KOAJ: I don't really understand why all these mortgage companies, Fannie Mae et al are biting the bullet, going bankrupt, having to be bailed out. It seems to me if they were giving massive amounts of mortgages on property without the buyer's making downpayments or having the ability to make payments there must have been a lot of fraud by the lenders otherwise the foreclosures would not have caused all these problems. Say the property was only worth 80% or what was charged or even less, that does not mean that these massive hits in the hundreds of billions should come. I just don't understand. There are evidently a bunch of crooks in the woodpile, otherwise this crisis would not have happened. Some banks and mortgage companies would take large hits but they should have a lot of reserves after all the money they have been making. I know someone that Washington Mutual defrauded in CA, she paid $80,000 down and they refused to refinance when her three years was up. She had made all her payments, too.
A ton of lenders weren't and won't be bailed out.
Here's kind of a simple explanation of what happens. Lender A has only so many loans they can hold on their books and can afford to have on their books and they sell loans off to investors or larger banks/entities like fannie and freddie to make room to do new loans. When things go bad, they have all these loans on their books they are all of a sudden stuck with and no investors. plus they have all the new loans still coming down the pipeline, so basically they are out of cash or in the hole with nowhere to go.
Margins the past few years in the secondary market haven't been very big at all, so there's not as much money being made in that aspect as you might think and that was also making it more of a tightrope and higher risk area for lenders.
As far as your friend goes, here could be a reason. She got an 3 year ARM it looks like and she qualified at that lower ARM rate and had a good expense ratio. 3 years later, she is most likely qualifying at a higher rate and her house isn't worth as much now I will guess and her expense ratio is probably higher now than it was then. Plus credit is much tighter now. I doubt they defrauded her, she probably just didn't qualify.
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Quote Originally Posted by Ap1Bfreetorun:
KOAJ: I don't really understand why all these mortgage companies, Fannie Mae et al are biting the bullet, going bankrupt, having to be bailed out. It seems to me if they were giving massive amounts of mortgages on property without the buyer's making downpayments or having the ability to make payments there must have been a lot of fraud by the lenders otherwise the foreclosures would not have caused all these problems. Say the property was only worth 80% or what was charged or even less, that does not mean that these massive hits in the hundreds of billions should come. I just don't understand. There are evidently a bunch of crooks in the woodpile, otherwise this crisis would not have happened. Some banks and mortgage companies would take large hits but they should have a lot of reserves after all the money they have been making. I know someone that Washington Mutual defrauded in CA, she paid $80,000 down and they refused to refinance when her three years was up. She had made all her payments, too.
A ton of lenders weren't and won't be bailed out.
Here's kind of a simple explanation of what happens. Lender A has only so many loans they can hold on their books and can afford to have on their books and they sell loans off to investors or larger banks/entities like fannie and freddie to make room to do new loans. When things go bad, they have all these loans on their books they are all of a sudden stuck with and no investors. plus they have all the new loans still coming down the pipeline, so basically they are out of cash or in the hole with nowhere to go.
Margins the past few years in the secondary market haven't been very big at all, so there's not as much money being made in that aspect as you might think and that was also making it more of a tightrope and higher risk area for lenders.
As far as your friend goes, here could be a reason. She got an 3 year ARM it looks like and she qualified at that lower ARM rate and had a good expense ratio. 3 years later, she is most likely qualifying at a higher rate and her house isn't worth as much now I will guess and her expense ratio is probably higher now than it was then. Plus credit is much tighter now. I doubt they defrauded her, she probably just didn't qualify.
Thank you for your response. I still think there are a lot of crooks out there helping to flip houses so they (mortgage brokers) can make money on each deal. Then they holler for help when they get caught short.
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Thank you for your response. I still think there are a lot of crooks out there helping to flip houses so they (mortgage brokers) can make money on each deal. Then they holler for help when they get caught short.
The problem is not mortgage fraud, it is "declining values".......
Public ephoria and EZ money drove up prices. Now job losses and as a result of a weak economy, people who need to sell are unable to and properties are hitting the banks.
Just my two cents.
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The problem is not mortgage fraud, it is "declining values".......
Public ephoria and EZ money drove up prices. Now job losses and as a result of a weak economy, people who need to sell are unable to and properties are hitting the banks.
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