dinochick

The Humpty Dumpty Economy

Excellent article.

It bothered me when they brought the bailout proposal on three sheets of paper, then it expanded to over 50.

The prosperity that we were living in was false, created by credit. The inflation of housing prices is what caused many to use their "easy credit", and of course the "disposable goods". When a toaster broke, you tried to fix it. Now you throw away and spend another $20 on one.
However, this "tude" has gone on for a long time. While allot of goods are cheaper than they used to be, some don't work as well. And, of course by the time you buy a laptop, it is outdated.

The old underwriting formula was 29/33 ratios. (yep I am an underwriter) and we didn't even include women's income of child bearing age (yes there was that "prejudice" in the seventies). So obviously, there is a serious "gap" that needs to be closed. Increase salaries or lower housing prices..

When companies lower salaries (as many are doing now due to the extensive unemployed who are desperate for anything) they contribute to the problem. Until standardized salaries for specific work, and limitations on housing inflations are regulated, you will continue to have this mess. I know this affects free enterprise, but obviously we didn't handle it very well.

Don't Blame Declining Lending Standards for Subprime Mess

We also need to take into consideration that the housing prices were going up, and income was going down. Big corporations and some small businesses are also at fault here, by not paying salaries to meet standard of living costs. By allowing stated income for salaried borrowers, we created this mess. If the buyers couldn't afford the home, the sales prices would have dropped... Period.. .Natural supply and demand. It was a feeding frenzy, powered by greed, fraud etc. And many borrowers are fault here, and now crying for help for their misdeeds.

I also feel that the pricing of houses need to be "controled" by certain factors. As there is a median price placed by FHA/VA , there should only be allowed an annual percentage increased based on the GNP and salaries. Each state, city, etc should be analyzed for the price of the area prior to the bubble, and adjust for salaries, areas and amenities. Any percentage that goes up over the percentage must have an approval of an "agency" created to monitor this. This could be funded by an addition to the property sales tax collected by the counties.

And.. we need to do away with Wholesale. It obviously is a problem.

Mortgage Fraud Is on the Rise, Infecting the GSEs

As an underwriter, who struggled to perform her duties with integrity, I am appalled that there are individuals who call themselves underwriters degrading the position even further.

I have been in the industry 40 years, saw the ups and downs, and this mess was by far much worse than the S&L situation. I hope the industry returns to the old fashioned way, as it worked, but alas, it wasn't a get rich quick industry, but homeowners fared better, and jobs were more stable.