fishweewee

Democrats pouring gas on the fire with the 40 year mortgage

Rate this topic

106 posts in this topic

12 hours ago, fishweewee said:

without those douche bag donkey rectums, you wouldn't be able to get a mortage.

 

FNMA, GNMA, FHLMC are government sponsored enterprises that buy (conforming) loans from banks.

 

They in turn pool these loans into buckets and turn them into bonds (securitization).  The bonds get sold to investors (for the pitiful interest income they provide and if the underlying mortgages don't default on their payments, you might get your principal back too).

 

the douche bag donkey rectums are the sausage factory of mortgages and essentially provide liquidity to the market.

 

the problem has been - garbage in, garbage out.

 

sausage factory was fed pig $hit from 1997 to 2008 - fukkin people took out loans they had no business taking and couldn't pay them back.  thanks to the dems who were trying to make homes more affordable.

Carter policy resurrected by Bubba.  W. Didn't stamp it down bc it was good PR.

7 hours ago, fishweewee said:

imagine this.

 

millennial couple wants to buy a home in NJ for $1 million.  

 

a few decades ago, before federal reserve money printing and zero percent interest rate, that same home was $350,000.

 

they put little down and get a 40 year mortgage.

 

things are swell, until the housing market corrects and that same home is now worth $750,000 - because it was overinflated to start with.

 

maybe the breadwinners lose their incomes.  maybe they don't. the couple decides to walk away from the house and the financial obligation because the house is underwater.

 

that loan was underwitten via the GSE's - FNMA, GNMA, FHLMC.  which have the implicit guarantee of the federal government.

 

this gets repeated tens of thousands of times.

 

guess what?  we have a repeat of the 2008 financial crisis.

 

who ends up paying for the eventual bailout?

 

you and me - we paid for the bailout of banks with endless money printing and government borrowing.

 

if it's not affordable with a 15 or 30 year, it's not going to be affordable with a 40 year.

 

the government is giving the tool to people to overextend themselves .... again.

Exactly.   And when the whole financial system goes into a tailspin the govt buys out insurance and auto industry to boot. 

6 hours ago, superstriper said:

George bush pushed for everybody to be able to get a housing loan-it was one of his main platforms -his admin pushed lending to those that could not afford houses and that in combination of bundling cause the massive bubble to burst

 

We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” President Bush, Oct. 15, 2002

 

 

Short sighted and cherry picking.  Shocker.

 

 

Share this post


Link to post
Share on other sites

Posted (edited) · Report post

6 hours ago, Nicky Da Fish said:

Do you own a home? Your posts show a lack of understanding of basic financial principles. Why would the example couple walk away? It's an unrealized loss until they actually sell. Longer terms are likely beneficial to lenders as they will pay higher interest rates. Also, the average mortgage gets refinanced after 7 years. No one holds a mortgage to maturity.

my first job on wall street was packaging mortgages at the investment bank that invented the mortgage backed security.

 

people have walked away.  that's one of the things that led to the financial crisis of 2008.

 

banks make loans at 5% and borrow at 2% to make a spread of 3%. banks use mortage backed securities as interest earning assets.

 

banks and servicing companies definitely hold to maturity. 

Edited by fishweewee

Share this post


Link to post
Share on other sites

A fancy name for walking away from your mortgage is called "strategic default" and has been the fad since 2006-7.

 

https://www.gobankingrates.com/loans/mortgage/underwater-mortgage-suze-orman-recommends-quit-paying/

 

Underwater Mortgage? Suze Orman Recommends Walking Away From Your Mortgage


By Casey Bond

October 18, 2011

 

As home prices continue to plummet and unemployment remains a huge problem, more and more homeowners are turning in the keys to their homes and refusing to make any more payments on their mortgages. However, walking away from an underwater mortgage, known as strategic default, has long been a subject of controversy and often viewed as highly irresponsible– until now.

 

In the wake of a collapsed housing market and sluggish economic recovery, a few noted finance authorities, including Suze Orman, have actually come out and recommended the practice of strategic default.

 

So, how can a supposed finance expert condone walking away from a financial obligation and purposely ruining your credit and reputation as a borrower? According to Orman, it comes down to a simple calculation.

 

Suze Orman Advice: Guide on Walking Away From a Mortgage


According to Orman, you should stick it out and continue to pay off your mortgage if your home is 10-20 percent underwater. However, if the balance on your mortgage is 20 percent greater than the value of your home or more, it isn’t worth paying off.

 

Step one should be to ask your lender to modify the loan and reduce the principal owed.

 

If they refuse, which they likely will, your next course of action is to ask for a short sale. If they don’t agree to that, try a deed-in-lieu of foreclosure.

 

Still get a “No?” Orman says this is when you should be walking away from your mortgage at this point, and you shouldn’t feel bad about it since you asked your lender for help and they refused.

 

The Repercussions of Walking Away From Your Mortgage


A strategic default, and subsequent foreclosure, leaves a nasty mark on your credit profile. Consequences include:

 

  • Drop in Credit Score: Foreclosure results in a penalty of approximately 85-160 points, according to Fair Issac, which means even a borrower with good credit can easily slip into the sub-prime category.
  • 7-Year Listing: Foreclosure stays on your credit report for seven years, which means your score will remain damaged for this period of time.
  • Cash Is King: Securing a loan of any sort will be very difficult. Your existing credit cards should go unaffected as long as you stay current on the balance, but overall, you will have to save up and pay cash for everything.

 

The repercussions of turning in the keys are severe and long-lasting, yet many strategic defaulters would rather live with those consequences than keep making payments on an underwater mortgage.

 

Should You Keep Making Mortgage Payments?


There are a number of convincing arguments for and against strategic default, though you may consider some weightier than others.

 

Why Walking Away From Your Mortgage Could Make Sense


Advocates of strategic default say it is really about making the best possible business decision. Why continue to pay thousands of dollars toward an investment that is no longer worth it, when you can rent a home for much less and save the difference?

 

While a foreclosure will stay on your credit for seven years, making it virtually impossible to get a decent loan or line of credit, you can use that time to save up and start over.

 

By renting a house for less, you can apply the new income toward other outstanding debt instead. You can even put a little cash aside for a down payment and apply for a mortgage again later. Seven years from now, you will have built your credit back up and saved for a home that has (hopefully) rebounded in value and become a viable investment once again.

 

Professor Brent T. White of the University of Arizona advises the financial benefits of walking away from a severely underwater mortgage far outweigh the short-term affect on credit. As explained on Credit.com, the only thing holding homeowners back is “their moral qualms about refusing to pay their bills…this moral barrier was constructed by a variety of players, including the government, the financial industry, and social control agents like banks and media.”

 

Why You Should Continue Making Mortgage Payments


Aside from the devastating effect on credit, walking away from your home loan poses a number of serious concerns.

 

The major issue behind strategic default is that you ignore your ethical obligation to uphold the terms of your loan. Our credit system relies on the trust between lenders and borrowers, and if people applied the same logic to other types of loans as they do when it comes to underwater mortgages, no one would ever feel obligated to pay back any of the money they owe.

 

In fact, allowing your home to be foreclosed helps drive down your neighbors’ home values as well, contributing to the problem and lengthening the recovery of your local housing market.

 

If you’re not experiencing a significant financial hardship like unemployment or a medical emergency, it’s hard to justify walking away from a mortgage simply because it’s underwater.

 

Alexandra Swan, Vice President of Frontier 2000 Mortgage & Loan, writes for her blog,

 

“appreciation or depreciation on the house is just a number that changes arbitrarily. When properties were appreciating at a skyrocketing pace, no homeowner ever went back to their mortgage company and said, ‘I know I bought this house for $200,000 and I financed $150,000 but now it is worth $500,000.00 so I think I owe you some additional money.’ So why, in the reverse situation, should the bank lower your principal simply because the value has dropped?”

 

As Swan points out, you wouldn’t quit paying your auto loan, even though you know it will only depreciate in value as soon as you drive it off the lot.

 

Secondly, consider all of the money that you’re essentially throwing away. You’ve made expensive mortgage payments for years, and by walking away from your home, you’re also walking away from your investment.

 

After all, an overvalued home is probably better than being in the hole a couple hundred thousand dollars with nothing to show for it. The housing market will recover some day–so who cares if your home’s value doesn’t catch up to the mortgage until 20 years into your 30-year fixed loan?

 

Finally, there will soon be severe tax penalties for defaulting. Walking away from your mortgage loan doesn’t mean you get a slap on the wrist and then go on your merry way. At the end of 2012, a federal tax break for short sales and foreclosures is set to expire, which means you’ll be required to pay income taxes on the remaining loan balance.

 

If you get lucky, you can use strategic default to your advantage, walking away from a poor investment now and saving for a better one years down the road. Many homeowners have done it, and many more probably will.

 

However, even the “experts” get it wrong sometimes (Orman is not a licensed investment advisor, by the way). It’s probably not a good idea to walk away from your home simply because it is undervalued–in this case, you’ll likely trade one unpleasant financial situation for another that’s even worse.

 

Share this post


Link to post
Share on other sites

Posted (edited) · Report post

From 1996-2006 we saw a pretty wild uptick in home prices caused by government policies.

 

-beginning in 1996 clinton dumbed down lending standards, prosecuted banks for violation of the community reinvestment act, and his HUD mandated mortgage quotas for low-income borrowers.

-the fed slashed interest rates to almost zero percent starting in 1999

-the number of exotic mortgage products exploded (option ARM, 1% teaser rates for the first year, etc).

-people who got burned during the dot com stock bubble and bust (1999) turned to real estate for speculation (remember the real estate flippers?)

-along with making houses easy to finance, speculation resulted in a massive rise in home prices relative to historical norms.

-for the flippers, everything was fine as long as prices kept going up

-as you can see in the chart below, prices started to sputter out in 2006

-flippers got caught with their pants down

-other homeowners who used crazy adjustable rate mortgages with intro teaser rates saw their monthly payments explode

-many homeowners were financed by liar loans - no verification of income or assets.  this was enabled by fannie mae's desktop underwriter, a computer application that cared more about loan to current market value than other important fundamentals (do the borrowers have a pulse?).

 

the party ended in 2006-7 and crashed spectacularly in 2008.

 

home prices dropped.  people defaulted on their mortgage because 1) they couldn't afford the recast monthly payment (in the case of option ARMS), or, 2) they just walked away.

 

these loans were held by banks, insurance companies, hedge funds, and other investors.  some hedge funds borrowed money to invest in these mortgages and other asset backed securities to amplify returns.

 

when it all blew up - these loans choked the entire financial system.  banks stopped making loans and the economy came to a screetching halt.

 

i wonder if history repeats itself if the dems don't remember the lessons of the last financial crisis.

 

our country won't survive another mortgage meltdown, not after the bailouts, several rounds of porkulus spending, and this latest pandemic.

 

4PmsVYn.png

Edited by fishweewee

Share this post


Link to post
Share on other sites

the fed has to fight price inflation by raising interest rates

 

but the fed can't raise interest rates

 

by doing so, it puts a damper on home sales because higher rates make mortgages on inflated real estate prices less affordable

 

the fed doesn't want to hurt the housing industry

 

but the fed has to fight price inflation by raising interest rates

 

but the fed can't raise interest rates

 

by doing so, it puts a damper on home sales because higher rates make mortgages on inflated real estate prices less affordable

 

the fed doesn't want to hurt the housing industry

 

but the fed has to fight price inflation by raising interest rates

 

...

 

Share this post


Link to post
Share on other sites

Can you make your payment with one weeks salary …? 40 years the the banks own you …get some meaningful work with that college edjumacation lol lol lol ….as previously posted buy a house and work where the govt will forgive those loans and help regentrify the neighbor hood …bu bu buttt buttt it’s not where the pretty people live in that those white PRIVELIDGED homes lol lol lol more hypocritical  lying dogs ..who the f u q told you to buy a 600000 dollar house for 40 years mortgage lol lol lol ….with the minimum down …lol lol lol and here comes day care at 375 a kid …..

Share this post


Link to post
Share on other sites
6 hours ago, fishweewee said:

the fed has to fight price inflation by raising interest rates

 

but the fed can't raise interest rates

 

by doing so, it puts a damper on home sales because higher rates make mortgages on inflated real estate prices less affordable

 

the fed doesn't want to hurt the housing industry

 

but the fed has to fight price inflation by raising interest rates

 

but the fed can't raise interest rates

 

by doing so, it puts a damper on home sales because higher rates make mortgages on inflated real estate prices less affordable

 

the fed doesn't want to hurt the housing industry

 

but the fed has to fight price inflation by raising interest rates

 

...

 

Who's on first!?

Share this post


Link to post
Share on other sites

Sounds like that communist free money joe promised is getting stuck between a c h I t and a fart …as predicted but joe is blind to it and let’s blame covid again …lol lol 

Share this post


Link to post
Share on other sites
1 hour ago, Kings over Queens said:

I think he was illustrating a cycle. 

 

Or hes a stuttering prick. 

I know Mike. I was emulating the joke. 

Share this post


Link to post
Share on other sites
9 hours ago, fishweewee said:

my first job on wall street was packaging mortgages at the investment bank that invented the mortgage backed security.

 

people have walked away.  that's one of the things that led to the financial crisis of 2008.

 

banks make loans at 5% and borrow at 2% to make a spread of 3%. banks use mortage backed securities as interest earning assets.

 

banks and servicing companies definitely hold to maturity. 

Then you should know that the reason for all the trouble in 2009 was that lenders were giving people loans they couldn't afford, not because of mortgages with long maturities. On average, mortgages get refinanced after 7 years, regardless of maturity date. Have you ever refinanced a mortgage? If someone made it to year 35 on a 40 year mortgage and lost their job, they would have plenty of equity at that point to lower their monthly payment if need be. Conservatives are the party that usually sides with lenders rather than borrowers. They fought additional oversight that was a condition of receiving govy bailouts in 2009 and still seek to eliminate the consumer protections put in place to prevent it from happening again. It was the Bush administration that re-jiggered requirements for Fannie and Freddie that led to lenders giving loans to people they never should have. We don't have that same problem today, lending standards are still relatively tight.

Share this post


Link to post
Share on other sites

Posted (edited) · Report post

1 hour ago, Nicky Da Fish said:

Then you should know that the reason for all the trouble in 2009 was that lenders were giving people loans they couldn't afford, not because of mortgages with long maturities. On average, mortgages get refinanced after 7 years, regardless of maturity date. Have you ever refinanced a mortgage? If someone made it to year 35 on a 40 year mortgage and lost their job, they would have plenty of equity at that point to lower their monthly payment if need be. Conservatives are the party that usually sides with lenders rather than borrowers. They fought additional oversight that was a condition of receiving govy bailouts in 2009 and still seek to eliminate the consumer protections put in place to prevent it from happening again. It was the Bush administration that re-jiggered requirements for Fannie and Freddie that led to lenders giving loans to people they never should have. We don't have that same problem today, lending standards are still relatively tight.

yes - i think i wrote extensively on that subject here oh i dunno 14 years ago. 

 

my point is - the dems and the federal reserve created conditions to artificially pump up home prices.  that's what happens when you dumb down lending standards (clinton) and quintuple the money supply (federal reserve). bush was busy waging war and allowed the affordable housing policies implemented by clinton to continue.  importantly, it was the onset of super low interest rates at the end of the last century that added the spark to some very dry tinder.

 

mathematically, keeping everything else the same, the amortization of the 40 year mortgage has a lower monthly payment than the 30 year mortgage.  this has the benefit of providing a lower monthly payment than you would with a 30 year mortgage.

 

the fed.gov has painted itself into a corner by inflating asset prices and the fed doesn't want to raise interest rates.  

 

even so, homes prices are out of reach for many.

 

the thinking is that by stretching out the term to 40 years, that's one dial that the federal gov't can give to make expensive homes more "affordable." 

 

this is a trap at currently inflated home price levels.

 

when borrowers who are enticed by the 40 year mortgage amortization see their artificially inflated home prices drop - they'll walk way and default.  and we are left holding the bag.

 

and here is another scenario.  what is going to happen to home values when interest rates finally go up?  (which they will, because at some point our foreign lenders will demand higher yields to compensate for our country's rapidly deteriorating credit risk).

 

home values will drop like a brick.

 

just watch.

 

every time the government has tried to make homes more affordable, it makes them less affordable.

Edited by fishweewee

Share this post


Link to post
Share on other sites

during the 1970's, the 30 year mortgage was introduced because we were sailing into double-digit interest rates (OPEC oil shock).

 

it's crazy that we're going to let 40 year mortgages because we are at near-zero interest rates (compared to historical levels).

 

does anyone remember when the 10 year treasury yield was 10%?  You could park your money in that and not have to invest in stocks. 

Share this post


Link to post
Share on other sites
Just now, fishweewee said:

my point is - the dems and the federal reserve created conditions to artificially pump up home prices

Except they havn't, Fed funds rate has been roughly the same through out the Trump admin. Plus, the Fed is supposed to be independent of the executive. Even so, Trump did everything he could to influence them to keep rates low, even during an expanding economy.

 

The real underlying factor driving increase in home prices is a lack of supply.

Share this post


Link to post
Share on other sites
Just now, Nicky Da Fish said:

Except they havn't, Fed funds rate has been roughly the same through out the Trump admin. Plus, the Fed is supposed to be independent of the executive. Even so, Trump did everything he could to influence them to keep rates low, even during an expanding economy.

 

The real underlying factor driving increase in home prices is a lack of supply.

Look back at 1999.  This was when it all started.

 

We're still dealing with that mess.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to register here in order to participate.

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.