After reading BENN‘s, Michael‘s and Greg‘s articles today, my ears were uber-perked regarding the current market conditions. In preparing to blog today, I had Fox News on in the background and loved Cavuto’s analysis of the current conditions so much that I cared enough to pause, play, pause, play and transcribe his “Common Sense” piece. Do you agree or disagree with the following?
“Sometimes, the toughest thing about freedom is recognizing that you are also free to screw up, to make mistakes, to not read mortgage fine print or to understand that adjustable rates can also adjust up. In a free society, you are also free not to learn these things; you are free to assume that when you make the biggest purchase in your life, you do not have to do the most amount of research on the purchase in your life. You are free to study everything, or study nothing. You are free to be duped. It is not fair, my friends, it is not right.
I think the President in his discussions with me today cut to the core of the problem in some mortgages today. Some didn’t know what they were getting into. Some buyers didn’t read, some did not care, some stories did not end well. Some presidential candidates say ‘make the government make them well. Help them out, bail them out.’
But, the President today offering me a not so politically correct answer- “no.” No bailouts, no gains, no money for the very same folks who some say created the mess in the first place. FORCE them to be transparent? Yes. Force them to write in English? Yes. Forcing them to do everything to help borrowers before dumping them on Uncle Sam? Yes. But, you don’t correct a problem by throwing more money at the problem. I think that what the President was saying is that in the end, it is up to US to know when we’re getting in too deep.”
Greg Swann says:
I agree with the President. A bailout would be disastrous.
August 8, 2007 — 2:51 pm
Jeff Brown says:
It reminds me of the criminal who said, “I confess – he did it!” 🙂
August 8, 2007 — 3:26 pm
Chuchundra says:
I think a wholesale bailout would certainly be wrong. There are a lot of people who went into this enterprise knowing the risks and deciding to take them for the chance to to make big returns, either by taking a ride on the property ladder or by loaning those people the money to do so. These people have made their beds, now it’s time to lie in them.
On the other hand, there are a lot of people who were pretty clear defrauded by con men calling themselves bankers or mortgage professionals and who now stand to lose everything they’ve worked for. I think, to the extent that it’s practicable, the federal government should pass some legislation and perhaps help out with a little money so that they could get out of these toxic loans and into ones they can make the payments on, if that’s possible.
August 8, 2007 — 4:58 pm
Michael Cook says:
I try to stay out of political matters, but I really feel like this stance takes a very elitest view. As a person working in the financial industry, I certainly understand the risk of most financial products. However, I think imposing that same understanding on the general public is unfair. What does a postal worker know about Alt-A or reverse amortization mortgages? Have you read any mortgage contracts lately, no quite Dr. Suess reading anymore are they? Furthermore, when he goes to a professional, who is suppose to have his best interest in mind and he is defrauded, what recourse does he have?
While there are plenty of people who knowingly took risk, punishing them punishes everyone. From the fallout, it is clear that the population of defrauded and misled individuals is more than just a hand full. I certainly can think of worse ways to spend hard earned tax payer money then helping hardworking US citizens avoid losing their homes.
August 8, 2007 — 6:57 pm
BR says:
Before we go around name calling I’d like to point out what are obvious solutions:
“FORCE them to be transparent? Yes. Force them to write in English? Yes. Forcing them to do everything to help borrowers before dumping them on Uncle Sam? Yes. But, you don’t correct a problem by throwing more money at the problem.”
These lenders need to get in the trenches with their clients by extending grace, by being creative with buying down to new rates or savvy refinancing. Did you know that more banks than not make it nearly impossible to talk to a human, much less resolve a default crisis by extending deadlines, rolling payments onto the back of the loan, etc… In my opinion it is the lenders who need to get their broom and sweep this out from under the rug, shine light on it, and clean it up. Until then, buyer beware, learn to speak greek, and get a thicker pair of glasses.
In the world of everyone knows it all because they read it on the internet, I didn’t know isn’t an excuse anymore.
August 8, 2007 — 7:21 pm
Michael Cook says:
For the record, I was certainly not calling anyone here elitist, I was merely suggesting the point of view comes from people who share the knowledge of the real estate market and its inner workings.
Its kind of like assuming everyone has Internet access. Last time I checked on 20% of the US had access to the Internet, crazy huh? Some times we get so deep into our professions I think we impose our knowledge on everyone.
August 8, 2007 — 8:41 pm
BR says:
but 77% shop online for homes- meaning they have access, they just don’t have pajama access. No one is saying let them drown, what i think the masses are saying is the mortgage industry makes a killing, they have money, clean up your mess, work with the homeowners, and how about you shave that rate down a tad and let them catch up even if you do bump it back up. No one on this earth is a fan of the profits of the mortgage industry so I think you’ll be hard pressed to find a willing audience.
further, my motivation on this issue is that in 5 years I’ve had only one client ever default on his loan, it took me 4 months just to get the lender to let us do a shortsale. In fact, they made it so complicated that by the very end we had almost given up, had it not been for the subprime crash hitting the news, I believe this bank would have let this loan fall.
In the end, they bent over backwards- their attorneys did just 2 days from foreclosure to help us get the 20 contracts we had submitted them that were only 9k different from the balance. Disgusting if you ask me.
The problem isn’t the buyer being unwilling, it’s the lender holding out for more cash. Who’s the elitist?
August 9, 2007 — 7:37 am
Morgan Brown says:
“But, you don’t correct a problem by throwing more money at the problem. I think that what the President was saying is that in the end, it is up to US to know when we’re getting in too deep.”
I think that the US and this administration clearly has shown no ability to determine what “too deep” is in several important instances.
I am not for a bailout, but I do believe that a laissez-faire approach to this issue will be disastrous. The government is there to protect its citizens from outside as well as inside forces. It owes that duty to Americans that were defrauded by a greed-driven industry.
Speculators, cheaters, flippers, etc. all deserve their due. American citizens who were promised a better life by lying cheats deserve better.
I can’t stand Hillary Clinton, but I agree that a good place to start would be the waiver of prepayment penalties on short-term ARMs – that would at least allow some people in these caustic ARMs to get in to something more stable.
Again I agree a bailout is a bad thing. However, if the government is going to bail out all sorts of industries why would they choose to not to offer some small modicum of assistance to their citizens?
The government needs to protect its citizens by increasing enforcement funding and creating compelling reasons for the industry and regulatory agencies to get their act together so this problem doesn’t happen again.
August 9, 2007 — 11:29 am
Michael Cook says:
BR,
I feel like you are stalking me. Lol, luckily I am in training and have quite a bit of free time to enter these debates.
First, I do not totally agree that the mortgage industry is fully at fault here. The profit has been spread all over the place. Investment banks, hedge funds, commercial banks, REITs, and HOMEOWNERS have benefited from the wild subprime lending frenzy. The US homeownership rate is near an all time high, and while some of those new owners will default, many will successfully enjoy their homeownership.
The question is who should pay. Should mortgage brokers pay because they originated bad loans or perhaps banks because they approved and supplied them. Maybe the investment banks that are holding the bad loans or investors who choose subprime bonds. Finally, maybe we should tax everyone with subprime loans to cover the their brethen who default?
There is far too much blame to go around and far to much profit to recapture. While you point to banks, I would be willing to bet my paycheck that Investment banks and hedge funds made more than commerical banks and brokers on subprime loans.
If Uncle Sam wants to tax the finance industry and give it back to consumers in default, I am all for that. I am simiply saying there should be some assistance and the government is the most impartial figure in this debate. Taxing any one group gives the rest a free ride.
August 9, 2007 — 11:36 am
BR says:
The question is who should pay. Should mortgage brokers pay because they originated bad loans or perhaps banks because they approved and supplied them. Maybe the investment banks that are holding the bad loans or investors who choose subprime bonds.
any of the above is better than me, I had nothing to do with it.
There is far too much blame to go around and far to much profit to recapture. While you point to banks, I would be willing to bet my paycheck that Investment banks and hedge funds made more than commerical banks and brokers on subprime loans.
Yes, so regulate, not bailout.
We can go on like this forever, I sound like a monster, but I think we agree on the point that consumers who have been suckered will probably have their day in court and become richer than all of us… I’m crossing my fingers.
August 9, 2007 — 2:46 pm
Michael Cook says:
“Become richer than all of us…”
Not sure US History has shown that people who get swindled, ever get made whole. Last time I checked we were still a rich get richer society.
August 10, 2007 — 6:17 am