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re: Who/what entity would you say is most to blame for the 2007-2009 housing crisis/recession?
Posted on 2/4/22 at 5:57 am to baobabtiger
Posted on 2/4/22 at 5:57 am to baobabtiger
quote:
. Today the lending is very clean.
Clinton flushed income verification down the toilet. Are we back to verifying people's income before handing them hundreds of thousands of dollars?
Many unscrupulous lenders used this. They would ask John how much he made. He would say $7/hr. They would write down $32/hr, get the loan bought, and sell it asap.
0
Posted on 2/4/22 at 6:12 am to TheAstroTiger
quote:
was just a kid at the time so someone help me out here. Banks would offer crazy loan amounts that people were accepting. A ton of people foreclosed on homes and it created a bubble from so many houses being foreclosed on? Is that right?
You got the first part. What caused the crash was that a few main players shorted the housing market when they saw that these loans were bundled and sold to banks. People in the stock market would pay for these bundled loans because they thought they were safe.
Watch the big short. Excellent movie. They explain it nicely.
Posted on 2/4/22 at 6:30 am to grizzlylongcut
The Clintons made the original push requiring banks to start lending to subprime, non-creditworthy borrowers
Posted on 2/4/22 at 6:33 am to OweO
quote:no they weren't
Financial firms were ignoring credit scores.
quote:kids can't get a mortgage you retard
If you are responsible for watching and that kid ask to play with a lighter and you say yes.. If the kid ends up burning himself do you blame the kid or the person who was responsible for giving the kid the lighter knowing what was likely going to happen?
Posted on 2/4/22 at 7:51 am to GreatLakesTiger24
It took awhile in this thread, but two major pieces not mentioned earlier
1- these were not all new homes. Many were cash out refis and many of those on the Stated Income method
2- Appraisers were allowed to get away with murder. The photos I saw of homes and comps were jaw dropping.
Saddest part was, at least for the Nola area, many of these cash out refis were sold to generational black families with paid off homes.
Grandma bought the home and her kids and grandkids lived there. The kid convinced grandma to refi 80% ltv and take the money for all kinds of stuff.
90% of those loans were libor based interest only 2-3 year fixed and stated income. It was insane.
Eta: it was classic government pushed policies that ended up hurting the exact people they said they were helping.
1- these were not all new homes. Many were cash out refis and many of those on the Stated Income method
2- Appraisers were allowed to get away with murder. The photos I saw of homes and comps were jaw dropping.
Saddest part was, at least for the Nola area, many of these cash out refis were sold to generational black families with paid off homes.
Grandma bought the home and her kids and grandkids lived there. The kid convinced grandma to refi 80% ltv and take the money for all kinds of stuff.
90% of those loans were libor based interest only 2-3 year fixed and stated income. It was insane.
Eta: it was classic government pushed policies that ended up hurting the exact people they said they were helping.
This post was edited on 2/4/22 at 7:55 am
Posted on 2/4/22 at 7:54 am to Meauxjeaux
I’ll say only one very small bright spot… and ONLY for Nola.
These cash out refis required flood insurance to underwrite. When Katrina flooded Nola, lots of those same families were able to rebuild.
These cash out refis required flood insurance to underwrite. When Katrina flooded Nola, lots of those same families were able to rebuild.
Posted on 2/4/22 at 8:06 am to Meauxjeaux
I remember around this time my mother in law got approved for a $550k loan. She was a slot attendant in Vegas who immigrated from Mexico. Lucky we told her not to do it.
But that was happening all over Vegas and Vegas got hit hard.
One of my biggest regrets was not buying the house I was renting in Vegas in 2009. I ended up moving for work for a few years, but the owner put it up for sale in October of 2009 for $95k. I drove by it a while back and it was for sale for $350k in March of 2021.
Meanwhile I bought in Idaho last year and the loan process is a bitch now. But it should be.
But that was happening all over Vegas and Vegas got hit hard.
One of my biggest regrets was not buying the house I was renting in Vegas in 2009. I ended up moving for work for a few years, but the owner put it up for sale in October of 2009 for $95k. I drove by it a while back and it was for sale for $350k in March of 2021.
Meanwhile I bought in Idaho last year and the loan process is a bitch now. But it should be.
Posted on 2/4/22 at 8:11 am to GreatLakesTiger24
quote:
home buyers don't get nearly enough blame. just because you get approved for a loan doesn't mean you should take it.
This is true, but so many home buyers (especially first timers), think the realtor is there to help them. They think the banks wouldn't give them the loan if it wasn't ok. There's a really lot of folks that don't understand finances at all.
Posted on 2/4/22 at 8:52 am to LasVegasTiger
quote:
But that was happening all over Vegas and Vegas got hit hard.
The company I was working at at the time, their Vegas operations were through the roof. Unreal - nobody in the country could touch it.
It's also where alot of our refi-home vs comps pics were coming from.
There was one where a guy refi-d a 2 story home for about $300k - cash-out refi.
The comps where 2 story homes in a pretty nice area with beautiful mountains in the background.
The refi was on a mountain slope with incredible landscapes - and it was like 3 aluminum alloy Airstreams welded together - 2 on bottom, one on top in a funky angular pattern with a stick built garage and outdoor kitchen and pool.
Kid you not. Don't let the kitchen and pool fool you - they weren't like they are today.
Posted on 2/4/22 at 9:41 am to Buryl
quote:
I try to be factually correct in the information I post here. If my information is incorrect, I appreciate being called out. Were you in the industry in 2007-2008? If you have information showing where I'm wrong, don't be coy. Enlighten your ignorant OT brethren! Because pretty much every source I've ever read on the role of the ratings agencies says the same exact thing:
quote:
Criticism of Credit Ratings Agencies During the Great Recession
During the 2008 financial crisis, a lot of worthless mortgage-related securities were given AAA ratings: the highest and safest investment grade. This led to a series of events that contributed to the global financial meltdown. The credit ratings agencies aimed for increasing profits and market share by giving inaccurately strong ratings to underperforming assets. This conduct fueled the meltdown that ultimately led to tens of thousands of foreclosures. The credit ratings agencies were blamed for conflicts of interest and the flawed methodologies they adopted for rating financial products during the Great Recession.
Credit ratings agencies use two methods to assess risk and rate the creditworthiness of financial products and sovereign nations: “issuer pays” and “subscriber pays.” In 2016, the big three credit ratings agencies continue to work under the “issuer pays” model that led to the subprime mortgage crisis in 2008. The system allows a bond issuer to pay the ratings agencies for initial and ongoing ratings of a security. The credit ratings agencies tend to overrate the credibility of the debtors so as to not lose established clients. This, in turn, can lead to a biased analysis and faulty ratings.
Yes I was in the industry...from my post on the previous page
"but considering i lived and worked it....sold a few 100mm in non-agency RMBS, CDOs, CLOs - was part of group whose only job was to peddle this stuff around the globe - i'm sure you know more than me....the simple answer as i posted earlier - the repeal of Glass Steagal in '99 was what caused this
one of the worst trades i was involved with - was a reverse inquiry of a CDO squared - the buyers ask for certain specs - it was 11.5mm / six months later they lost 10.3mm of it"
and the reason you are not correct is because the majority of people who write or wrote about the crisis weren't not actually participants - they are writers and not in the business for a reason...make a lot more money being involved than writing about it
As far as the rating agencies go - they have and still have models that include basic assumptions for losses based on historical performance of assets and re: asset appreciation, asset quality, recovery values, etc...that is for the RMBS market, ABS market (cards, autos, small biz, consumers, containers, data centers, etc...) and CLO. This information is used to determine how much credit support (subordination + residual) is needed for a tranche of a securitization to get a certain rating. Once that is established - issuers can obtain a pool of "like" assets to securitize with a reasonable expectation of what rating each amount of the deal will be.
Going back to 2006-2007, they were not commingling subprime with prime or even Alt-A loans. Each asset class of RMBS was separate - guidelines had been in place since the early 2000s as for what the credit support needed to be to obtain a specific rating. Where they got things wrong was with the home price appreciation baselines - and not realizing the amount of mortgage originator fraud that was taking place. Couple that with new types of interest only loans, they didn't realize the leverage that was taking place for the individual borrowers. Once
home values stopped going up - it was all over in a matter of months.
You have to realize that the majority of buyers for these assets are money managers, hedge funds and insurance companies who employ armies of analyst to do their own internal ratings - these are the biggest of big boy investors.
Posted on 2/4/22 at 9:59 am to LSUtoBOOT
Holy shite.
How many people think it was Clinton and Frank?
And where the frick did you get that ignorant idea come from?
How many people think it was Clinton and Frank?
And where the frick did you get that ignorant idea come from?
Posted on 2/4/22 at 10:22 am to Salviati
[quote]Hedge funds, banks, and insurance companies caused the subprime mortgage crisis. Hedge funds and banks created mortgage-backed securities. The insurance companies covered them with credit default swaps. Demand for mortgages led to an asset bubble in housing. [/quote
AIG began making insane money insuring all these so called AAA tranches derivatives of Govt bonds, so Wall Street created more CDO’s derived from some goofy financials that no one understood. The credit swaps grew and grew, everyone said they had govt backed derivatives on Triple A bonds, rating agency rubber stamped it, until Mark to the Market accounting, then they were caught with no clothes and it all came tumbling down.
AIG, once one of the very few AAA rates insurance company is on the brink of bankruptcy. Every institution is Too Big to fail. But, the Govt picks winner and losers, let’s Lehman Brothers failed while letting Merrill and Bear and Stearns be absorbed by other banks. Of course Goldman, Govt Sachs, survives-because Treasury Secretary Geithner ex Goldman partner as most Treasury Secs before him.
Wall Street gets slapped on the wrist and everyday, working man now has to jump
Thru hoops and spider webs just to buy lifelong house!
AIG began making insane money insuring all these so called AAA tranches derivatives of Govt bonds, so Wall Street created more CDO’s derived from some goofy financials that no one understood. The credit swaps grew and grew, everyone said they had govt backed derivatives on Triple A bonds, rating agency rubber stamped it, until Mark to the Market accounting, then they were caught with no clothes and it all came tumbling down.
AIG, once one of the very few AAA rates insurance company is on the brink of bankruptcy. Every institution is Too Big to fail. But, the Govt picks winner and losers, let’s Lehman Brothers failed while letting Merrill and Bear and Stearns be absorbed by other banks. Of course Goldman, Govt Sachs, survives-because Treasury Secretary Geithner ex Goldman partner as most Treasury Secs before him.
Wall Street gets slapped on the wrist and everyday, working man now has to jump
Thru hoops and spider webs just to buy lifelong house!
Posted on 2/4/22 at 10:38 am to LasVegasTiger
quote:
I remember around this time my mother in law got approved for a $550k loan. She was a slot attendant in Vegas who immigrated from Mexico. Lucky we told her not to do it.
This was also a huge part of the problem. We bought a home in 2006, and our approval amount was absurd. We did have excellent credit, but in no world would we have been remotely comfortable with that figure. The math didn't add up, and the whole situation felt predatory.
Posted on 2/4/22 at 10:57 am to grizzlylongcut
The government both regulated and encouraged the sub prime lending through Fanny Mae and Fanny Mac.
No free market would EVER risk their capital in sub prime mortgages. It was the guarantee of government pay that made it feasible and it was also the government saying that it was racist to not do sub prime mortgages that created the bubble
In short- it’s the government
No free market would EVER risk their capital in sub prime mortgages. It was the guarantee of government pay that made it feasible and it was also the government saying that it was racist to not do sub prime mortgages that created the bubble
In short- it’s the government
Posted on 2/4/22 at 11:47 am to Quatre Pot
quote:
The government both regulated and encouraged the sub prime lending through Fanny Mae and Fanny Mac.
No free market would EVER risk their capital in sub prime mortgages. It was the guarantee of government pay that made it feasible and it was also the government saying that it was racist to not do sub prime mortgages that created the bubble
In short- it’s the government
No.
In short, no.
Now, try reading the thread and find out what really happened.
Oh, and stop being a useful idiot.
Posted on 2/4/22 at 12:39 pm to hubreb
I have no doubt that you know more than me regarding the financials.
To paraphrase what you said: The ratings agencies didn't commit fraud, they were simply incompetent. I don't necessarily disagree, and incompetence could be a component of what led to the failure.
But you are ignoring that people inside the ratings agencies themselves ADMITTED was going on: they delivered good ratings to keep their customers happy!
Ratings Agencies Caved to Bank's Demands and Helped Cause Crisis
In the end, I don't believe anyone was actually convicted of fraud. Not because it didn't happen, but because our AG at the time was a man named Eric Holder. Eric's background was in representing Wall Street and big banks. So, unsurprisingly, he allowed his buddies at the agencies paid out a couple of billion in settlements.
Eric Holder Returns to Repping "Big Banks"
I lived this crisis on the opposite side as you - starting in 2003 I worked for a small homebuilder and developer in one of the craziest markets in the country, after Vegas. People were literally being driven through new developments (not ours) in busses, and buying multiple homes, without ever touching the ground. Entire neighborhoods were empty, everyone was speculating. At some point, the pyramid has to collapse.
By 2004 we knew that 1) There was a bubble, and 2) The pace of appreciation was completely unsustainable.
We did not expect a collapse because, hey, surely someone in charge is paying attention, right? Wrong.
Back to the ratings agencies: It's hard for me to believe that a few know-nothings out west knew things that multi-billion-dollar ratings agencies, who were literally PAID to know things, did not know. Especially when "not knowing" directly lead to them receiving hundreds of millions of dollars in fees.
To paraphrase what you said: The ratings agencies didn't commit fraud, they were simply incompetent. I don't necessarily disagree, and incompetence could be a component of what led to the failure.
But you are ignoring that people inside the ratings agencies themselves ADMITTED was going on: they delivered good ratings to keep their customers happy!
Ratings Agencies Caved to Bank's Demands and Helped Cause Crisis
In the end, I don't believe anyone was actually convicted of fraud. Not because it didn't happen, but because our AG at the time was a man named Eric Holder. Eric's background was in representing Wall Street and big banks. So, unsurprisingly, he allowed his buddies at the agencies paid out a couple of billion in settlements.
Eric Holder Returns to Repping "Big Banks"
I lived this crisis on the opposite side as you - starting in 2003 I worked for a small homebuilder and developer in one of the craziest markets in the country, after Vegas. People were literally being driven through new developments (not ours) in busses, and buying multiple homes, without ever touching the ground. Entire neighborhoods were empty, everyone was speculating. At some point, the pyramid has to collapse.
By 2004 we knew that 1) There was a bubble, and 2) The pace of appreciation was completely unsustainable.
We did not expect a collapse because, hey, surely someone in charge is paying attention, right? Wrong.
Back to the ratings agencies: It's hard for me to believe that a few know-nothings out west knew things that multi-billion-dollar ratings agencies, who were literally PAID to know things, did not know. Especially when "not knowing" directly lead to them receiving hundreds of millions of dollars in fees.
Posted on 2/4/22 at 1:27 pm to TheAstroTiger
quote:
Banks would offer crazy loan amounts that people were accepting.
Go deeper. Ask yourself what led banks to take more risk.
Posted on 2/4/22 at 1:35 pm to TigerGM
quote:
Watch the big short. Excellent movie. They explain it nicely.
It was a good movie. But it is also true that Michael Lewis learned how to monetize story telling to make them more appealing to Hollywood. In his recent books he focuses on a selected cast of characters and tells a story through their point of view. He does well in documenting many facts, but he maintains a fairly narrow view of things. If his motives are genuine, he’s probably just trying to keep things easy to digest for the reader.
I would also recommend to the OP, Thomas Sowell’s Housing Boom and Bust. He covers much of the most relevant information that Michael Lewis chose to stay silent about. But obviously Thomas Sowell’s books will never be made into movies. Though his biography should.
This post was edited on 2/4/22 at 1:37 pm
Posted on 2/4/22 at 1:46 pm to Salviati
quote:
Holy shite. How many people think it was Clinton and Frank? And where the frick did you get that ignorant idea come from?
Please give your theory. Based on your posts it’s like you completely made up your understanding by watching the big short. Good movie but definitely has a bias and ignores big steps in the process of forming the bubble to fit that view
Government incentivized giving people loans they couldn’t afford. Banks pounced on it and capitalized on it for as long as they could.
This post was edited on 2/4/22 at 1:48 pm
Posted on 2/4/22 at 1:57 pm to notiger1997
quote:And immediately following televised political histrionics, being told by the Fed Bank Examination Team currently auditing (routine thing) that we were turning away good loans. They referred to applications that payday loans would turn away.
remember Democrats having their race baiting politicians standing in front of congress demanding everyone should be able to get a loan and house even if they had next to nothing for a down payment. Republican banker folks were happy to make it happen knowing the government would bail them out
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