the lenders aggressively and without duress promoted.

The idea that the banks or their enablers who are now fixing the problem deserve any empathy really rubs me the wrong way. Poor banky wanky. Not that I condone all of the of the particular things FB’s do but the banks get what the deserve. I mean, in theory they could.Possibly they could? Yeah right.[/quote]

I certainly don’t have much empathy for the bankers. As you point out, what many of them did should be a criminal offense (and might even be prosecutable, if the pols had enough spine to enforce the laws in that direction). I’d love to see the people who directed that crappy mortgages get AAA ratings go the slammer for 15 years. And the folks who ran the lenders that were shoveling liar loans to the investment community. Etc.

But just because all those people were doing bad things – really bad things – doesn’t give borrowers a free pass. Nor does it give voters a free pass. We aren’t exactly pounding down the doors of our Congressman to remove all the loan and price and tax and other supports for a bloated housing sector. In fact, we rather like those things. So when a few individuals end up doing our dirty work for us, we can blame them when things go wrong, but we are at least as much to blame. When everyone wanted to be able to buy, with almost none of their money, an asset that was virtually guaranteed to make them rich, they weren’t complaining about Angelo Mozilo. If he hadn’t done what what he did, someone else would have. We created the environment, and a few people came forward to serve up what we asked for.

Not all of us, but most….

And allowing borrowers to punish the banks now sounds like fun – just retribution and all. But the problem is that almost all banks are economically insolvent. All that’s holding them up is money from taxpayers, or the promise of money from taxpayers. So when we whack the banks, we’re not whacking the bankers, we’re whacking the taxpayers. That’s your neighbors.

[patientrenter]

[quote=Russell]

PR, Theoretically, even if banks are successful at getting permission from the federal government to take all the money they see, they won’t blow a bubble with a ponzi scheme in a non-recourse state and across the nation in order to take it. Lots of people should go to jail for creating a public nuisance if nothing else. I am not talking about the little fish who did take the fog a mirror get a loan policy the lenders aggressively and without duress promoted.

The idea that the banks or their enablers who are now fixing the problem deserve any empathy really rubs me the wrong way. Poor banky wanky. Not that I condone all of the of the particular things FB’s do but the banks get what the deserve. I mean, in theory they could.Possibly they could? Yeah right.[/quote]

I certainly don’t have much empathy for the bankers. As you point out, what many of them did should be a criminal offense (and might even be prosecutable, if the pols had enough spine to enforce the laws in that direction). I’d love to see the people who directed that crappy mortgages get AAA ratings go the slammer for 15 years. And the folks who ran the lenders that were shoveling liar loans to the investment community. Etc.

But just because all those people were doing bad things – really bad things – doesn’t give borrowers a free pass. Nor does it give voters a free pass. We aren’t exactly pounding down the doors of our Congressman to remove all the loan and price and tax and other supports for a bloated housing sector. In fact, we rather like those things. So when a few individuals end up doing our dirty work for us, we can blame them when things go wrong, but we are at least as much to blame. When everyone wanted to be able to buy, with almost none of their money, an asset that was virtually guaranteed to make them rich, they weren’t complaining about Angelo Mozilo. If he hadn’t done what what he did, someone else would have. We created the environment, and a few people came forward to serve up what we asked for.

Not all of us, but most….

And allowing borrowers to punish the banks now sounds like fun – just retribution and all. But the problem is that almost all banks are economically insolvent. All that’s holding them up is money from taxpayers, or the promise of money from taxpayers. So when we whack the banks, we’re not whacking the bankers, we’re whacking the taxpayers. That’s your neighbors.

[patientrenter]

[quote=analyst]
Lenders were/are not pushed to do anything dangerous or likely to lead to losses.

They are required only to use realistic appraisal values, and maintain appropriate loan-to-value ratios. This is easy, boring, and the path to a reasonable profit, but not the path to riches.

That is why the charlatans who engineered the real estate bubble, and are responsible for all the damage that it caused, were not satisfied with the arrangement.[/quote]

analyst, it sounds like borrowers have no responsibilities, and lenders have them all. I guess I can’t subscribe to a theory that says that the person getting the money has 0 responsibility, and the person giving the money has 100%. In a transaction where you let someone use something of yours of great value, who is more exposed to losses?

If I rent your house while you’re on your next vacation, does the fact that the rent was high, or you didn’t clean up first, or something else, mean I can trash your house and it’s OK? The money lent out in a mortgage ultimately came from other people, and they need it all back, with a little income, just like you if you rented out your house. They are very exposed, just as you are renting out. Saying it’s OK to trash the house, or default on the loan, is going to have serious consequences on people’s future behavior.

Right now, the world is awash in savings. We can borrow like drunken sailors, and default at phenomenal rates, and it’s OK, we can still borrow more. But that’s not going to last forever. Down the road, world savings will return to normal. When that happens, do you think that people will want to lend to US homeowners? Or to a nation that thinks that it’s up to the lenders to make sure the loan is repaid?

[Author]

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