The next recession & the state you live in

a reply to: Edumakated

More specifically, it was brought on by all the consumer fraud that occurred because underwriting guidelines were too loose. People were lying about income and all kinds of other fraud buying investment properties.

Bold part mine for emphasis

Change that to seller , bank , mortgage company and I will agree 110%
Especially Fannie Mae and Freddie Mac
Changing income on the paperwork , listing folks as having an income of over 50 thou a year when they were actually on some form of government system

Starred

originally posted by: Gothmog
a reply to: Edumakated

More specifically, it was brought on by all the consumer fraud that occurred because underwriting guidelines were too loose. People were lying about income and all kinds of other fraud buying investment properties.

Bold part mine for emphasis

Change that to seller , bank , mortgage company and I will agree 110%
Especially Fannie Mae and Freddie Mac
Changing income on the paperwork , listing folks as having an income of over 50 thou a year when they were actually on some form of government system

Starred

All were complicit. Everyone from Main street up to Wall Street.

originally posted by: Edumakated

originally posted by: Gothmog
a reply to: Edumakated

More specifically, it was brought on by all the consumer fraud that occurred because underwriting guidelines were too loose. People were lying about income and all kinds of other fraud buying investment properties.

Bold part mine for emphasis

Change that to seller , bank , mortgage company and I will agree 110%
Especially Fannie Mae and Freddie Mac
Changing income on the paperwork , listing folks as having an income of over 50 thou a year when they were actually on some form of government system

Starred

All were complicit. Everyone from Main street up to Wall Street.

You offer to sell a goose that lays a golden egg cheap .
How many folks would buy one ?
Build it and they will come
Give em an offer too good to be true (and was) and they will accept

Sub prime was "you pay 0-1% interest"
What they did not say was for the first 5 years .
Then BAM
Folks were hit with that 13% interest rate

$50k in $100 bills will easily fit an a standard ammo box bought at a rummage sale.

Just a good investment hint.

originally posted by: Gothmog

originally posted by: Edumakated

originally posted by: Gothmog
a reply to: Edumakated

More specifically, it was brought on by all the consumer fraud that occurred because underwriting guidelines were too loose. People were lying about income and all kinds of other fraud buying investment properties.

Bold part mine for emphasis

Change that to seller , bank , mortgage company and I will agree 110%
Especially Fannie Mae and Freddie Mac
Changing income on the paperwork , listing folks as having an income of over 50 thou a year when they were actually on some form of government system

Starred

All were complicit. Everyone from Main street up to Wall Street.

You offer to sell a goose that lays a golden egg cheap .
How many folks would buy one ?
Build it and they will come
Give em an offer too good to be true (and was) and they will accept

Sub prime was "you pay 0-1% interest"
What they did not say was for the first 5 years .
Then BAM
Folks were hit with that 13% interest rate

No, people knew the terms of the loan. They just try to play stupid when things don't work out in their favor. I've been in the mortgage business 15 years. Have you ever gotten a mortgage? There were all kinds of disclosures both before application, during application, and at closing explaining how the mortgages worked.

Here is what happened in most cases.

First, the vast majority of sub-prime was refinancing. What would happen is someone would either 1) be in trouble or starting to get in trouble financially or 2) decided they wanted to use their new found home equity to take cash out to either start business, pay off credit cards, buy boats and Harleys, or god knows what else.

They may have had something about their situation that prevented them from qualifying for A paper / conventional financing. Typically it was either bad credit or couldn't verify income. The applicant would "state" their income and that was the end of the verification.

The next thing you need to understand is that the sub prime loans were meant as temporary. The plan would be someone makes their payments on time and then within a year or two, they'd refinance out of the loan into a conventional mortgage as their credit or situation improved.

What happened in reality is that most people continued their bad financial habits, so when it came time to refinance to better loans, they still wouldn't qualify. This was ok, as there was always another subprime lender in the wings they could refinance into because home values held up.

As values started declining and lenders started failing, banks started "tightening up" their guidelines. As such, the guy in the sub-prime loan didn't have anything they could refinance into. To make matters worse, they also couldn't' sell the home as they were underwater. So they were basically stuck. This was compounded even more as rates started to rise.

They were already on the edge with low rates, so when rates rose, they couldn't afford the house. Typically, when most people can't afford a house, they can sell it. However, if you have a $200k loan on a house that at best might get $150k, you are underwater $50k. All they could do is a short sell or foreclosure.

The contagion spread because CA, AZ, NV, and FL were huge sub-prime markets and they brought down a ton of lenders and it started affecting "normal homeowners" bringing down values all over the country.

a reply to: Edumakated

Have you ever gotten a mortgage?

Only 4. That I payed each off in 10 years.
Only accept fixed.

originally posted by: Edumakated
The contagion spread because CA, AZ, NV, and FL were huge sub-prime markets and they brought down a ton of lenders and it started affecting "normal homeowners" bringing down values all over the country.

I've heard that in several high COL places now like NYC, San Francisco, and so on that the current trend is interest only home loans. Basically, people are buying these homes that might cost $10 million each, and then getting a loan that is essentially indefinite. The payment is nothing more than property tax+interest. So, home owners are now facing a situation where they build zero equity, and will again be trapped when home values inevitably decline again.

Have you heard much about this trend?

I think while the auto and student loan bubbles are going to be notable and impactful when they do burst, it's going to be the tariffs that break the camel's back here. We're already shaky enough -- CoL is high, jobs don't pay enough and now s# is going to cost even more to buy. We already know what happens when consumers lose confidence, and calling tariffs "growing pains" doesn't inspire confidence any. We're underestimating China in a potentially crippling way, one punch to the proverbial kidney and we're down. All they have to do is mitigate, and I don't think they're playing this trade game with us without a solid, surefire Endgame to win it. Frankly, I think that Endgame is yuan devaluation, and nobody else sees this possibility despite them having done it before and it working. If they devalue, it keeps things cheap and mitigates tariffs, and hello again square one & White House.

The bubble that will be the KO punch will come from trade, not pensions or loans.

originally posted by: JasonBillung
a reply to: JAGStorm

#1 don't be afraid to move if you lose your job.

This.

I read someplace that most Americans live and die within 80 miles of where they were born. Some go away for a time, but always return. This is understandable - family, friends, familiar surroundings, etc.

But when it comes to your quality of life, Americans should not be so provincial. I go back to the town where I graduated high school and still see the same losers hanging around for no reason other than they are afraid to leave their bubble of security.

Try something new. You might like it.

Hah, does that 80 miles dealie technically count if I was born in MI, moved to FL and grew up there but moved back to where I was born in MI a few years ago?

originally posted by: Justso
Actually, Florida was a haven during the last recession. They don't have income tax but offer alot more to their citizens if they are poor or homeless. There are huge networks to help those enduring a financial or family crisis due to their huge taxes on tourism. Florida is politically fiscally conservative but that could change. Starting to attract many liberals so I expect the spending to accellerate.

No it isn't. It's a horrible place to be poor in, and those "networks" aren't big at all.

BTDT personally. I grew up there, was homeless as a teen with my mother for a while, and then as an adult, went from comfortably middle class to solid poverty after '08. "Help" in FL is pathetic at best. I don't know what safety net you think that state has, but it definitely does not have it.

Between high CoL, and very s#y job opportunities, I will never recommend FL as a place to put down roots. If you want to waste your retirement money, knock yourself out, but you'll end up like my grandmother, who made that mistake -- broke & on every possible senior program the government offers after about 15 years, you'll burn through everything you have trying to live cheap down there.

a reply to: Nyiah

Thing is the pain with China is the pain. We either take it on now on our terms and under circumstances we know or we allow China to hold our purse strings and that power over us forever.

Do you speak Chinese?

a reply to: dothedew

"I chose to close on a home at the perfect time! LOL"

Buy high, sell low. The story of my life!

originally posted by: ketsuko
a reply to: Nyiah

Thing is the pain with China is the pain. We either take it on now on our terms and under circumstances we know or we allow China to hold our purse strings and that power over us forever.

Do you speak Chinese?

In all honesty, it's capitalism either way. Either we're all for letting capitalism do it's supply & demand thing both domestically and internationally, or we're not. If places here can boom or fail due to using capitalism to their every advantage, we've got no place to complain about China. They're just pulling the old "monkey see, monkey do" routine we've been doing for decades at home.

May the better competitor come out on top, here or abroad. Ain't that right, capitalists?

Many states are turning to legalized recreational weed for revenues. I am pretty sure Florida will be legalized next year.

a reply to: eManym

Weed might work until all states catch on.

They never use that money for what they say they will.
Weed - more money for schools
www.thedenverchannel.com...

Tolls -for roads
www.chicagotribune.com...

etc etc!

originally posted by: Aazadan

originally posted by: Edumakated
The contagion spread because CA, AZ, NV, and FL were huge sub-prime markets and they brought down a ton of lenders and it started affecting "normal homeowners" bringing down values all over the country.

I've heard that in several high COL places now like NYC, San Francisco, and so on that the current trend is interest only home loans. Basically, people are buying these homes that might cost $10 million each, and then getting a loan that is essentially indefinite. The payment is nothing more than property tax+interest. So, home owners are now facing a situation where they build zero equity, and will again be trapped when home values inevitably decline again.

Have you heard much about this trend?

Nothing wrong with interest-only loans. I/O and Option Arm loans were the products of choice for the wealthy because they allow you to use your mortgage more effectively for financial planning. I/O loans were really popular with my investment banking clients because most of their income comes in year end bonus. So they could make minimal payments throughout the year, then when they get their bonus they could make a large principal payment.

These loans had been around for decades and performed well when sold to the right people. The problem is that some banks started offering them to Joe Sixpack as an affordability product instead of a financial planning tool. In other words, you can't really afford this home, but if you just make interest only payments it would work.

originally posted by: Edumakated
The problem is that some banks started offering them to Joe Sixpack as an affordability product instead of a financial planning tool. In other words, you can't really afford this home, but if you just make interest only payments it would work.

That's what appears to be happening right now. It's why people who make $100k are buying homes that cost $8 million, and why people who work driving for Uber are buying homes that cost over $1 million in the Bay, which comes out to buying a home worth roughly 25x your annual income (or more for the $100k person).

It strikes me as being very irresponsible, but eventually individual recklessness becomes a communal problem once the banks are left with a bunch of toxic assets again.

The people in these types of arrangements are also those who are most likely to be in a subprime auto loan.

You make a lot of good points! Health is important, healthcare costs so much these days that it can bankrupt you alone! It is a great idea to move to find a job, one of my friends got a position as a principal in Montana because he was willing to look across the whole nation for a job instead of just his hometown. Real-estate is a steal during a recession, my friend bought a foreclosed home for $30,000!

a reply to: Nyiah

I'm sorry you suffered. I did see alot of homeless and was quite aware St. Pete tried to stop us from feednig the poor and homeless. But, we fought back and it was a hard fight but we were successful in the end.


They also provided free healthcare for all. Something I did not see in Atlanta or anywhere else.

I did see churches and groups trying to help and they did make an impact. Of course, not everyone apparently did benefit. I am so sorry-really rough times for most.

I don't know how Joe Sixpack could buy a $1 million house or a $100k per year earner buying a multi-million dollar home. Neither would qualify for the home loan.

originally posted by: eManym
I don't know how Joe Sixpack could buy a $1 million house or a $100k per year earner buying a multi-million dollar home. Neither would qualify for the home loan.

0% down interest only. All you need is enough money to cover the payments, which if course is driving prices up to the point where the interest payment is now what an entire mortgage used to cost. An interest only loan for a $1 million home at 4% APR is 3333/month. That's about 1600 per person with a roommate/spouse which at 50% of income requires essentially what fast food wages start at in that area.