Comments on Sid Pachter's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/sid-pachter/articles http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-146986 146986 Tue, 08 Apr 2008 11:32:31 -0400
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The problem with this is that this is NOT where it actually began. You hinted at it but completely overlooked it. Another reader mentioned Congress, which is half correct. However, none of these loans could be made under a free market banking system with such impunity.

The Federal Reserve dictates the short-term interest rates and also sets the standard for lending practices of member banks. Since banks are "insured" against loss, there is a loosening of lending guidelines - hence the fractional reserve system.

It's easy to blame the member banks because they have no alternative. If you're a bank, you come under certain rules and regulations. Of course, smaller banks don't take the risks of larger banks. For example, local credit unions or banks that do business only in a handful of counties in one particular State won't take on the same types of risky loans that a larger bank like Countrywide will.

Sometimes I think that some of the big shots in the banking and financial business believe that they are "too big to fail"...and maybe they are. With more regulation comes more alleged protection - for depositors AND the institution itself; protection from responsibility.

Get rid of the gyrating, arbitrary interest rates set by the Fed, and most of your reckless lending policies will be solved. Reckless banks will go out of business, but they'll still be rated appropriately by independent rating agencies.

It sounds harsh, but we are living the alternative. Does anybody really enjoy this?]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-146291 146291 Mon, 07 Apr 2008 08:51:07 -0400
You have wrongly identified the MB in your scenario as the Mortgage Broker. In reality the firm you describe is a correspondent Mortgage Banker. The Mortgage Broker makes no underwriting decisions at all. They simply package an application and submit it to a lender for underwriting. The DD company is usually reviewing loans which have already been purchased by a wholesale lending organization from either a broker or correspondent lender (Mortgage Banking firm which the lender has delegated underwriting authority to). They may not have listened to you about your reviews, which they frequently did not, but the loan was already funded at that point. The failure was that many wholesale lenders are still not taking action against the violators. I have a friend who tells me horror stories about the loans she does DD on for a national mortgage lender also known for Auto loans.

The more authority a lender delegates down, the greater the risk of fraud going undetected. I notice that you carefully avoided discussing the appraiser's role in a large percentage of this fraud. If the regulators in California, Florida, Arizona and Nevada had forced appraisers to only use owner occupied purchase transactions for comps, the impact of the rapid (artificial) inflation of values could have been tempered.

In the future regulators in markets where speculative purchases exceed 15-20% of sales should enact flipping rules similar to but stricter than those in place with FHA. If you remove the speculative flipper you will see the laws of supply and demand accurately determine values which will adjust in difficult times but not plummet as we have seen. ]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-146010 146010 Sun, 06 Apr 2008 14:20:24 -0400 http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145944 145944 Sun, 06 Apr 2008 11:31:53 -0400 http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145908 145908 Sun, 06 Apr 2008 10:00:13 -0400
www.tickerforum.org/cg...]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145907 145907 Sun, 06 Apr 2008 09:57:06 -0400 http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145906 145906 Sun, 06 Apr 2008 09:55:18 -0400 http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145866 145866 Sun, 06 Apr 2008 08:47:06 -0400
The present day lenders need to softly approach their delinquent borrowers to sell them on the idea of staying in their home until the market changes; markdowns are taken,etc., for the sake of security of the property.

However, most lenders are so "old school", they don't know how to be nice! All they see is a deadbeat borrower not making their payments.

Chuck Allen

]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145861 145861 Sun, 06 Apr 2008 08:28:11 -0400 I say let the free market reign. If someone feels they were taken advantage of then let them hire a lawyer. The laws are already in place.
I VOTE NO BAILOUT FOR ANYONE.]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145839 145839 Sun, 06 Apr 2008 06:38:00 -0400
If Congress doesn't fix the home pricing problem...

Everyone who bought a house from 2005-to-2008 will be upside-down. Anyone who is upside down and is on ARM CAN NOT refinance. Banks will rather let a foreclosure occur than refinance a mortgage with a borrower owing more than the home value.

If a borrower can't refinance, she will go to foreclosure.

These foreclosures will reduce property values, which will encourage homeowners to stop making mortgage payments since their house, too, is now upside down. And let's not forget those who opened home equity lines of credit to fully the furnish vacation home's Arizona room.

This would be a... material... downward... spiral.]]> http://seekingalpha.com/article/71258-explaining-the-mortgage-meltdown?source=feed#comment-145830 145830 Sun, 06 Apr 2008 06:23:34 -0400
The big question is if government can cultivate a plan to encourage homebuyers to buy up the glut of foreclosure growth to offset deflating prices. If it's only a tax credit of $8,000... it's not going to save the neighbors who bought a home at $400,000, and is now worth $280,000. Why should anyone buy that? I know they're gonna foreclose too because who in the right mind would pay $400,000 in debt on a home worth $280,000? And that would further deflate prices. This is the US Picture.

Gov't needs to offer a tax credit carry-over to allow homebuyers to write off any depreciation experienced from their home purchase. That will encourage homebuyers to buy today. Until then, homebuyers will just sit on the sidelines.]]>