A Ledgie wants to know: Economy Edition

[strandinthewind]

Originally Posted by HejiraNYC

But tax revenue is collected no matter what. From everybody. So does that mean if I was reckless with my money and bought millions of dollars worth of dot-com stocks in the late 1990's, that I am entitled to a government-sponsored bailout because I paid my taxes?

Well, no. When times are good, there is way more tax to collect and the huge rev. generated by companies like Bear Stearns pays or generates much of it, which is what that article said.

And - the govt. sadly will never or rarely will help out individual people, though it did in the Bear Stearns instance because if that company went broke, the run on banks would have been devastating.

But, I agree, the govt. helps out corps in a way that is awful. I mean look at your phone bill. In Georgia and I suspect elsewhere because it is a Fed Tax, we pay something like $5.00 per phone line to subsidize AT&T's cost for providing phone lines to rural areas That is an INSANE govt. handout. Why the hell shouldn't AT&T, a private but regulated entity, revise the national average price per line and absorb the cost themselves instead of getting arguably BILLIONS a year if not month in that subsidy.

[SuzeQuze]

Originally Posted by strandinthewind

I did not know or assume he could. I specifically said "if"

You seemingly are quick to judge the rich as scoundrels. If not, I recant with hat in hand.

Well no. The scoundrels are just the ones I comment on! He was not a good person and as I noted, he was eventually let go. I applaud many rich people and hope to be one one day. That said I'm sure I do have a bias against the rich. That happens when you have a dad who grew up poor, on Social Security because he lost his dad at a young age. But he and I have both come a long way.

[strandinthewind]

Originally Posted by SuzeQuze

. . . and hope to be one one day . . . .

When you are, I will marry you

[SuzeQuze]

Originally Posted by strandinthewind

When you are, I will marry you

Nice I better become VERY rich then! I'm thinking an invention everybody needs is the way to go for me.

[HejiraNYC]

Originally Posted by strandinthewind

In the end, I am all about the facts and try never to rush to convict without them.

The facts are:

-Top Bear Stearns brass made millions upon millions over the past couple of years.
-Top Bear Stearns brass stated unequivocally (deceptively) that all was fine.
-Bear Stearns was among the largest dealers of mortgage-backed securities, which they ALL KNEW was a ticking timebomb.
-They knowingly defrauded thousands of shareholders.
-They continued to pay themselves royally during the ponzi scheme, all the while realizing that it was unsustainable.

Sure, they could all testify that they had no idea what was going to happen with all of that mortgage-backed junk. N*gg@, please. Even Helen Keller could see what was going to happen. They were reckless with other people's money and skimmed off the fat before getting caught.

[strandinthewind]

Originally Posted by HejiraNYC

The facts are:

-Top Bear Stearns brass made millions upon millions over the past couple of years.
-Top Bear Stearns brass stated unequivocally (deceptively) that all was fine.
-Bear Stearns was among the largest dealers of mortgage-backed securities, which they ALL KNEW was a ticking timebomb.
-They knowingly defrauded thousands of shareholders.
-They continued to pay themselves royally during the ponzi scheme, all the while realizing that it was unsustainable.

Sure, they could all testify that they had no idea what was going to happen with all of that mortgage-backed junk. N*gg@, please. Even Helen Keller could see what was going to happen. They were reckless with other people's money and skimmed off the fat before getting caught.

Great - show me the law. I suggest RICO applies.

[HejiraNYC]

Originally Posted by strandinthewind

the run on banks would have been devastating.

Hmmm... you mean like the 1980's S&L Scandal involving Jeb, Neil and GW BUSH?

[strandinthewind]

Originally Posted by HejiraNYC

Hmmm... you mean like the 1980's S&L Scandal involving Jeb, Neil and GW BUSH?

It wasn't just them and I suggest it started brewing in the 70's.

In the end, some, but certainly not all, corps are always trying to get away with something. Remember the check kiting scheme EF Hutton did I think that the Bear Stearns big wigs likely will be prosecuted. However, we need to see the books to determine that. Even if they did nothing illegal regarding the trading of the AAA bonds, if they consistently lied while diluting their own shares, they likely will go to jail as many others have in the past.

[petep9000]

Originally Posted by HejiraNYC

The facts are:

-Top Bear Stearns brass made millions upon millions over the past couple of years.
-Top Bear Stearns brass stated unequivocally (deceptively) that all was fine.
-Bear Stearns was among the largest dealers of mortgage-backed securities, which they ALL KNEW was a ticking timebomb.
-They knowingly defrauded thousands of shareholders.
-They continued to pay themselves royally during the ponzi scheme, all the while realizing that it was unsustainable.

Sure, they could all testify that they had no idea what was going to happen with all of that mortgage-backed junk. N*gg@, please. Even Helen Keller could see what was going to happen. They were reckless with other people's money and skimmed off the fat before getting caught.

My best friend had been hired by Bear some years back as an auditor. On his first day at work, his director handed him 2 plastic baggies. One with paper clips, and one with rubber bands. And he was told that these were the only clips or bands he would get during his time there, as they had done a cost analysis and found that those two items were frequently wasted, or stolen. This is the thanks he got, for a position that he would sometimes wind up working 13 hour days for.

What's the old expression? Penny-wise but pound-foolish?

[JWS]

Originally Posted by HejiraNYC

It's actually the legacy of the 50+ million ignorant nutjob Americans out there who voted for GWB. Surely it's because everyone knows that the gays and the pro-choicers are destroying the fabric of society, whereas, a former oilman and a former executive at Halliburton would certainly look out for our best interests and would make us safer. Oh, and surely bailing out their buddies on Wall Street rather than rebuilding New Orleans is surely the moral and "Christian" thing to do.

.

I agree. George Bush stole the election by one vote...5-4, by the Republican Supreme Court.

IMO, and plenty of others, Bush will go down as the worst President in modern history. Enerything he touched has been a disaster. I can't think of a single positive accomplishment of his inept administration.

[gldstwmn]

Originally Posted by strandinthewind

When you are, I will marry you

Cheating on me again, I see.

[strandinthewind]

Originally Posted by gldstwmn

Cheating on me again, I see.

What can I say

[SuzeQuze]

Originally Posted by strandinthewind

What can I say

Chris, he goes where the $$$$$$$$$ is. Of course I only have it in my dreams right now so all bets are off. Plus, I am not opposed to sharing. Haha.

[strandinthewind]

The article below represents the second wave, which I submit will be far worse than the first wave, which was the failing of roughly 9 or so percent of the sub prime mortgages out there and the ripple effect. It just amazes me that banks still look to force a foreclosure when they will get less money a la the Phoenix example set forth below. Fraud aside (which does not appear to be the case there) - that deal seems like a win win for everyone.

In the end, as noted in the article, many people have used their homes as an ATM and are balking now that they have to pay it back. Taking out all the equity in your home to go to Europe or even educate your children (there are cheaper schools and your kids can get loans or possibly scholarships, work/study programs, or grants ) is not the soundest financial planning. The soundest financial planning is to ignore the yearning to Jones on your neighbors and pay off your house instead of borrowing against it to live beyond your cash based means. In the end, I do not feel sorry for anyone who took out all of the equity in their home and spent it on BS and now bitch about paying it back and/or that the house is not worth what they owe. That was the clear risk they took when making the loan. To say one did not know it now is utter BS IMO.

In the end, many people have lost their homes though no fault of their own. I am not talking about them. But, all this "poor Johnny home owner who is mortgaged to the hilt for convenience and now is losing their house so let's get the taxpayers to bail them out" is just BS to me. I say let them declare bankruptcy and be done with it if the assinine banks won't work with them. The banckruptcy likely will allow them to discharge the extra debt and keep their house.

______________________________________________________________________________________

March 27, 2008

Equity Loans as Next Round in Credit Crisis

By VIKAS BAJAJ

Little by little, millions of Americans surrendered equity in their homes in recent years. Lulled by good times, they borrowed — sometimes heavily — against the roofs over their heads.

Now the bill is coming due. As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis.

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.

To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.

Such tactics are impeding efforts by policy makers to help struggling homeowners get easier terms on their mortgages and stem the rising tide of foreclosures. But at a time when each day seems to bring more bad news for the financial industry, lenders defend the hard-nosed maneuvers as a way to keep their own losses from deepening.

It is a remarkable turnabout for the many Americans who have come to regard a home as an A.T.M. with three bedrooms and 1.5 baths. When times were good, they borrowed against their homes to pay for all sorts of things, from new cars to college educations to a home theater.

Lenders also encouraged many aspiring homeowners to take out not one but two mortgages simultaneously — ordinary ones plus “piggyback” loans — to avoid putting any cash down.

The result is a nation that only half-owns its homes. While homeownership climbed to record heights in recent years, home equity — the value of the properties minus the mortgages against them — has fallen below 50 percent for the first time, according to the Federal Reserve.

Lenders holding first mortgages get first dibs on borrowers’ cash or on the homes should people fall behind on their payments. Banks that made home equity loans are second in line. This arrangement sometimes pits one lender against another.

When borrowers default on their mortgages, lenders foreclose and sell the homes to recoup their money. But when homes sell for less than the value of their mortgages and home equity loans — a situation known as a short sale — lenders with first liens must be compensated fully before holders of second or third liens get a dime.

In places like California, Nevada, Arizona and Florida, where home prices have fallen significantly, second-lien holders can be left with little or nothing once first mortgages are paid.

In December, 5.7 percent of home equity lines of credit were delinquent or in default, up from 4.5 percent in 2006, according to Moody’s Economy.com.

Lenders and investors who hold home equity loans are not giving up easily, however. Instead, they are opposing short sales. And some banks holding second liens are also opposing refinancings for first mortgages, a little-used power they have under the law, in an effort to force borrowers to pay down their loans.

“Acknowledging a loss is the most difficult thing to do,” said Micheal Thompson, the executive director of the Iowa Mediation Service, which has been working with delinquent borrowers and lenders. “You have to deal with the reality of what you are facing today.”

While he has been able to strike some deals, Mr. Thompson said that many mortgage companies he talks with refuse to compromise. Holders of second mortgages often agree to short sales and other changes only if first-lien holders pay them a small sum, say $10,000, or 10 percent, on a $100,000 debt.

Disagreements arise when the first and second liens are held by different banks or investors. If one lender holds both debts, it is in their interest to find a solution.

When deals cannot be worked out, second-lien holders can pursue the outstanding balance even after foreclosure, sometimes through collection agencies. The soured home equity debts can linger on credit records and make it harder for people to borrow in the future.

Experts say it is in everyone’s interest to settle these loans, but doing so is not always easy. Consider Randy and Dawn McLain of Phoenix. The couple decided to sell their home after falling behind on their first mortgage from Chase and a home equity line of credit from CitiFinancial last year, after Randy McLain retired because of a back injury. The couple owed $370,000 in total.

After three months, the couple found a buyer willing to pay about $300,000 for their home — a figure representing an 18 percent decline in the value of their home since January 2007, when they took out their home equity credit line. (Single-family home prices in Phoenix have fallen about 18 percent since the summer of 2006, according to the Standard & Poor’s Case-Shiller index.)

CitiFinancial, which was owed $95,500, rejected the offer because it would have paid off the first mortgage in full but would have left it with a mere $1,000, after fees and closing costs, on the credit line. The real estate agents who worked on the sale say that deal is still better than the one the lender would get if the home was foreclosed on and sold at an auction in a few months.

“If it goes into foreclosure, which it is very likely to do anyway, you wouldn’t get anything,” said J. D. Dougherty, a real estate agent who represented the buyer on the transaction.

Mark Rodgers, a spokesman for CitiFinancial, declined to comment on the McLains’ situation, citing privacy considerations.

“We strive to find solutions that are acceptable to the various parties involved,” he said but two lenders can “value the property differently.”

Other lenders like National City, the bank based in Cleveland, have blocked homeowners from refinancing first mortgages unless the borrowers pay off the second lien held by the bank first. But such tactics carry significant risk, said Michael Youngblood, a portfolio manager and analyst at Friedman, Billings, Ramsey, the securities firm. “It might also impel the borrower to file for bankruptcy,” and a judge could write down the value of the second mortgage, he said.

A spokeswoman for National City, Kristen Baird Adams, said the policy applied only to home equity loans originated by mortgage brokers.

Underscoring the difficulties likely to arise from home equity loans, a Democratic proposal in Congress to refinance troubled mortgages and provide them with government backing specifically excludes second liens. Lenders holding a second lien would be required to write off their debts before the first loan could be refinanced. That could leave out a significant number of loans, analysts say.

People with weak, or subprime, credit could be hurt the most. More than a third of all subprime loans made in 2006 had associated second-lien debt, up from 17 percent in 2000, according to Credit Suisse. And many people added second loans after taking out first mortgages, so it is impossible to say for certain how many homeowners have multiple liens on their properties.

“This is turning out to be a real impediment to solving this problem,” said Mark Zandi, chief economist at Economy.com, “at least, solving it quickly.”

www.nytimes.com

[DavidMn]

You know, I'm not the most brilliant financial mind, but a few years back when all these "experts" were proclaming the economy to be taking off like a rocket because homeowners had all this money from the equity in their homes, I knew the chickens would come home to roost eventually.