Mortgage Meltdown

[JOEBIALEK]

Until recently I was an underwriter for a sub-prime mortgage company that is about to close. It seems that most media outlets and government officials fain ignorance about the real underlying cause of the problem. There is either a tendency to blame the borrower or act as though no one in the industry {or outside of it} saw this coming. They fail to mention that those who gained the most financially got off scot free while leaving the mess behind for everyone else to clean up. In my former company, the sales managers and loan officers "held the keys to the safe" while deciding which guidelines to ignore sometimes going so far as to bribe fellow underwriters to "look the other way". Sales managers often overrode an underwriter's decision they did not agree with. Other times fellow underwriters would be threatened with their job for "impeding company growth and progress" just because they refused to go along with the flagrant disregard of guidelines . I complained to the sales managers about the bribing but all I got was a formal write-up for making "inappropriate comments".


There was absolutely no support from the owner of the company all the way to the human resource representative. This company is as corrupt as they come. I can't tell you the number of sexual affairs that occurred between married and unmarried people; primarily among the management staff {at the workplace itself}. Promotions were strictly political thus moving people "up the ladder" who never proved themselves worthy or were on a final written warning to be terminated {for poor performance}. As a result of the corrupt management of this company, I and several hundred others were laid off. I believe the federal government needs to investigate this company and bring to trial those corrupt individuals who broke the law. This would set an example for the rest of the mortgage industry that absolute corruption corrupts absolutely.

[noddin0ff]

You're laid off...why not name name's since you're ranting anyway?

[topspeed]

Huh.

Never heard of underwriters being over-ridden by management. I'm not saying it didn't happen, I'm just saying I've never heard of that. That said, I've seen it go the other way around a coupla thousand times. Underwriters = God in most of the lending institutions I've encountered.

As for the mortgage mess, I can only hope our government keeps it's claws out of it and doesn't "bail out" the idiots responsible. Who are the idiots?

1) Buyer's over-extending to keep up with the Jones'
2) Buyer's purchasing real estate with 100% financing because they are so fiscally astute, they can't figure out how to save a plug nickel for a down payment.
3) Investors that threw common business sense out the window in hopes of a pipe dream.
4) The secondary market that empowered the above.

Capitalism has a way of adjusting naturally, and that is exactly what we are doing now. The economy, and real estate in general, has been through worse and survived. Anybody remember the 18% interest rates in the late '80's? How 'bout the 8 year real estate depression of the mid '90's? Been there, done that.

This is a normal market kids, get used to it.

[JSE]

As for the mortgage mess, I can only hope our government keeps it's claws out of it and doesn't "bail out" the idiots responsible. Who are the idiots?

1) Buyer's over-extending to keep up with the Jones'
2) Buyer's purchasing real estate with 100% financing because they are so fiscally astute, they can't figure out how to save a plug nickel for a down payment.
3) Investors that threw common business sense out the window in hopes of a pipe dream.
4) The secondary market that empowered the above.

Capitalism has a way of adjusting naturally, and that is exactly what we are doing now. The economy, and real estate in general, has been through worse and survived. Anybody remember the 18% interest rates in the late '80's? How 'bout the 8 year real estate depression of the mid '90's? Been there, done that.

This is a normal market kids, get used to it.

Well said. What the hell did these "poor" people think would happen with the ARMS after the initial fixed period? Mortage rates have been at an all time low over the past few years. Did people really think that their mortage would go down any further? If they did, they were fools. Also, why did so many people decide to maxout and spend way too much for a house they normally could never afford thinking "hey interest rates are at rock bottom right now so let's get an ARM hoping the rate won't go up, sure our credit is complete crap but they will give us 5% for a couple years and said it probably won't go up that much" (yes, that was a huge run on sentence!) I'm usually a compasionate guy but I have none for the people who way overspent and got an ARM "hoping" for the best. They gambled, they lost. Simple as that.

I am so tire of everyone blaming the coporations, government, exceutives, banks, etc, etc and never the person dumb enough the buy into these mortages. People need to start taking some responsibility for their own actions. Government and corporations have become the scape goat for dumbasses. I'm sick and tired it. I'm not saying Government and Corps. are not corrupt to various extents but come on people, use your head and little and maybe blame yourself and accept the consequences of your actions.

ARMS can be a good thing, some time. My wife and I bought a house year ago as an investiment. We knew we would be in and out of it within 3 to 5 years max. We got a very low rate at the time with a 5 year fixed interest rate. We knew it would go through the roof after 5 years but we knew we would have turned the house by then. We sold in about 4 years and saved a ton of money. We were smart about it. We were not buying our dream house.

[Feanor]

Huh.

Never heard of underwriters being over-ridden by management. I'm not saying it didn't happen, I'm just saying I've never heard of that. That said, I've seen it go the other way around a coupla thousand times. Underwriters = God in most of the lending institutions I've encountered.

....

The underwriters I most familiar with are life insurance underwriters; that might be different but no so much I bet. Like other employees, they work to standards dictated by management. If you don't follow managements rules you are "over-ridden" or just plain fired.

In our organization, underwriters come under pressure for sale people continually. Fortunately ours is a well-balance and responsible financial organization where management supports underwriters so long as they adhere to guidelines. But it certainly wouldn't be hard to imagine another organization where Sales had more sway.

[bobsticks]

[QUOTE=JSE] What the hell did these "poor" people think would happen with the ARMS after the initial fixed period? [QUOTE]

Undoubtedly the same folks that feel betrayed by the poor sound quality of the free Radiohead release...

[SlumpBuster]

They gambled, they lost. Simple as that.

ARMS can be a good thing, some time. My wife and I bought a house year ago as an investiment. We knew we would be in and out of it within 3 to 5 years max. We got a very low rate at the time with a 5 year fixed interest rate. We knew it would go through the roof after 5 years but we knew we would have turned the house by then. We sold in about 4 years and saved a ton of money. We were smart about it. We were not buying our dream house.

Flipping is a strong contributing factor to the meltdown. Being from Michigan (now officially the worst economy in the US), I've been seeing it first hand. There are at least 6 houses on my street up for sale competing with the 2 foreclosures. Sure, lots of McMansion ****ers are going broke, but alot of regular folks are too. Requesting that others accept personal responsibilty has to be weighed with potential victim blaming.

For example, what if you had not been able to sell your house? Then you would be just another dumbass (your word, not mine) that gambled and lost. Your gamble was dependant upon something wholly outside your control: that there would be a buyer for your house. There would have been precious little you could have done if there was no buyer. Sure, your going to say you bought smart so you could sell smart later- good neighborhood, good fixups - but a gamble is a gamble is a gamble, as all real estate purchases are. Under your analysis when the gamble pays off, it is because you were smart. When it doesn't, you're a dumbass. Maybe you weren't any smarter, maybe you just had better timing. Or, maybe, by flipping your house in such a short time you were contributing to the problem of driving up home prices. Takes two to tango. That is the other side of the coin, after all.

Just my 0.02. Hope it doesn't come off as too jerky sounding. Its not really my point to argue, but to suggest that the homeowner is not necessarily at the center of this.

PS I can't believe I just participated in a Joe Bailek thread... I'm such a sucker. :D

[JSE]

Flipping is a strong contributing factor to the meltdown. Being from Michigan (now officially the worst economy in the US), I've been seeing it first hand. There are at least 6 houses on my street up for sale competing with the 2 foreclosures. Sure, lots of McMansion ****ers are going broke, but alot of regular folks are too. Requesting that others accept personal responsibilty has to be weighed with potential victim blaming.

For example, what if you had not been able to sell your house? Then you would be just another dumbass (your word, not mine) that gambled and lost. Your gamble was dependant upon something wholly outside your control: that there would be a buyer for your house. There would have been precious little you could have done if there was no buyer. Sure, your going to say you bought smart so you could sell smart later- good neighborhood, good fixups - but a gamble is a gamble is a gamble, as all real estate purchases are. Under your analysis when the gamble pays off, it is because you were smart. When it doesn't, you're a dumbass. Maybe you weren't any smarter, maybe you just had better timing. Or, maybe, by flipping your house in such a short time you were contributing to the problem of driving up home prices. Takes two to tango. That is the other side of the coin, after all.

Just my 0.02. Hope it doesn't come off as too jerky sounding. Its not really my point to argue, but to suggest that the homeowner is not necessarily at the center of this.

PS I can't believe I just participated in a Joe Bailek thread... I'm such a sucker. :D

Yep, I'm a sucker as well. I should know better.

Anyway,

There are always legitimate cases of people being victims through no fault of their own. My contention is that a large part of this problem is people living above their means. That seems to be the "American Way" lately. There are way to many materialistic people out there who have to drive the nicest cars and have the nicest house when they really can't afford them.

In my case when we took out our ARM timing was only a small factor. We knew going in if something happened and we could not sell, we could still afford the mortgage regardless of what the interest went up to. We would rather not but we could have. And, we had enough savings that we could have always paid the loan off is full if needed at any time. My wife and I live well below our means and we make it a point to have plenty of savings. I know not everyone can do this but if they can't, they should not be buying more house than they can afford to begin with. We do very well and we have friends that make a fraction of what we make and just about all of them have bigger houses and nicer cars.

And, under my analysis I did not say if a gamble did not pay off your a dumbass when flipping a house. I was referring to people who buy more house than they can afford hoping/guessing/praying the interest rate on their "adjustable" mortgage does not go up. The people who took that gamble are "dumbasses".

Flipping investments are all gambles. Some you win, some you lose. The difference is you generally know that going in and you "should" plan for failure. If you don't, well then I guess you would be a dumbass to some extent. If you can't afford to loss your ass on an flip investment, you should not be in that line of business to begin with.

[JOEBIALEK]

good points

[JSE]

good points

Thanks? :out:

What a Tool! :lol:

[GMichael]

When I was buying/building a house back in 2005, this is how our Banker presented our options to us.

We could get an ARM loan at 5.5%
A fixed loan would be at 6% and would cost us an extra $2500 up front.
Every banker and real estate agent we spoke to sang the same song, "Buy as much house as you can." "Your pay will increase over the years but your mortgage won't."

We bought into the 6% fixed loan and have enough savings to pay our way out of trouble for many years. A smaller house was fine. But how many people (many with no experience) believed what was told to them by the so called experts? Sure, we could say, "let the Buyer beware." Does that make it OK to tempt people with this?

[Rich-n-Texas]

Thanks? :out:

What a Tool! :lol:
:lol: :lol: :lol:

The perfect response! Green chicklet for JSE!!!