63 Responses to “Morgan Stanley – It’s Big Part in the Great Housing/Mortgage Crisis”

1. dafox Said:
   December 22nd, 2008 12:13 pm

   I’m not sure why you’re so adamant about pinning the fault on one entity. There were so many things that went wrong in this fiasco – it really was a perfect storm. It’s my opinion that everyone should be sleeping in the bed they made:
   * the banks lent out money they should have never done. therefore they should bear the losses
   * mortgage brokers lied. they should be punished to the full extent.
   * people never sat down and looked at a personal budget to figure out how much they can afford. if they borrowed more than they could afford, they should lay in the same bed as the banks.
   * I’m sure I’m missing some others who did wrong – whether legal or morally.

   its very simple. if everyone stops blaming and just pays the consequences for their actions, I think people might learn their lesson. instead, *everyone* is being punished – including those who never borrowed or lived beyond their means.
   I feel this is one of the biggest problems with society today – nobody has the balls to take responsibility for their own actions.

2. Deron Said:
   December 22nd, 2008 12:46 pm

   I have been wishing that I’d saved all the marketing pieces I received over the last decade.

   Not just the ones that advertise the wholesaler, as this one does, but also the pieces that were designed so that brokers could add their logo to them. It’s calmed down a bit, but I still hear/read banks and investors claiming that they were given bad loans they didn’t want. Pieces like this one and even the marketing materials provided by lenders suggest that they got exactly what they wanted.

3. peterb Said:
   December 22nd, 2008 1:12 pm

   Let’s try to track the chronology of events. 1st, the Fed, Greenspan, dropped the rate to 1% and left it there for about 2 years. This presented an opportunity for making profit off spread. Where ever it could be found. Just as Japan created this opportunity for spread through the carry trade. So, now here’s this fat opportunity looking for a place that can handle the volume with relative security. Real estate fit the bill almost perfectly.

   In the 20 years I’ve been buying and selling real estate, I’d never even imagined that lending could get so incredibily loose and free!! I think it was early 2003 that it became clear to me that the concept of risk had left the building. Neg Am loans at 90% to 100% LTV?! The lender was taking all the risk in a non-recourse environment. Who wouldnt double of triple down in this evironment?? It’s all upside. Just have a decent FICO and you’re good to go. And people did exactly that. What a surprise. Look for it again as money is about free again. But seeing as almost every asset class went through the roof in this last global bubble, a new one may be hard to find.

4. hahaha Said:
   December 22nd, 2008 2:16 pm

   i call bullsh$t…………

   i didnt buy a home i couldnt afford because that is a stupid thing to do. other people are stupid and bought homes with exotic mortgages. the banks couldnt package mortgages if people didnt participate…

   it is the people that bought home they knew they couldnt afford that caused the problem….period.

   there wasnt ANY FRAUD. if i make $50k a year i cant afford a $1mil home. doesnt matter if a bank will give me a loan….if i did this i am the one that created the problem. if the mortgage guy changed the numbers I WOULD KNOW IT BECAUSE I COULDNT BUY A MILLION DOLLAR HOME. it starts with the home buyer….period!

   this is the same as the bernie ripoff. everyone knew he was doing something wrong but they were getting something for nothing….

5. BertDilbert Said:
   December 22nd, 2008 2:27 pm

   peterb

   Comment from Mr. Poole, President St. Louis Fed, FOMC, Dec 10, 2002…

   “I’ve been in Europe, and I spent a day at the Bank of England. Incidentally, I was pleased to be the first person from the FOMC to congratulate Mervyn King—in person anyway. Officials at the Bank of England are very, very concerned about price increases in their housing market. House prices have gone up about 25 percent in the last year. They view that as a housing bubble, as something that has the potential to cause a lot of problems in the future when the bubble collapses. Certainly they are looking at it that way rather than as a sign of a great deal of optimism.”

   The excuse of the Bank of England today is that if they had tightened interest rates it would have unfairly affected other areas of the economy. However this could easily have been worked around by insisting on higher margin (down payment) required from the banking industry in making loans. The Fed is in charge of margin in the stock market for this exact same reason, to control speculation. The excuses emanating from the central banks are rather weak.

6. gloomboom.com Said:
   December 22nd, 2008 2:44 pm

   This housing bubble has nowhere to go but down. It is incredible what the Feds are trying to do by reworking mortgages. It is an exercise in futility! It is a waste of money and we will be paying it back for generations or simply going bankrupt. Good grief!

7. BarbedWireSmile Said:
   December 22nd, 2008 2:50 pm

   Dafox: with programs like these, what would mortgage brokers have to lie about?

8. Just4Laughs Said:
   December 22nd, 2008 3:00 pm

   I disagree. The fault is to be spread around. Borrowers are as much to blame for not understanding what they were getting into as regulators are (SEC, Fed, Bush administration) for making a blind eye, insurers for insuring and rating agencies for endorsing such nonsensical products and of course the inventors of such products.

   Look buddy. Just get serious with your writing, otherwise you may lose valuable readers.

9. Martin Said:
   December 22nd, 2008 3:17 pm

   Anyone have any ideas on this 3% mortgage rate being proposed by the NAR for ANY buyer? And in conjunction with 2year moritorium (currently being proposed in England) on housing payments for those currently behind?

   I have been holding out, due to my common sense but the more unnatural things the FED does the more likely it seems they may reflate the housing bubble successfully. HIstory shows the FED is an ACE at making bubbles.

   Common sense says a 100K mortage at 10% interest is a much much better deal than a 1,000,000 mortgage at 1% but most people out there lack common sense.

   I am thinking if they do either of the above, I may have to just plop my money into realestate.

10. Martin Said:
    December 22nd, 2008 3:19 pm

    I might add, I certainly am not going to make any moves right now, but I cannot believe the amount of manipulation being persued by Republicans and facilitated by Democrats.

11. Truth doctor Said:
    December 22nd, 2008 3:26 pm

    Mr. M.,

    You’re blaming the enablers for this mess. I won’t apologize for them – they deserve every ounce of pain they get! But nobody forced a borrower at gunpoint to take out a loan. Most (not all, but the vast majority) had a twinkle in their eye and dollar signs in their heads as they knowingly overleveraged themselves – often into multiple houses – with the intention of selling later for a huge payday. How many times did we hear people say “sure, I can’t afford the reset payments, but I’ll sell/refi WAY before then and cash out!”

    Again, you’re right in that they couldn’t have done this without the banks, government, etc. being complicit. But at its most basic, this mess required people to walk into a bank, be handed a piece of paper that spelled out the exact terms of the loan, and (and this is the important part) they had to willfully sign that paper and agree to repay the loan. That’s why I don’t like the “we were confused” excuse. If you had any reservations at all, why did you sign? The answer is because they wanted to make a windfall profit on the property – regardless of the “details”.

12. Stu Said:
    December 22nd, 2008 3:33 pm

    I am of the opinion that it really doesn’t matter who is to blame. Reality would bare out that everyone that was involved shares in the blame somewhat. They share in varying degrees, but they all are to blame as far as I am concerned. The real issue is the approach that is being undertaken to resolve the issues at hand as a result of the bursting of the housing bubble. If lenders are to blame for lending money and offering no collateral in return and no proof if you will of ones ability to pay the money back, then what the hell do you call what our Government is doing? Congress via the Fed and Treasury are lending money it doesn’t have to companies that are not able to pay it back with no strings attached if they don’t. Sure we own AIG, Fannie and Freddie now as Tax Payers, but what good is that if they are broke and need to be dissolved as companies at some point. Just ask the lenders holding hundreds of REO’s how that’s working out. Do you think they are sitting around telling each other how happy they are that the loans defaulted but that is OK because we now own the homes? I seriously doubt that is the case.

    I need to say part of that again but more accurately this time. Congress via the Fed and Treasury are lending future American Tax Payer dollars (money they don’t have) against our will to their biggest contributors and buddies throughout the financial world. They are not demanding anything of them (no detailed plan on how and when they are going to pay it back) except for them to take the money. They can pay out executive bonuses if they would like too (oops they are already doing that). They can hoard the cash and pay down their debt with it, so essentially the American Tax Payers are funding these lenders debt (oops they are already doing that too). In fact they can all do whatever they damn well please with the money which is exactly what they are all doing. Will the American Tax Payer be happy to own a worthless AIG down the road and at a major expense in increased taxes to pay for all of the losses? I seriously doubt that will be the case when and not if it happens.

    Let’s stop the blame game and commence with the fix it game. It always yields much better results when you look where you are going and not where you came from. We know where we were because we were just there. Most know and understand why we got where we are now. So we would be best served by looking at where we are going and how is the best way to get their. Clearly the Governments response to date is to do what got us here all over again. Lend money we don’t have to companies that won’t be able to pay it back… or was that the lenders that just did that? All I know is that the approach being taken today scares the hell out of me!

13. Old School Girl Said:
    December 22nd, 2008 3:48 pm

    Look, the vast majority of people have no idea about financing. They had no idea whether they were getting in way over their heads. They honestly believed that the banks wouldn’t give them a loan that was impossible to pay honestly pay off – that was how it had always worked in the past. What they didn’t understand was that mortgage lending had turned into something like the credit card industry: they were happy for you to make the minimum payment for years, and just keep wracking up the interest. A reckoning would eventually come, but they just didn’t know that. I really believe that.

    I sold my home at a modest profit in 2006. I looked into buying another one, calculated what I could afford based on income and existing debt, and put the number at roughly $250,000. The banks were willing to lend me $500,000. The bank literally asked me why I didn’t want more house, and I looked straight at the guy and said “I have no idea what formulas you are using, but this is what I can afford.”

    At what point do you expect the average American to have that discussion with their banker/broker? The average person goes in and asks the bank “How much can we afford?” rather than TELLING the bank “Here’s how much house I feel safe taking on – what can you offer me?”

    I didn’t buy a house, by the way, because what I was seeing at that price did not suit my family. I figured I was better off renting for the short term. Now I look like a genius. Why? I didn’t want 5000 sf worth of house (how the hell do you keep that clean, anyway?), and I didn’t want the McMansions thrown up without a thought to how people should live in them – but that were really cheap. If I was going to buy a house, I wanted to be able to live in it for 10+ years.

    I long ago learned that much of what I would normally attribute to malice among the general population is really stupidity. I truly believe that the vast majority of people weren’t running some scheme, they were just trying to buy a home and believed they’d be permanently priced out of the market. You can say what you want about stupidity, but it amounts to a congenital defect (worsened by horrible education) and it does no good to blame people for it. If you want to make things better, teach people not to believe what they are told, and to think for themselves. Then give them the tools to do it. Lots of people will still not have the ability to run their lives properly, but you will reduce the number with education and public announcements that counter the message one hears like a mantra from the “professionals” who are “in the know”: “this is what people do!” “the market is going up, up up — act now, or be priced out forever,” “You are never going to make that payment: come and see me 6 months before that, and we’ll refinance (at another set of fees for me!)”.

    And ladies and gentlemen, let us not forget the single biggest factor in people buying houses that they couldn’t afford: leveraging their lives to buy into a better school district for their kids. Yeah, that sounds like some evil people there.

14. hahaha Said:
    December 22nd, 2008 3:55 pm

    there is no ‘fix’…over priced homes have to revert to affordable…reaonably priced homes. debt must evaporate to nothing.

    i couldnt figure out a way to profit from the housing bubble but i have doubled my net worth this year shorting the banks, CRE, and emerging markets.

    seems bizarre to net $18k a day on SRS and doing nothing for it (but being smart and recognizing dumbsh%t moves by the ‘smart’ people).

    my only fear is we all go down in smoke when we hit the ‘oh sh5t’ moment and fall off the cliff……….

15. hahaha Said:
    December 22nd, 2008 4:02 pm

    also …..great blog site. mr M does have the best info on the mortgage market!

16. Stu Said:
    December 22nd, 2008 4:11 pm

    hahaha I couldn’t agree with you more that we should have left it alone and it would have fixed itself. A recession would have ensued and we would have been nearing a bottom by now perhaps, but that is not what we did. So that option is no longer on the table. We now have to fix the mess that has been created in trying to fix it in the first place. We let everything just fall now and we are all in trouble. I still agree with Mr. M. that principle write down, albeit a bitter pill to swallow is the only answer to stop the emerging flight of homeowners by either walking away or defaulting. That will at least stabilize prices for everyone which would be a good start. Stopping all bailouts moving forward would be another in my opinion. Keep the $350 Billion they don’t have and destroy the balance of the bailout from wasting any more tax payer money. Next kill the programs one by one that are nothing more than a give away of more tax payer money that the Government doesn’t have either. We need to stop incurring future losses and start preventing them!

17. fred Said:
    December 22nd, 2008 4:13 pm

    You, Mr. M are the “Rainman” of the mortgage industry. You get all your little facts and figures straight but you have no common sense whatsoever. Of course the buyers are to blame. They took out loans they could not afford. I doubt they were stupid and couldn’t do the math cause everyone is doing the math very well right now and figuring that it costs to much to stay in a home that’s losing value. Did all these assholes all of a sudden remember how to add? Doubtful. Everyone who participated in this is to blame. Especially the buyers.
    F-
    PS Don’t be such a jerk.

18. BertDilbert Said:
    December 22nd, 2008 4:34 pm

    Just4Laughs

    But we cannot let the Fed slide. They meet 8 times a year and discuss all facets of the economy including housing. They also are charged with safety and soundness in our banking system. Even if everybody else was at fault, it does not matter. The Fed stands at the top of the totem pole in the level of responsibility. The Fed should have known, or was reckless in not knowing, the conditions existing in the marketplace, as well as effects of the aftermath of a bubble collapse.

    It does not matter what the homeowner did, the broker did, loan officer, bank, CEO etc. The end level of responsibility in this case rests at the Federal Reserve. Anyone blaming the homeowner for this is just plain wrong. They are the very lowest in responsibility. It is everyone else who is licenced and regulated, not the homeowner. If the entire flock of sheep end up in the briar patch, where was the Shepard?

    Further it is not like the other central banks, IMF and BIS don’t talk to the Fed, as I pointed out in the earlier quotation in 2002. The conversation would go something like this. “Gee, we see you have this giant speculative bubble in the housing market. What are you going to do when that sucker pops?”

    It is not that they were “reckless in not knowing”, that is like the “dog ate my homework”. One can only conclude they did know and yet failed in their responsibility. This does not compare to Madoff and the SEC failure that everybody points to and says the SEC screwed up big time. That can be blamed on underlings. In this situation the Fed cannot blame underlings. Why? Because central banks watch each other and talk and visit as a matter of course.

    Here however is what really happened. The Fed knew and the President of the United States or Treasury interfered and overruled intervention in the housing sector. This goes to the very very top of the ladder.

    Even a high school dropout can figure this stuff out. This is the question that needs to be put, and perhaps under oath, to Bernanke and Greenspan. “Were you overruled by the President or the Treasurer” or like questions that do not allow for wiggle room.

    Why is this my opinion? Because the Fed and their lawyers would not act in a way that would endanger the institution of the Federal Reserve. I know this from reading all of the transcripts over the years that this is the way they operate. When Bush comes to shove, the Fed will have the final finger to lay the responsibility on.

    Quit kidding yourselves that this was the homeowners and banks fault, this goes all the way to the top. The Fed knew, the President knew and someone told the Fed not to do their job.

    When will the press and Congress ask the real and right question? The high school drop out already figured it out, why can’t the smartest people in the room?

19. Javagold Said:
    December 22nd, 2008 4:38 pm

    homeowners couldnt get these homes without brokers/banks and these crazy loans…….end of story, period……so get off of Mr. Mortagges back

20. Financing The MBS Fix: The 800 Pound Gorilla « Your Mortgage or Your Life… Said:
    December 22nd, 2008 4:38 pm

    [...] one block of loans from another bank, nothing like the task of assimilating thousands of blocks of toxic loans from hundreds of different banks, with dozens of different systems and software packages being [...]

21. peterb Said:
    December 22nd, 2008 5:17 pm

    Blame is for children and politicians. Just see where things are going and try to profit from it. As long as we have freedom, we’re in good shape. Or what’s left of it.

    Most of the people buying a house they couldnt afford was predicated on it going up enough in value to refi and profit from it. Oops, bought at the top and that didnt work. Every other asset is or has collapsed as well. So these guys arent alone.

22. admin Said:
    December 22nd, 2008 5:32 pm

    Fred…Rainman here – that is fuching funny. But you are wrong. My ‘little facts’ are correct and so is my analysis. The fact is that at the time the loan was originated everyone could afford these loans. The Realtor, loan officer, builder and bank all said “based upon your income and this hybrid intermediate-term piggy back ARM qualifying at interest only payments at 4% interest only and 5% down THAT YOU QUALIFY.”

    For the first couple of years everything was fine until the reset. OR until their home price tumbled 50% and people realized that all of their income each and every month is going out to a massively depreciating asset.

    Make no mistake about it – the walk aways are not all from people who CANT AFFORD their payments. They are from folks who can ‘afford’ them just fine. Its just with the payment they cant save money or live the lifestyle they want to. In addition the recession puts fear in them so they feel compelled to de-leverage and save money.

    The quickest way to solve their problems is to walk away and rent. They are instantly de-levered and can save money. Their credit will be ruined for 5 years but their home wont come back for 20. Walking away is a no brainer great financial decision.

    No go short MS and get your money back.

23. BertDilbert Said:
    December 22nd, 2008 6:53 pm

    Fred, actually it is more like this.

    The home buyers were enticed into a game of Texas Hold em poker. The banks changed the rules to bring players to the casino. They said; “Instead of the of the normal 20% ante, we are going let you play the hand with a 5% ante, we will cover the rest, don’t worry about it.

    And so it was that the player could sit at the table with 20-1 leverage. Heck, this is a gamblers paradise. If you leveraged a stock purchase, the best your margin account would offer would be 2-1. Housing offered the gambler 10X the leverage available in the stock market.

    But it gets better, the bank made a better deal: “We got a really hot deal going tonight! We are going to let you make these tiny payments to stay in the game! We will let you stay through the flop and through the turn card! No mater what cards come down, we will be forced make all raises at no cost to you!”

    So the flop and turn cards are played and the homeowner says “Holy Crap, theses are the worst cards I have seen in my entire life! You know what Mr. Bank? I think you stacked the deck and cheated me out of my ante!! This was a stupid rigged game!”

    So the homeowner thinks about it and discovers that he can get his whole ante back! All he has to do is stop making payments for the next 10 months to a year and skip out right before the vultures arrive! Hot digity dog! The 5% downer was able to sit at the table for no cost!

    Meanwhile the bank really wasn’t backing the deal. They found investors and told them that they had these really hot poker players that just can’t lose. Unfortunately some of the players started losing, leaving the banks backing numerous bad hands with no fall guy to attach them to.

24. mortgage analyst Said:
    December 22nd, 2008 7:02 pm

    Fred,

    I am not sure that I would even give Mr. Mortgage the credit for getting all his facts and figures correct. There are so many examples where he mathematically and/or logically contradicts himself in one post, it is almost not worth pointing them out anymore. It’s kind of like getting in a fight with a drunk – why bother?

    But hey, go Green Credit!

25. peterb Said:
    December 22nd, 2008 8:18 pm

    After taking a close look at this post, it looks like everything I experienced as a buyer of multiple homes in the last 6 years.
    Absolutely amazing. I agree that there were some people that didnt get it, but I think there were a lot more thinking that prices would go up and make it all ok. But all the “professionals” in the industry were only too glad to help get the deal done. But where’s the surprise there? It was a beautiful thing. But like all parties, there had to be an end to it.

    I’ve come to the conclusion that the desire to find blame is motivated by those that were on the wrong side of the trade.
    But MM has his data down!! Thanks MM.

26. Milstar Said:
    December 22nd, 2008 9:37 pm

    Actually this looks pretty tame. I worked for a wholesaler & we sold to CW, DB, Saxon and a few others & we did all this plus
    1 day out of BK
    Chapter 13 buyouts
    Stated S/E 100% down to 560 etc.

    Sorry but MS looks pretty good here. I do agree this does illustrate how drunk the party got though…

27. HousingRealist Said:
    December 22nd, 2008 10:00 pm

    Javagold – you and others that bought homes during the bubble years share in the responsibility of buying YOUR OWN HOME! You and people like you are the reasons our country is suffering. No more personal responisbility. It’s always someone elses fault. It’s easier on us emotional to blame someone rather than say, I was a fu$^ing idiot, and I now need to pay for my bad decision. On the bright side, it was a great learning experience, and I bet you will be much more critical of financial decisions in the future!

28. KurtA Said:
    December 22nd, 2008 10:42 pm

    Lots of great comments with some really diverse opinions. Thats what I like about blogs. They mix things up and stir your thinking a bit. I think that Mr. M is very good about pointing out the situation as it truely happens/happened, but I think that if you listen to the comments and almost every other comment I’ve heard on other blogs you will find a large group of people, (the majority I fear), that feel that the market has to shake out even the homeowners, innocent or not, that made bad decisions.

    This principle reduction solution is going to leave a very visable symbol in everyones neighborhood of the people who were bailed out with principle reductions. That sign will say ENTITLED. The majority are not going to have principle reductions and as they make thier payments on their bubble priced houses they look across the street at the guy who got the do-over back to 2003 prices. The corporate headquarters of entitled AIG aren’t accross the street in your face every day but that entitled neighbor sure is. Human nature will take it’s course.

    Actually, I’m not even sure we are at the bottom of this slide, say you got a principle reduction now to a 03 rate and the market slides another 30%. Another neighbor gets his principle reduction then to 99 rates. Will the entitled neighbor in turn dislike the newly entitled neighbor that got even a better principle reduction then he did?

29. JAllen Said:
    December 23rd, 2008 12:18 am

    Mr. M – Thank you for allowing “some really diverse opinions” on your blog. Please continue.

    @mortgage analyst – What exactly are you referring to?

30. hahaha Said:
    December 23rd, 2008 12:33 am

    it is ridiculous to state that mr m’s ‘numbers’ are suspect. no one could absolutely quantify this mess. every situation is different with dozens of overlapping levels. his site gives the best representation of reality i have seen and i have followed this housing (bubble) since 2003.

    mr m has suprised me several times with problems i wasnt aware of and i read a dozen housing blogs.

    also if 2+2=4.1 sometimes i dont care. this is a free site and it is a lot of work to put this stuff together. great resource…..

31. upthecreek Said:
    December 23rd, 2008 12:40 am

    Thank you Angelo Mozillo.. May you choke on your last Obama Buck

32. Michael Blomquist Said:
    December 23rd, 2008 12:41 am

    Here are my two cents:

    Blame:
    1)Regulators – We pay taxes to maintain market stability and rule of law. In addition to protect the financial markets, banking system, deposits, etc.

    2)Lenders – Their guidelines were in violation of safety and soundness regulations and in the long run the executives would be the only benefactors.

    3)Credit rating agencies (NRSROs) Without their investment grade ratings it was illegal for most of the “giant pools of money” (pension, mutual, insurance)to invest in the toxic loans and companies.

    4)Investment banks who were brokering the loans the aided and abetted / fueled the Ponzi scheme, criminal enterprise, conspiracy, etc. See First Alliance and Lehman.

    5)Brokers/loan originators (fiduciaries) who breached their duties and helped clients commit loan fraud and or financial suicide by purchasing homes that were predicated on fraud – intentionally, temporarily and grossly inflated.

    6)Analysts who had their heads up their rears when they were analyzing the companies writing this toxic waste.

    7)Borrowers

    8)Media
    ?

    The borrowers who committed fraud have been financially and emotionally devastated (mostly). Yes, the borrowers should suffer, but should have never been able to commit such rampant acts of fraud. There are many cases where borrowers were inflating their incomes by 100-200% and 1-2 W-2s could have easily documented their incomes. (4506?)

    If any of 1-4 were doing their jobs none of this would not have happened! Ironically, they are also the ones who have mostly skated from prosecution and reaped the biggest rewards. (except regulators)

33. BertDilbert Said:
    December 23rd, 2008 12:52 am

    Kurt A

    I think the correct thing to do is to let the chips fall where they may. Those who lied on their loans should be punished as the loan was obtained by fraud. In addition, they should held liable for losses. The losses can be paid back via a wage garnishment. This will help relieve the burden to the taxpayer for someone else’s misdeeds.

    And

    Those who signed up for loans that they cannot pay have to eat the penalty of playing all hat and no cattle. It is up to them to understand the loan they are getting. If it was the lenders responsibility to explain the loan and they failed, then the homeowner should take whatever legal recourse they have.

    And

    All others that feel they have a legal claim should use the court system either on an individual or class action basis. This would include overpaying for property due to false market conditions created by the banks.

    Because
    .
    I am tired of hearing the government should do something. They have already done enough.

34. karen Said:
    December 23rd, 2008 1:27 am

    What bothers me most about all of this (following up what Old School Girl wrote) is that the houses built during the boom are so badly built, so huge, and so GROSS looking. at some point in a few years I’ll be in the market to buy a house. but why would I want one of these monstrous pieces of cr@p?! if the houses were decent, then at least they could be maintained as something worthwhile to use in the future. but even the tolerable-looking ones are poorly constructed and have so many bathrooms that it seems that the entire country has become incontinent.

    Most people have brains the size of peanuts, and even the smart ones can be stunningly irrational. Although it will indirectly harm me, I would prefer to see underwater owners flee a life of house serfdom, by walking (running!) away. Paulson and Bernanke, however, should rot in jail.

    Thank you, as ever, Mr. Mortgage. and thank you for leaving up unflattering comments; it’s good to have a mix.

35. JonnyDrano Said:
    December 23rd, 2008 1:33 am

    I love the casino analogy, I had tried something similar but you nailed it.
    “Mortgage analyst” and other Mr M bashers…go start your own blog/site and see how many people follow. I appreciate the perspective of Mr M and the view from the trenches or is that tranches!
    I think 5 years from now there will be lots more people in the USA “off the grid” and self sufficient. We are headed for uncharted territory. Enjoy the Ride.

36. Joe Mama Said:
    December 23rd, 2008 1:56 am

    Mr M,

    I like your analysis, and your site is a good source of info, but you really like to push the idea that individuals are not responsible for their decisions. Why?

    If you go to the local Best Buy every salesman there will say you can afford the biggest, most expensive TV on the floor. Does that mean you should buy it? And if you do is it the salesman’s fault

    If you get a speeding ticket is it the fault of the automobile manufacturer for making a car that can go faster than 65mph?

    Sure these products were bad, but ultimately it is the buyers decision. From the responses on the blog it looks like a good number of people here agree with me.

37. Javagold Said:
    December 23rd, 2008 2:09 am

    Housing Realist,
    I have no idea what you are talking about….i bought my house put 20% down and a 30 year fixed…..how does that make me an idiot ?….and no i do not blame myself for a ponzi scheme of housing prices that has collapsed an made the value of my house blow thru my equity thru not one ounce of fault of my own….i realy dont care what you think, so no need to reply, but know one, thing i will get my money back the EASY way (balance reductions for all) or the HARD way (stop paying and living rent free for many many YEARS), but i will get it back , that i promise you

38. admin Said:
    December 23rd, 2008 2:26 am

    Joe Mama – If I bought a car certified by BMW to be perfect — no dents, completely safe and a few months later after I wrecked it the repair company said ‘this car was in a major accident, the odometer was turned back, it had not gone through the 100 point inspection for safety and it is not safe to be on the road without serious repair work to fix the deficiencies’, I would blame the dealer.

    Just like I blame the cigarette makers for knowing that nicotine is addictive and hiding it for 30-years. Now everyone knows they are addictive and kill so if the consumer kills themselves its their problem.

    During the years in question 2003-2007 everyone including the regulators, banks, politicians, realtors branded these loans as mainstream and safe but the fact is they were not. They did not do proper testing and lied.

    Biotech companies get sued and blamed all of the time for this type of negligence.
    Banks, Realtors, regulators and politicians branded exotic loans as mainstream. They either knew the risks and lied or they did not due proper due-diligence. The former would compare to the cigarette companies lying about the effects of nicotine as addictive and the cigarette as cancer causing. Now they must warn people so f the consumer kills themselves its their fault. The latter compares to bio-tech companies rushing unsafe drugs through the process and hiding clinical evidence that the drug may be harmful for the ‘benefit of the greater good’. In both reasons the manufacturer is culpable.

    Consumers should not be mortgage finance or housing experts. They should be able to trust their banker or Realtor. When a bank says ‘you qualify for this loan’ it should mean something — not that at 50% debt-to-income and with every last penny of after-tax income going to debt each month your income will barely cover all of your payments. Yes, there were greedy consumers who took advantage of the system. But in the grand scheme of things, the system failed the consumer. Hey guys — I am not a Democrat either.

39. Gavshire Hathaway Said:
    December 23rd, 2008 3:58 am

    @Javagold
    Your situation is unfortunate, but your attitude stinks. In a nutshell you are everything wrong with our country. Not that I would blame you for walking away. But I find fault in your misguided sense of entitlement, and the fact that you can’t take responsibility for your actions.

    Given that you put 20% down and got a 30 year mortgage, you can clearly afford the house you’re in. It is your choice to walk away, or not. It is a financial decision. But taxpayers should have no responsibility to ‘make you whole’ for what turned out to be a bad decision and a terrible ‘investment’.

    While you purchased your house, I made the decision to rent. I took my down payment and shorted the living hell out of financial institutions via put options all last year. Rest assured that even if you “get your money back” from other taxpayers like myself, you’ll come out far behind those of us who saw this coming and planned accordingly.

    And ironically, if you do “get your money back” — it is likely to be worthless within a year, due to a currency collapse by an insolvent nation, because our government similarly chose the path of moral hazard. But I suspect this irony would be lost on you.

    Cheers,
    GH

40. BertDilbert Said:
    December 23rd, 2008 9:01 am

    Gavshire Hathaway, well it could be settled in a number of ways. If the bank does not have the financial wherewithal to afford the principal writedown on the balance sheet, the bank could enter a settlement agreement under Section 3 10 a and settle the principal in free trading stock. Javagold can then sell the bank shares and use the money as he sees fit, which may include paying down the principal.

    The settlement might not even have to go to court, the insurance commissioner of the State of CA could approve it. Hundreds or thousands of homeowners could be included in each settlement.

    When the bank shares become too cheap for the exchange they are trading on, the bank can reverse split its stock to bring the price back up. They can do this as often as they want.

    This way the taxpayer does not have to absorb the cost of making Javagold whole again. Rather, it would place the burden on the shareholders of the banks that failed to do their due diligence when making their investments. Why should tax payers be bailing out bank shareholders that made a crappy investment?

    Banks singed up to be publicly traded companies so they would have the ability to print their own money. Why then should the taxpayer allow the governments printing press to run on this while their’s remains idle?

    If the bank’s shareholders fail to authorize an increase in the authorized shares, then the bank should go into recievership and let them handle the situation.

41. Stu Said:
    December 23rd, 2008 10:43 am

    BertDilbert, while I appreciate your attitude of punishment for those that lied on their loans, it just doesn’t work that way. These folks didn’t dupe the system, but rather the system duped them. Sure they lied but it was only because they were allowed too. Now they are in a pickle and it is not because they lied, as they would have gotten away with that, but it is because house prices stopped rising. Many before them when things were still going up lied too, but were rewarded with a market that seemed endlessly rising. Some made rather large sums of money and got out, while others were greedy and eventually got stuck. These folks are the ones that will simply follow the law to the letter and walk with the bank assuming all losses. Right or wrong and who is to blame is irrelevant now. Some banks will fold as a result and the FDIC will pick up the pieces and any losses not covered by the assets of the failed banks us tax payers will pick up the tab for.

    Those that got loans they now cannot afford due to rate resets etc. are in the same situation, but with a very unique difference. Before they decide to walk and have the lenders and tax payers pick up the tab, they can still be saved. These are the folks where principle write downs make the most sense. Allow the lenders and homeowners to workout a reduction where the bank takes a much smaller hit and the homeowner stays. It is a win-win for both parties involved. Again I know it smells bad, but it is a viable solution that will work. The other winner is homeowners who were responsible living in neighborhoods with a lot of potential foreclosures or folks ready to walk. They will not see there homes value crash due to REO sales in the area pulling down their comps.

    All other that feel they have a claim do not have to seek legal advice or use the court system. They just need to call their bank and say “Listen this is what I want you to do or I walk” and let the bank make the call. They default and REO the home at 30%-60% less than market or do a principle write down of 10%-30% and keep the paper. This is not rocket science but a legal binding contract that can be altered with both party’s approval and / or legally the bank can default or the homeowner can walk. The latter scenario is not going to end up pretty for the lenders and possibly the tax payers depending on the extent of the damage to the lenders.

    P.S. The tax payer due to all of the Government bailouts is now on the hook when banks default and do not have enough assets to cover everything. That applies to mortgages that they sell at open market for say .50 on the dollar and even peoples deposits in these banks that cannot be covered. This is also not just about housing as People’s accounts are now 100% covered by the tax payers via the FDIC. The tax payer is the biggest loser here in all defaults due to a walk away or foreclosure if it forces the bank to go under. The sooner people realize this, the sooner they will start understanding that principle write downs are needed and the sooner the better for everyone. Also please don’t expect insurers to be able to cover the losses as they will need their own bailout soon enough.

42. David Said:
    December 23rd, 2008 11:54 am

    GREAT Powerpoint presentation on why there is so much more PAIN TO COME!! Awesome job on this one!!

    http://www.designs.valueinvestorinsight.com/bonus/pdf/T2_Housing_Analysis.pdf?ref=patrick.net

43. BertDilbert Said:
    December 23rd, 2008 12:12 pm

    Stu

    I have already proposed that everyone should do what is in their best interest. I have proposed that the homeowner should stop making payments and bring the bank to the table to write down principle because the banks refuse to talk unless you miss a payment. Missing the payment is opening the door to negotiation. You can ask the bank to make a settlement in stock or reduce the principle or whatever.

    If the bank does not like your terms then by all means walk. This is a private transaction between two parties, there is no government involvement. My argument against a principal reduction now is simply that we could see another 20% downside and more on the coast. Why settle now if there is more downside to come and as Mr. M states, we are only in the third inning of a 9 inning game of bad paper. There could be another 40% downside, we just do not know.

    The difference is when it moves from a private party settlement into a public settlement by the government in making it right to those who obtained their loans via fraud. What’s the difference between robbing a bank with a gun or a piece of paper? One is blue collar and one is white collar. If you chose white collar then you are in the same cell with Madoff.

    My opinion is that we need to bring back law and order into the system and prosecute up and down the line. They can pick vegetables for a year which will force the illegal immigrants back over the boarder, solving our uncitizenized population problem. Just think of it, the liar loaner, mortgage broker, loan officer, appraiser and CEO who all did their dirty deeds would be picking grapes and strawberries side by side. They would have lots of time amongst themselves to discuss who is the most to blame.

    Meanwhile those that are unemployed by the economic mess can be employed by the jobs previously held by the people who are in the fields picking fruits and vegetables. This will lower unemployment insurance burdens placed on the states. This will also lower the amount of economic aid needed to employ the population, which is in essence a taxpayer bailout of the economy. By keeping food prices low along with unemployment, showing that there is justice in the land, we keep the potential for civil unrest at a minimum.

    Also why would the government be stepping in to bailout shareholders of the banks? The companies can hand over shares to the government and the government can sell them on the open market until the stock price is a penny. After the government has sold shares in the company down to subpenny then all available resources have been expended. At that time then the government should step in.

44. C.C. Said:
    December 23rd, 2008 1:01 pm

    Hey Bert -

    When I was 14/15/16, I picked strawberries and cucumbers during the summer (Mid 70′s) for small wage, in an amongst a veritable sea of soon-to-be-labeled ‘Americans who won’t do these jobs…’

    The majority out in those fields picking were – um, sshhh… White

    Now that all the granite counter-top installers from parts hither & yon (non-citizens), find themselves out of work because Pulte, D.R. Horton and KB ain’t building much anymore, why, all of a sudden there’s competition for burger-flipping…

    Oh, and in case you’re becoming too mired in the residential aspect of this once ‘healthy’ (read: Perverse) economy, take a gander at what’s right around the corner. Say, sometime in early-mid Feb of 2009. Funny, out in the North 1st street area of San Jose, there are still huge tracts of built-out commercial acreage that have been sputtering in & out of lease since the meltdown of ’99-2000.

    You want to know what we’re going to end up doing out here in about 2 years? We will either bring large-scale domestic manufacturing back to this area (and others throughout the U.S.), to jump-start a realeconomy or, this place is going to look a like a photograph I have of the Santa Clara Valley from 1946 – where the only cluster of buildings is a small outcrop that identifies downtown, from the surrounding tracts of Farm acreage…

    Yes, food is going to be a ‘growing’ business in the near future. Watch for it and/or, get on board.

    http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2244023820081222?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=22&sp=true

    Peace -

    C.C.

45. Just4Laughs Said:
    December 23rd, 2008 1:39 pm

    BertDilbert

    I absolutely agree with you on all points!

46. Rebe Said:
    December 23rd, 2008 1:56 pm

    Number one, realtors and mortgage told these fools that real estate can only go up and they took the bait! I had my banker tell me in 2007 in CA that I was going to miss the boat by not buying, no way San Francisco bay area can go down. LOL

47. JAllen Said:
    December 23rd, 2008 1:59 pm

    Mr. M: I have to respectfully disagree.

    Collective greed caused this, Mr. M. We all know it. We all saw it. Almost anyone who could either participated or perpetuated it.

    After an extended time abroad, I returned to the Bay Area, hoping to buy a house (Fall ’05). Even with cash and good credit, I was shocked by 1) For sale signs everywhere, 2) news stations blaring skyrocketing home prices 3) all properties with multiple offers & bidding wars 4) warm TV & print ads for HELOCs/ARMs, etc. 5) everyone (agents, family) telling me I’d better “jump in” cause everyone was “snappin’ ‘em up.”

    It was mania and it worried me and I just knew that I wanted no part of it. I didn’t know prices would crash, or I would have been shorting builders & financials & bought SRS.

    Now the crash and everyone is pointing fingers and looking for Mama to bail them out. And it’s disgusting.

    The point is this: Either we take responsibility for our own actions that cause us pain, or we place the blame elsewhere. How we react tells us a lot about ourselves.

    I’m worried that we are becoming a nation of whiners who believe we are entitled to ever-increasing wealth.

    We’re not. Our standard of living has been decreasing for over 40 years. Owning .5% of a Lexus, Plasma and McMansion is not wealth. It’s a lie.

48. Stu Said:
    December 23rd, 2008 2:06 pm

    Bert, I was referring to your post to Kurt. While I agree we have to enforce the laws that exist today it is far too late to prosecute those that did as you say. We are talking tens of thousands of people. We don’t have the means to do what you are proposing. In the future I agree, but the lax lending standards allowed it and the new standards won’t allow for the obscene fraud that took place over the past 5-7 years, so it is a moot point. While it is nice to play sheriff we can’t on the massive scale it would call for. I see maybe some big names falling before all is said and done to appease the public, but nothing like you are advocating will happen. In fact we don’t have enough strawberries to pick for all of them (joke). I assume that you are joking too, but it is a serious matter…

    Share holders will get nothing, but the losses must get recognized somewhere don’t they? Every ledger must have a positive and negative match somewhere. If the total losses by the banks as a result of going under are higher than their assets (I am sure that they will) then someone takes the losses. Well it is not the share holders I am worried about. Say we lent 15 Billion to bank A, and backed by Uncle Sam (i.e. tax payer) and we do not have enough to get that money back. Who writes down the losses? The Government (tax payers) will have to take the losses. What about the FDIC backing all the deposits? Say there are $500 Million in 100% backed deposits that the assets didn’t cover. The FDIC (i.e. tax payer) takes the hit correct? Banks we lent money too going under will cost tax payers money in the end. You can count on that! There are nowhere near the assets to cover these loans, deposits, etc. Look at where AIG stands right now. Tax payers are on the hook for some hefty amounts of money that I see no way of possibly getting back. All of this goes right to the bottom line of the deficit that we the tax payers must pay for. All of these bailouts are using money the Government does not have. They have either borrowed it and must pay it back or printed it and that will eventually cause inflation (destruction of the value of the dollar). That is basically a tax to the tax payer in essence isn’t it? The only loser here will be the tax payer in the end.

49. BertDilbert Said:
    December 23rd, 2008 2:10 pm

    C.C

    Karl Denninger posted on his blog the other day that due to the housing crisis and unemployment, that cities should set up soup kitchens but illegal aliens would not be allowed to eat, it would only be for Americans. I felt motivated to respond so I signed up but was unable to post because I was not registered for the required time. As a result I never posted but here is my response that I saved.

    Karl, as we ripen with age, sometimes we turn into grumpy opinionated old farts, I know because I am one of them. I understand your exclusion for illegal immigrants but hear me out.
    Illegal immigrants are the ones that have been washing our cloths, scrubbing our floors, washing our dishes. They are hired by Americans because Americans like the benefit of cheep labor.
    In particular, illegal immigrants plant and pick our food all day long in the hot sun doing grueling bend over work (fat average Americans are not well suited for this).

    While they are not officially here, our politicians know all too well that the price of food is one of those things that Americans rate when asked about current conditions. Low food prices keep the populace docile. To accommodate this low food price policy, they have adopted agricultural labor laws.

    All of this boils down to having cheap food on your table. In addition, the subsidised food prices by using cheap labor hides the true cost of food and keeps it off the inflation figures. Taxes to support the illegals are not counted into inflation. It is not like we couldn’t secure our boarders if we wanted to, there is an ulterior unspoken motive behind their presence.

    You now propose that those that have put cheep food on the table of Americans for their entire lifetime during the “good years” should not be allowed to eat. I totally understand where you are coming from but after performing years of underpaid service for your country, you are suggesting they now be denied the very thing they have provided, the most basic human need, food.

    It’s a two way system Karl. They take advantage of us and we take advantage of them. I would just like you to take a pause for a moment and give the matter further consideration.

50. Rebe Said:
    December 23rd, 2008 2:16 pm

    The war and the FED caused the bubble when Bushco invaded Iraq based on lies in Mar 2003. June 2003 Greenspan lowered rates to the lowest in history. Then the banks went along with the plan. Look at the bonuses these guys got when they ran away, just before the SHTF.

    Prince CEO of Citi “Things will get interesting when the music stops but until then we will keep dancing.”

    2005

    everybody knew BUT the buyer what was going to happen.

    I said to a 24 yo realtor in 2003, “This overbidding is going to destroy the economy” Realtor: “Yeah, lots of people are going to lose their homes” If a 24 yr old knew…

51. Joe Mama Said:
    December 23rd, 2008 2:16 pm

    Mr M

    I still disagree with you. If you buy a stock because some Cramer says it’s a good bet but then it declines in value are you going to sue Cramer? Why not sue the brokerage? Then sue the gov’t for allowing the brokerage to be in business?
    Then sue the board of directors of the company? Then sue the city where the company is located for allowing them to do business? Then sue anyone who did business with them for perpetuating the fraud? Then sue your parent for not getting you a better education? Then sue you school for not warning to be less gullible?

    Do you see how silly your proposed argument is?!

52. Rebe Said:
    December 23rd, 2008 2:19 pm

    Bottomline they bought the homes because they expected them to appreciate in value. I have had realtors even today say “you can refinance” uhmmm…no you can’t!

53. Just4Laughs Said:
    December 23rd, 2008 2:19 pm

    Michael Blomquist:

    Thanks for your insightful comments. May I add the most important factor in all this mess?

    Investors of securitized loans

    And they were plenty – from small towns in Norway to large pension funds in Germany and South Korea. It’s demand that drives supply. If it was not for their insatiable lust for profits to fuel the fire not much would have happened.

54. Stu Said:
    December 23rd, 2008 2:25 pm

    Food and energy do not show up in the inflation figures.

    With that being said I was listening to the radio yesterday and the topic was illegal’s. They were commenting on how Mexico is afraid of all of Mexicans coming back across the border. They do not have the infrastructure to deal with the estimated 5 million who have returned. It is causing all sorts of havoc for their country. They do not have the hospitals, schools and / or jobs to absorb them all. They are in total panic!

    The radio personality was funny as she suggested that Mexico may pitch in or even pay in full to help get the damn wall built ASAP. They want to keep there own people out of their home country. Oh the Irony…

55. Crash Davis Said:
    December 23rd, 2008 2:28 pm

    I agree with 1/2 of what you are saying and the other 1/2 I do not.

    The 580 100% ltv loan has been offered by HFC since 1998. Guess what it performed. What happened was the alt a market reduced rates to much an eliminated the risk based pricing. BANKS COPIED THE PROGRAM BUT INCREASED THE LOAN AMOUNTS so they could do loans in their home state of California.

    It allowed for California dreamers to buy HOUSES NOT HOMES FOR THEIR FAMILIES BUT TO RETIRE, GET RICH QUICK AND EASY.

    Midwest, 80% of median households can afford goverment loans, max 30% in California. 11% in 2007. YOU HAVE HAD 3 PROPERTY CORRECTIONS SINCE THE LATE 80′S. the correction point was at 20%, so what do you do, pay option arm it to 11%. They it corrects back to 30%.

    California screwed us. Those not effected by the ecconomy here can not refi because the loan programs are gone. Because of you in California.
    JUST MORE SELF ASSORBED CALIFORNIA FLAKES.

    Avg home here is 130k.
    Home buyers here where buying their own homes. You all in California where trying to get rich.

    We had stable appreciation of 5 to 7% a year. YOU 20%.

    45% OF ALL NON PRIME LOANS IN THE U.S. WERE ORIGINATED IN CALIFORNIA. ALMOST HALF. Come on, look in the mirror. You were a loan officer in California. YOU DID NOT SEE IT OR DID YOU CHOOSE NOT TO??

    LOOK IN THE MIROR. BANKS, WALSTREET, AND YOU WEST COAST FLAKES RUINED IT FOR THE COUNTRY. CITIZENS OF CALIFORNIA, WALLSTREET, AND THE BANKS OWE US.
    YOU ALL ARE THE CHEATERS.

56. Joe Mama Said:
    December 23rd, 2008 2:28 pm

    Javagold, you got a 30 year fixed, right? So you are upset the market went against you and now you want to walk. I would likely do the same thing (walk) but lets cut the BS. Everyone knew there was a lot of froth in the market. You made a big bet. Had the bet worked out (levels moved in your favor) then we wouldn’t be having this conversation because you would be telling your friends and family how smart you were to buy the house 3 yrs ago and you would be more than happy to continue making your fixed monthly payments. Period.

57. John Lorson Said:
    December 23rd, 2008 11:03 pm

    After years of research into the many factors that contributed to the current housing market conditions the root of the problem lies with the Wall Street firms and Government Agencies, who deceived homeowners and investors for profit by promoting special or creative financing. By promoting these exotic lending products to prospective homeowners, who heretofore were unable to qualify, these entities unduly stimulated real estate sales which in turn created artificially high and unsustainable home prices. FNMA and FHLMC define market value as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affect by undue stimulus. It further states: Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby the price represents the normal consideration for the property sold unaffected by special or creative financing. Millions of homeowner and investors are not in financial difficulties, they aren’t behind on their payments, they are just “Underwater”. They can’t sell or refinance without a short sale or writing a huge check at closing for 15 years or more. There is a fix. The fix will stabilize the housing market by allowing families and investors retain their properties, with payments they can afford, knowing that 100% of their payment is going to pay down their mortgage balance. The cash saving can be used to pay off other debt, create saving and return to normal spending habits. Federal and State, government with income taxes, will profit as there will not be interest deductions. Economic stimulus without government intervention or tax payer’s dollars is the end result. Want more information? An alliance is forming. and membership is free http://www.theamericanpeoplesfix.com

58. Michael Said:
    December 25th, 2008 11:08 pm

    I am reading alot of people blaming the home buyers for overextending themselves but the fact of the matter is the following, follow me here:

    The stand in lender whose name appears on the mortgage was paid 110% immediately to a few days later for your mortgage.

    The Master Servicer bought it from the stand in lender and sold it to a Depositor for a Trust, usually a mortgage backed security. In the process making approximately 5%

    The Depositor then sold it to the Trustee for the MBS for 105-150% of the face value of the mortgage note.

    The Trustee then split the mortgage into 50-100 tranche’s and purchased insurance for the top 50 or so. This means when the home buyer did not make the monthly payment insurance or the lower tranche’s would make it for them.

    THE PAYMENT WAS STILL MADE

    Now that the insurance companies like AIG and AMBAC can no longer make the monthly payments the Trustees are unloading the MBS’s off to Treasury and the Federal Reserve.

    So everybody up the securitization chain has already been paid fort the note that was signed at closing except for the last holder, in this case the Federal Goverment.

    Now, If I am correct their is no paperwork to back up all these electronic (MERS) transfers and the last owner of the note no longer holds the actual note and never received it.

    Therefore they cannot claim any monies as they are not the holder in due course. Filing a lost note affidavit would be defeated by any first year attorney and would be looked on as as a fraud upon the courts.

    As the name implies, to re-establish a lost note the first step is to file a lost note affidavit, this means someon swearing the note was in their possession and was lost at some point in time.

    As you can see from my example the note was never in the possession of the Federal Government.

    I conclude the home owner owes NOTHING ON THE NOTE.

    The home owner was duped into a securtization transaction that needed new mortgages to fill up MBS’s that were being sold all across the world. This was an unregistered security that is void for rescission.

    I agree with Mr. Mortgage. Wall Street is clearly the blame here. They made hundreds of billions of dollars in fees and trading mortgages.

    We are told in October that the financial system is BK in America and all the profits went where?

    Bonuses, Lear Jets, Homes in the Hamptons, Bentleys, Etc Etc and the Taxpayer should pay for any new losses.

    Force the lender to prove they hold the actual mortgage on your house and I bet chances are high they say they lost it.

59. Michael Said:
    December 25th, 2008 11:12 pm

    also to add if they actually produce the note, YOU WIN.

    Their would have to be at least 3 assignments on the back of it to be legally enforceable and they are not their.

    MERS is all electronic.

    Banks now this and so this is why notes are shredded.

    Only 1% of mortgages are contested, so they get away with it and settle with anyone who fights.

60. Susan Day Minerly Said:
    December 26th, 2008 7:03 am

    John Lorson:

    Happy Holidays. Good plan except for the misadvertising on the web site. I have a few questions.

    1- Since the number 1 & 2 reasons for foreclosures are unafordablity and/ or negative equity, how will your plan stop foreclosures?
    It doesn’t have to be both for homeowners to be foreclosed on or to just walk away, your website states you are the in real estate business, so you know this already.

    2- The website states principal reductions are required because of the “banks” behavoir in increasing prices. How are you obtaining principal reductions if you expect homeowners to pay the full principal balance amount, only the banks/investors interest is eliminated, that is not a principal reduction,it still leaves the homeowner in negative equity.

    3- You state that after 6.6 years of paying a mortgage payment of only principal, the homeowner can sell the house and pay off the mortgage in full, how?

    4- What is being done to acknowledge the fact that values/prices have dropped and are continuing to drop? Where are you stablizing the market as stated on your web-site?

    On your website, it shows a scenario with a current value of $175,000, in 6.6 years is the value supposed to be $260,000 the same as the original mortgage or will it be less than the current value of %175,000 ? Obviously it must remain the same at least, or the bank couldnt get paid in full.

    One last question, the payments show only principal is being paid down, interest is eliminated but there is one sentence that states interest is eliminated until the loan is paid off? Is the interest paid then?

61. John Lorson Said:
    December 27th, 2008 1:57 pm

    Susan Day MinSerly

    Thanks for taking your time to review the information we provided. Our example of The Fix: Purchase price $325,000, loan amount $260,000, current property value $175,000 and going down. Answer to (1) the current payment $1,558.83, the proposed Fix payment $1083.33 a monthly savings $475.50. Answer to (2) the principal balance with current loan after 5 years: $253,417.44 verses The Fix $195,000. Answer to (3) the first time an owner will be able to sell without writing a check, short sale or foreclosure for the current loan the current loan balance will be 14 years and with The Fix 6.58 years. The Fix provides accelerated principal reduction with lower payments. The bank/investor received no interest ever. (4) With lower payments and the accelerated principal reductions owners will stay in their homes and stop foreclosures. The Fix will help stabilizing the real estate market by reducing the supply of homes on the market. . The buyers must qualify with verifiable income and assets. “Verifiable Incomes” not special or creative financing will determine real estate values in the future. Prices will fall until the supply of qualified buyers meets the value of real estate. The special and creative loan products are no long available, no undue stimulus on the real estate market. Hopes this helps.

62. Investment banker’s fraud caused our 2nd Depression? - Coldstreams Business and Economy Said:
    January 4th, 2009 5:22 pm

    [...] Mr. Mortgage’s Guide to the TRUTH! » Morgan Stanley – It’s Big Part in the Great Housing/Mortga…. [...]

63. Mortgage Mess « ChrisBlog Said:
    February 3rd, 2009 2:27 pm

    [...] Morgan Stanley – It’s Big Part in the Great Housing/Mortgage Crisis [...]

Leave a Reply

Copyright © 2012 Mr. Mortgage’s Guide to the TRUTH!

Design a derivation of Tadlock's Blogging Smiply by Justin Owings • Powered by Wordpress