UN to open 'probe' on US housing crisis

[mookiemookie]

Originally Posted by Platapus

The question would be how many of these "bad" loans were made by institutions not regulated by CRA?

75%. Many of these loans were made by mortgage brokers not covered by the CRA:

http://www.ritholtz.com/blog/wp-cont...chartg1109.gif

Furthermore, if CRA was to blame, you would have expected to see the largest housing bubbles in big time CRA areas like Harlem, the south side of Chicago, Washington DC. This was not the case. Tony areas like Miami, Phoenix and Southern CA are where real estate skyrocketed and foreclosures have hit hardest.

And what you say is true: read the CRA law and you'll see its not about forcing banks to make loans they otherwise wouldn't - just the opposite: it's about forcing banks not to reject loans they otherwise would make. This is what I do for a living and I've given presentations to professional societies and seminars on this. I like to take the printout of the CRA law (its only 7 pages) and offer someone $20 if they can point out anywhere in it that there are quotas or hard numbers in it. So far no one has gotten my $20.

[AVGWarhawk]

I think the reality of keeping up with the Jones was the cause. I always wonder how the Jone's got their money in the first place

[mookiemookie]

Originally Posted by AVGWarhawk

I think the reality of keeping up with the Jones was the cause. I always wonder how the Jone's got their money in the first place

That's true, there was definitely a lot of that. Shows like "Flip This House" and that garbage only fed the fire. There was a ton of demand, and banks were all too willing to feed it and give money to people who had no business getting a loan. And why shouldn't they? If they knew they could make a loan on Monday and sell it to Wall Street by Friday, what the heck did they care if the borrower was going to repay it 30 years down the line?

[Platapus]

Guilty as charged.

When The Frau and I were first looking for a house to buy, we wanted to find something in the 300-350K range but could not find anything to our liking.

Then we stumbled upon a builder and started considering a new construction for 450K. If I was smart, I should have stopped there and started looking for existing houses in the 400K range. But we got caught up in the excitement of a "new" house.

Of course the initial cost of 450K is a fantasy. about 500K later we had our new house.... too big... too expensive for what we needed (or even wanted).

Fortunately we were smart enough not to take out a loan we could not afford, but still we allowed ourselves (no one to blame but ourselves) to get suckered in to buying too much for too much.

[AVGWarhawk]

Originally Posted by mookiemookie

That's true, there was definitely a lot of that. Shows like "Flip This House" and that garbage only fed the fire. There was a ton of demand, and banks were all too willing to feed it and give money to people who had no business getting a loan. And why shouldn't they? If they knew they could make a loan on Monday and sell it to Wall Street by Friday, what the heck did they care if the borrower was going to repay it 30 years down the line?

Well sure Mookie, it was a soup pot full of things that contributed. I believe most can be attributed to living way beyond their means. Some lived off their homes with refinancing to the hilt. These individuals paid the credit cards after the refinance but ran the cards up again. Sooner or later you can not refinance your home. Just not smart living off your home like that. So, the next thing you know your mortgage is twice what it was before the refinance, you credit cards are up to the limit again because you needed that John Deere tractor and the Craftsman at a 1/3 of the price would just not do in your neighborhood. So, who gets the shaft first with no payments? The credit card folks. That only last so long before the long arm of the lawyer is sending court order for payment. Now that the law is after you for the credit cards what suffers next? The house payment. You basically got three months to figure it out before that long arm is putting your goods out on the street. The house sold at a short sale. I can only point one finger here....the consumer. The one who signed the dotted line without reading. The one who needs a trip to Disney every six months. The one that need the Hummer. Time for a lot of folks to take the responsibility of the failure of their finances.

Rubbish

[mookiemookie]

While what you say is true, the consumer isn't in charge of the loan approval process. They can want want want, but at the end of the day the ones holding the purse strings are the banks who extended these ridiculous amounts of credit and loans to people without regard to traditional lending standards.

[CaptainHaplo]

Mookie - yes, banks own some level of responsibility.

But - no one held a gun to the head of the person digging themselves deeper and deeper in debt.

Ultimately, the decision rested with that person, they made the wrong decisions. Others - banks - may have made such decisions possible, but no one but the individual is responsible.

Its like saying a gun maker is responsible for someone getting a gun and then going to rob a liquer store. The person committing ther crime, or in the case of housing and overall debt - the person living beyond their means, has to take the final responsibilty.