Saturday, October 4, 2008

Greed was prime factor in subprime mess

If one believes the politicians, then low-income, minority buyers were bamboozled into signing on for homes they could never afford. That's a grim fairy tale unsupported by hard facts.

According to the Washington-based nonprofit Center for Responsible Lending, nearly 90% of subprime borrowers are not first-time homebuyers.

Instead, it was serial financing that fed the subprime gluttons. In the late 1990s and early 2000s, interest rates were low and housing prices were rising. Like other places in the nation, many Queens homeowners took advantage of refinancing deals that provided larger loans than the value embedded in the first mortgages. Then borrowers pocketed the difference.

But to lure a larger number of clients, mortgage brokers changed the rules, abandoning the risk controls that protect against default. Brokers took chances on risky borrowers. Many borrowers had blemished credit histories. Some refinanced three times. Borrowers offered the no-down-payment loans that had low rates. The numbers were affordable, and that "tease" grabbed many into the fold. But those low rates would later adjust, and most applicants faced a rate that floated much higher, putting them at greater risk of default.

Some people were never told that the mortgage would reset at a higher rate. That's criminal. But there are many more who signed on believing the American Dream would take care of them. Let's be clear: The American Dream is available to everyone, but no one is entitled to it. No one. You have to work for it. There are rules. Common sense does apply.

Greed, not race, led to housing woes


Anonymous said...

nearly 90% of subprime borrowers are not first-time homebuyers.

This is fiction especially in Queens, in fact the opposite is true and borne out over time. Serial financing, second mortgages to renovate a newly purchased property was quite common as these folks had no money. Risk controls were thrown out the door by the banks who were happy to pay brokers who brought the unqualified masses to their door step.

Several events will occur and prove to destabilize Queens and Brooklyn: Most home owners whom are deemed to be unqualified and unable to pay their mortgages shy 30% without illegally packing their properties with tenants must forfeit their property.

Banks will need to lower the % rates for those home-owners to close a payment shortfall of -20%, including lenghtning the mortgage term to remain in their property.

Government should use bailout $$ to provide banks with difference in payment shortfall for those homeowners whom have 40%+ equity in their home but have found themself unemployed due to the bad economy - this preserves equity to those who obtained it in a conservative way.

For those homeowners whom are in grave default, repossision by the bank is a given but the former homeowner remains in his home at a reduced rate by which the property is subsidised by the government and pooled together with other similar properties (rentals) for sale to investors at below market price. Investors can then obtain full possession to occupy after 5 years, which gives tenant time to restructure fiscal lives.

Anonymous said...

Some people were never told that the mortgage would reset at a higher rate.

Bullsh!t. Do people not read what they're signing?

Where's my reward for being smart enough to not get a mortgage we couldn't afford 5 years later? Where's my reward for making responsible choices and not looking for the government to fix my own stupidity?

Taxpayer said...

Donald Trump lives in "affordable" housing. Commissar Dear Leader Greedberg lives in "affordable" housing.

So do most of us if we are paying the rent or mortgage in full and on time.

Politicians love to use the term "affordable housing" (it has no definition - it is utterly meaningless) to use our money to pay for housing that unqualified would-be buyers simply cannot afford. To the unqualified, the housing is "unaffordable".

But politicians don't want to disappoint these people. They want their votes.

So, your hard-earned tax payments to "unaffordable government" are used to enrich the banks, who then turn around and enrich the politicians.

Third-term Commissar wants to stick around to keep ripping us off. His scam has worked well so far. No one complains. So, why should he stop now?

He will piss some cash onto the mindless, greedy, lazy council members to convince them to vote for term limits repeal.

Will anyone complain?

Let's watch.

Anonymous said...

The money is drying up on the mega projects so he wants to be around for another term to keep the projects alive.

Get rid of him, and bid goodby to this building frenzy.

I love how the media makes it look like the public wants more. They are manipulating the public - no they are misleading the public.

italian girl said...

"Bullsh!t. Do people not read what they're signing?"

No, unfortunately many did't read what they signed or they just didn't care. We can blame the banks all we want, but the primary responsibility was with the homeowners. If you couldn't afford a 700K home, then you just didn't buy one. Period. The banks were only out to make a buck. And now we are all going to pay.