yes an on the surfice answer...but still same problem... no matter how you look at it or explain in, we are still here in this situation it is still $$$$ and we are paying for their mistakes

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P5 card hacked
'our curr€ncy, your problem'
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Yeah, but why did they do that? Did they stand to profit one way or another? Greed is still the underlying issue and motivator, IMO.

Did you miss my statement? The lending institutions were Federally required to start doing these loans. Can you blame them for trying to figure out a way to make a profit on them? Is profit evil now? I think the companies involved may have been lax, played loose with their rules/regs, etc (no argument from me on that). However, the simple fact that a company is trying to maximize profits for their stockholders is not an evil action. It is what we WANT companies to do.

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Nope, didn't miss your statement. I feel that greed is the underlying cause because the gov't had something to gain (money or popularity), the lenders were eager to make the loans becuase it created revenue they weren't able to capitalize on before, homebuyers signed up to buy a house that they really couldn't afford or more house then they could afford and so on. It was greed all around. Someone is always benefiting or profiting in one way or another.

I agree that greed can be a very positive thing, but it also has it's downside.

Ummm, yeah. Isn't that an essential aspect of "society"? Caveman goes out to get food, in exchange for the cavewoman cooking it later? Guy flips burgers at McD's, in exchange for Ronald McD paying him salary, whilel Ronald sells said burger to someone else, making a profit for the trouble? I know you know all this, but I just am annoyed that so many folks can so easily act like trying to be capitalists (ie, making a profit) is a bad thing on its face. I detect an easy slide to Marxism in that easy blame.

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I agree with you that bad lending practices played a huge part in getting us where we are today.

I think QS was asking what is the underlying reason people do the things they do. What is their motivation? My answer was because of greed. I am all for capitalism, sometimes things just go to far and need to be put in check and that is what is happening now.

I came across a statistic while performing an analysis for my company several months ago (i'd have to dig for the source). It stated that in 2007 1% of the the worlds population made approx' 20% of the worlds money. Who the hell is that 1%?...We certainly don't read about them on the Forbes list. I believe that percentage may very well be the culprit. I believe they also manipulate the federal reserve.

Some history in this video that is pure fact, even if you don't like the political spin toward the end.
http://www.youtube.com/watch?v=H5tZc8oH--o

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Hi all. Well I will try to answer the question posed at the outset as from where I sit, the answer seems pretty clear....

Here in Australia, when you take out a mortgage for the property, you are effectively giving a personal guarantee for the debt to the bank. If you default, the bank will step in, repo the property (and they don't care about how much they sell it for) then pursue you for the difference. Your only escape is to declare Bankruptcy or do a deal to pay off the balance over a period of time.

We also have a national credit referencing agency called Baycorp, which records all your applications for any kind of credit, together with your defaults (so don't EVER miss your phone bill) and it is checked by the lender each time you apply for a mortgage. Essentially, the onus is upon YOU the borrower to make the payments or if you cannot, you sell the property and pay off the balance somehow.

Now, this system means that you rarely get an LVR above 80% (Loan to Value Ratio or the amount the lender will contribute towards the value) with a bank, and if you didn't pay that bill and your credit is stuffed then you go to a non bank lender. These lenders have higher LVR's, looser credit restrictions, and allow you to state your own income level by self certification. BUT!!!! They still do a credit check on you, and they also do a background picture to see if you really have the lifestyle to which you claim. The message is, you cannot obtain a mortgage without a personal guarantee.

My understanding of what has been happening in the US is, that non bank lenders have been giving mortgages to so called 'ninjas' (no income, no job or assets) and when those people default, they can just hand the keys back and walk away!!!!!!!!!!!!!!

A lot of people are blaming the 'wall street' people for their trading of equities or in real world language, packaging up these mortgages and trading them. This is nothing new or no big deal, just the scale of it is the problem.

Here in Australia you can buy what is called a 'loan book'. When your broker writes up your loan, he gets an upfront and trailing commission from the lender. That trailing commision (around 0.025%-0.04% of the total value of the loan depending on certain criteria) continues for the life of the loan. Brokers from time to time build up a portfolio of loans and sell them off. Just like real estate agents buy and sell their rent rolls. Banks will quite happily give you finance for them as they know the income is sound (what you have to be careful of though is that the commission only lasts for the life of the loan....in other words, when someone goes and re-finances or buys a new home, that loan ends).

Over a period of time the book begins to become stale and drops off in value quite markedly as the loans drift off to different lenders. So if you buy this, you have to do a lot of research about the amount of churn, the age of the book, the number of dodgy borrowers etc. When you compare the cost of financing it versus the income/management/cost of new business to maintain the value it soon becomes clear that it is a niche product only suitable to be bought and sold by those in the industry.

I was able to buy a $4 Billion loan book. Sounds impressive, but the reality is that after about 3 years that loan book would only be worth 60-70% of its original value, and the income would be unable to service the repayments after only 2 years. Even though you are only paying a factor of eg 2 times income for the book, the point of buying a diminishing asset disappears quickly. So I didn't..

For those of you wondering where all the money has gone on Wall Street, take a couple of million for the purchase of the book, chop it in half after 2 years and leverage that on a huge scale for the number of trades that have likely occurred.

Essentially, I think that the foundations of your whole mortgage industry are dangerously flawed because the borrowers are not liable for the debt. It only took the trading or 'leveraging' of this flaw to magnify the damage. If you have a flaw in something, fix it before you leverage it as you will only leverage the flaw to levels of disaster now being seen.

That product should never have been traded on the scale that it has, on such a flawed foundation..... that is the root cause of this mess IMO

Finally....

(A personal observation here)....over the years on this and other forums, I have seen enough comments about 'compensation','your rights' 'class action' etc to understand that taking responsibility for your own mistakes has largely disappeared in American Culture. I know this statement offends some of you, but ask yourself this, how many times do you read that a dealer 'should give you a new car because the gizmo broke down twice and you only got a Ford as a loaner'

As hard as it is to hear, Americans medicine will be self administered and it will probably be in the form of taking responsibilty for your own actions.

Or to put it another way, taxpayers paying for the losses incurred by financial institutions that have had taxpayers walk away from their debts on them....

Cheers

John

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