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Here's the fine print from the $25B foreclosure settlement the five big mortgage banks signed...
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Wednesday, March 28, 2012, 3:27 AM ETHere's the fine print from the $25B foreclosure settlement the five big mortgage banks signed last month: Of the $17B banks must earmark for "assistance to borrowers," more than half can be used in ways that won't stop foreclosures, including some activities that are already standard bank practices, such as demolishing abandoned houses.
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You sound like the devil made me do it. Is that what the bank lobbyist spent their money on. Trying to get the Govt. to stop making bad loans. Is that why the banks and wall st. insured those bad loans. You can stop protecting the banks. Do you think the banks would have made those loans if they had to hold them all. If they didn't have fannie and freddie and AIG and others to insure those loans. The banks,Govt,and wall st. where all part of the scam.......they just never thought it would blow up this big. I've read your comments for a year now and I make you the NO.1 wall st cheer leader....RAA RAAA RAAA THE BANKS.
Since it is my business for 20 years now I think I have a better idea than you what happen. Real estate was used to drive the economy. The borrowers are dumber than door knobs. the banks wanted all the deals they could sell to wall st. Many of the mortgage companies were complicit in fraud with buyers,appraisers,and realtors.BUT the large majority was a case of dumb buyers being taken atvantage of. That is the truth from someone who was and still is in that business.
I noticed you said your Govt. Who is your government? And pray tell what in this world that your living in is FREE. WWWho gives excessive credit the Govt or the banks. Did the govt. make them stop givng excessive credit now or are they doing it on their own. Don't know what country you live in. But the last 6 houses I sold in the last 3 years are all FHA and I gave 6% towards the buyers closing cost and some recieved free govt. money cause many didn't have 3.5% of their own money.That is with a 620 credit score. For your info and you find it ....94% of the loans made in 2010 where because of FHA. They are made through the banks like US bank, Wellsfargo and so on......and that is the only reason they are doing the loans......they are feeding from the same troft. My neighborhood bank won't even do loans for some people who have 740 credit scores and regular jobs and good debt to income ratios. I guess they aren't afraid of getting sued. They aren't doing those loans because they know real estate has further to drop and they know that interest rates will eventually go up and it will then be a better deal for them.
Go ahead shake your pom poms.
First off, no matter where you worked for 20 years, you use the word "banks" interchangeably when referring to commercial (lending) banks and investment banks, both of which are different entities and were on entirely different sides of this equation.
Sure, the banks know that borrowers are dumb as doorknobs. That doesn't prevent them from offering loans, especially when mandated by redline-threatening, posturing politicians in D.C. The commercial banks were all the more willing because they got duped into thinking they could offload the risk in RMBS. The "AAA" RMBS were a contrivance of the investment banks (especially Goldman) in a quiet conspiracy with bond raters. The banks thought they were being protected, and Goldman (and others) was buying CDS against the very RMBS they were issuing, often on the same day! That's where the real fraud in this whole affair was, not centered at the commercial banks, which merely turned out to be the meat in a sandwich between the Government's insane policies and the smiling investment banks, which were going to "insure" the commercial banks, but were selling them down the river.
Then, you mention issuance of new loans and state that only those supported by FHA are being made. I suppose the implication there is that this is more bad behavior from the banks, who are "unwilling" to make new loans. Well, the reality is that banks have no incentive to issue mortgages at all-time low rates that are only this low through an unsustainable Fed policy. Several CEO's have publicly stated that they have little incentive to make mortgages or commercial loans at the current artificial rates and have argued for an end to ZIRP. (I, too, believe ZIRP is suppressing the economy, not aiding it.) I wouldn't take long-term commercial risks at today's rates either.
I'm not any cheerleader for anything or anybody, except my own portfolio. I just try to call them as I see them, and in this case, the public, as usual, has been easily hoodwinked, and even wants more intervention from our (yes, mine, too, regrettably) idiot Government. Those that still wish to pound banks into the dust are the real boobs in all this because without the banks being healthy and getting more active there won't be any robust growth, period.
Some should give up their puritanical religiosity on this bank-bashing crusade and find some more fruitful area for criticism. Heaven knows, Washington offers manifest opportunities.
Commercial banks took out plenty of insurance on those loans. They did loans with no PMI payments for the borrower but insured them none the less. At first it was all good that is until the houses started to sell for less than what the policy covered. That was happening all through 2000 to 2008 and it wasn't a problem for the banks they didn't lose much. But in 2008 that changed. If they could find insurers now they would still be doing those loans. They are still doing those loans as long as fannie and freddie and Benny help them out. Your not going to tell me different because I used their insurnace cost to base some of my offers.
Your right about the investment banks to a large degree. But both types of banks are all big boys playing in the big pond. If they didn't think they could win they wouldn't have done it. They all had there had in it ....even the ignorant and the ones that knew.....me included. Since 1998 I couldn't figure out how they were getting away with it. It was simple they just played the numbers till the numbers fliped on them. This event has not yet been paid for. There is more pain coming.....it will be a slow grind.
I say when the govt. and the banks sell those houses to investment firms who then package them into reits ....you'll see loan rates go up. You will see stock buyers flocking to those investment with promises of great returns. If I'm wrong time will tell. Its always easier to spend someone elses money.(share holders,tax payers)
The PMI's were only relevant to the loans maintained on the bank's books. They thought they were immune to those syndicated, but, of course, it all blew up too quickly and the buybacks killed them, not to mention the endless legal parade that's followed, as well as further meddling by politicians.
Funny, you mentioning about trying to figure out how it could all work. I distinctly recall riding down the road one day in 2006 or 2007 and listening to a radio commercial touting "no-documentation required, and borrow up to 125% of your home's value...." And, being what I usually consider an astute financial person and investor, I scratched my head and said to myself, "there must be a catch...this is a bait and switch because there's no way in hell anything like this could be genuine..." I just let it go as more puffery and not the screaming, blinking red light to get out of all financials, if not all stock issues entirely. Consequently, I suffered one of my worst losses ever in 2008, but, fortunately, made extremely astute calls in 2009 and made back double what I lost.
The whole thing, though, was a reminder to never ignore what common sense tells you and do follow through to ascertain the facts. Never assume anything. If I'd done that, I could have made the gains and avoided the losses. Next time, I hope that I'm more vigilant.
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Thanks for sharing. I've scratched my head often and didn't think further when I should have. Many times those scratches are the things that should make you stop. I scratched my head when I seen all these low rates for so long. Can't figure out where people are going to get the money to buy these homes when rates go up. They have very little cash and too much debt. Maybe I'm tainted because I deal with too many people who are financially illiterate. There are people out there who are still buying. Not me I'm selling. Maybe I'm not to bright....Time will tell.
If the frightened, yet amazingly docile, American public instead protested and prevented the federal government's bailout of the big banks, those astute calls would have been as wise as when Bank of America bought Countrywide and Merrill Lynch.
Plenty of people confuse being lucky with being astute. Narcissists don't ever recognize the difference.
I have been buying distressed stocks, preferreds and debt for almost twenty years. I am very comfortably retired from doing so. It took a long while to let my brain overcome my emotions, but when I did, I started to make money more consistently, not without reversals, but consistently higher portfolio values each cycle.
As for "being lucky," there was nothing lucky about buying bank preferreds in early 2009. Many bank preferreds of top national and regional banks were selling at 80% discounts, with yields over 30% in many cases. This was all occasioned by fear and speculation that the Government would nationalize the banks. There were loud promoters, saying we should go the Sweden route and nationalize all the ailing banks.
Then, when the Government announced, instead, it planned to support the banks by buying preferred shares (TARP), that was the signal in unmistakable blinking lights that no major bank would be allowed to fail, and it guaranteed that all cumulative preferred shares of said banks would see their dividends paid on schedule. That was the very day that I (and I wasn't alone) bought preferred shares of various banks, far and wide, fully expecting them to recover their value back to par and pay me sizable sums of dividends, which is exactly what transpired.
It wasn't "luck." It was having the courage to put my money behind my analysis of the situation. That's what investing is all about.
I've spent years here posting how I approach investing and how it has produced very favorable results for me over a long period. You may happily discount it if you think it lacks value. Feel free, if you wish, to label me a "narcissist" because the methods I employed have proven successful. If that makes you feel better, fine. I'd rather make money.
Everyone relies on at least a little luck to make money in stocks, especially nowadays when Wall Street is a bit of a casino propped up by dangerously supportive Federal government spending. This is my last comment in our discussions. You made some good points, but I think we've exhausted the discussions.
It is now a crime to offer risky loans to poor people. Low income people should not be able to own their own home. Is this the new American dream?
And now to point a finger at the Banks for using funds to clean up the mess, improve their balance sheets and get the economy back on its feet again.
Banks imploded on the back of a housing bubble they didn't protect themselves from, while presenting themselves as the most sophisticated of the sophisticates, and data continues to prove subprime was only a small part of housing collapse.
I'll also say low income folks can still buy houses, just as anyone else can, provided they save for them, and budget within their means, I don't think everyone is entitled to a Mercedes three iPads and a house on minimum wage. I know plenty of immigrants who save and scrape up over $100k knowing full well how difficult it is to get a loan, and I know many born and bred Americans who feel they should be entitled to a house just because they there lucky enough to be born in this country, while blowing every dollar of excess cash they earn on beer on gadgets.
Totally agree.
http://read.bi/HCnbYZ
Another proponent for the "we-are-Japan" comparisons.
The differences beteeen Japan and the U.S. are so profound that the U.S. course simply won't follow Japan, and for myriad and logical reasons. Of course, this won't become entirely obvious to those who are making such bets until the damage is done.
Apparently you missed the first chart. The price/rent ratio chart suggests that home prices are currently still more expensive than home prices in all but one of the last 42 years.
Don't miss my other comment to you, about your misguided effort to use the "forward P/E" to claim that stocks are inexpensive. In brief, there's zero predictive value to 12-month forward P/E. You should consider turning off CNBC permanently, or you'll bog your brain down with misinformation or propaganda from salesmen posing as analysts.
I watch CNBC only to know what the shills are pushing too hard (which is a great contrary indicator). In fact, the daily media appearances hyping up a real estate recovery helped me correctly identify a top in homebuilder stocks recently.
I don't watch CNBC, but manage to make a nice living from my investing, nonetheless. If you had read my many comments, you'd know unmistakeably how I preach to any who will listen how punditry and "predictions" are valueless.
Note the price-to-rent-ratio chart in attached. I'd say it is highly suggestive that prices are at or near bottoms:
http://bit.ly/HFj5uY
My referenced chart was provided by a professional economist at the internationally respected OECD, in a presentation to the Atlanta Fed Conference (with Ben Bernanke in attendance). I'm not sure the Fed would be interested in the retired blogger giving them a presentation.
My referenced chart carries a bit more reliability, don't you think? The OECD chart price/rent ratio suggests houses are roughly 10% higher than the average of the last 40 years, and roughly 12-22% higher than the ratios that existed between 1980 to 2000. I consider this to be far from a bottom.
I got the impression that you watch CNBC because some of your posts contain comments that guests on CNBC have uttered. I've heard at least 10 guests on CNBC utter the argument that the market is cheap based on the forward P/E relative to the historical average. Either the guests are misinformed of the danger of using the forward P/E as a valuation tool or they're just shilling the market in hopes of bringing in retail investors (who have been leaving equity funds steadily for years now).