Friday, August 31, 2007

Government says "NO" to Personal Responsibility - "We will do everything in our power to help those persons who didn't read the fine print"

I am so MAD you don't even know!!!!!!! I don't even know where to start. I will just make some bullet points and talk about them. I just want to get this post up quickly as I need to go make some money....not for myself, but for our new 'populist' society that is more focused on pandering to the group, than protecting the individual.

As you probably know, President Bush spoke this morning on the 'mortgage issues' this country is running into. Then I had the 'pleasure' to hear the HUD secretary speak as I was starting to type on my computer. More on that fine bureaucrat later.

This country has 'lost it'. There are no consequences for making bad decisions anymore. Build in the flood plains and don't buy flood insurance, don't worry, the government (read: taxpayers) will take care of you. Same thing applies now to housing. Don't read the fine print, don't understand what you are signing, didn't get rich with 'no money down' real estate, no problem. We will create even more taxpayer funded bureaucracy by having some bureaucrats write some convoluted mortgage legislation that will dictate who gets help and who doesn't. Like our current tax code (we need the fair tax), this legislation will be poorly worded and have more 'holes' and 'gray areas' than the moon. It will be rushed out to the market and it will feel 'good' for the politicians helping out and obviously for the people that get to keep their homes with OPM (other people's money - IE the taxpayers). How are you going to determine who 'knew' what they were doing, and those who 'didn't'? I'm sure everybody will be 'honest' and the people that 'knew' they couldn't afford their loans will step forward and take their lumps and not try to take advantage of the 'special' government program. Are you kidding me???

In one breath Bush says 'no bailout', but I guess 'bailout' only means 'direct grants to homeowners' as proposed by the likes of Hillary and her other Democratic counterparts. Using legislation and creating special government backed loans (all backed and funded by the taxpayers) to help people refinance apparently is not bailing people out. Reforming the tax code so that when lenders 'write down' the mortgage on properties that have declined in value, that won't be taxed as income anymore.

Quick example: you buy 450k home. You have trouble making payments. You refi or negotiate with lender and the property is now worth 350k. That 100k that the lender 'forgave' is currently taxable as income. But under the proposed change, that would be a free '100k'. I know that taxes are a pain (see but why should somebody get a 'free' 100k or whatever the amount is, and not have to pay ANYTHING on it. Again, it is another 'reward' for making bad financial decisions.

I'm sorry, but listen to me VERY CLEARLY here: THIS THING IS FAR FROM OVER. THIS IS WAY WORSE THAN JUST 'SUBPRIME' LOANS. NONE OF THESE BANDAID SOLUTIONS ARE GOING TO HELP THIS PROBLEM THAT HAS BEEN CREATED. These politicians and analysts have NO IDEA what went on the past 5-6 years and the sad thing is, they think they averted disaster.

This was evident when the HUD Secretary Alphonso Jackson spoke on CNBC (PLEASE WATCH THIS VIDEO from CNBC). After listenting to this guy, I was NOT impressed one bit with our government. I read Alphonso's biography, I was left wondering why somebody with a financial background isn't the HUD Secretary. He has political science undergrad, masters in education administration, and then he got his law degree at some point. Anyway, PLEASE watch the video above. Here are few choice quotes I got from the HUD Secretary:

"We will do everything in our power to help those persons who didn't read the fine print"

"We have been discussing this for months, we believe we caught this in time"

"We got it and corrected it in time, if this had gone into 2007/2008 we would have a more extensive problem." (we ARE in 2007 there Mr. Secretary!!)

"I still believe we are going to have a soft landing".

Maybe I don't know how to read a calendar, but I am pretty darn sure that we are about 2/3 of the way through 2007!!! So, yeah, I would say we already have an extensive problem and governement is doing what governement does best...REACTING late with a legislative, burearucratic, tax-payer funded solution. I'm typing this, it just flashed up that congress is proposing a 300 million dollar bailout.

I WILL BE posting more on this topic. These 'experts' and politicians are saying so many incorrect things, I don't know where to start right now. Either way, just think about this: what happens when the alt-a, a-paper, and OPTION ARM loans start to default? It is coming, it will just be later on in 2008-2009. Mark my words...this mess is way worse than just 'subprime'.
Sorry, no bailout for Wall Street, or homeowners. No bureaucratic legislation either. The FREE MARKET has, and will fix this problem. If Wall Street can't make money from the loans, they won't make them!! Once this thing runs it's course, people WILL be more responsible next time around. PAIN has a funny way of helping people learn from their mistakes, but if there is no PAIN, there is no lesson. Wall Street made billions for a few years there, now they need to 'give it back' so to speak. AGAIN, NO BAILOUT FOR HOMEOWNERS, OR WALL STREET!

Have a nice LABOR DAY weekend. Something to think about: how many people that are having trouble with their mortgages will be working on Monday to help pay the bills versus just taking the day off?? I'm sure the 'bailout' talk is really motivating people to work hard and make their mortgage payments.

Stay is going to be a bumpy road for the next few YEARS!



Anonymous Anonymous said...

You are a guy who quit a company preying on people who were doing these loans. You should know that not every loan agent was as ethical as you. Deceiving practices and the sort.

I, like you, knew something was wrong. I took personal responsibility but I don't want to see more suffering. If this does get big we will all know someone we might have to take in.

But your solution is LET THEM SUFFER. Which is a cop out at best and immoral at worse. All the investors who thought they were Millionaires should give the money back.

Remember on the other side of Debt is Credit. Someone has this money. Give it back. Those people who were paying a monthly payment on what they were supposed to if prices were not crazy high should be able to keep there homes.

BTW... There is no such thing as a Free Market.

8/31/2007 2:36 PM  
Blogger SoCalMtgGuy said...

First off, I never dealt with borrowers, only brokers.

It isn't a cop out, or immoral. There needs to be consequences for the 'binge' that took place.

Who should give the money back?? The money is gone, it is spent on over priced 'assets'.

Who is going to give the money back? The borrowers??? They spent it on a house. WHO is going to 'give the money back' as you say???

I know this situation SUCKS! But we can't legislate on 'intentions' for this.

I said who should get help: People that did FULL DOC loans, that put 10% or more down, had reasonable Debt to income ratios, and did not get any I/O or neg-am loans.

Yes, the markets will sort this out...they already are.


8/31/2007 3:16 PM  
Anonymous Anonymous said...

One note on the tax thing. You currently get to waive $250k ($500k/couple) of gain if you lived in a house for two years. Why not let people not pay taxes on money they never actually 'made'? Limit it in a similar manner to the cap gains exclusion if you need to.

8/31/2007 5:23 PM  
Anonymous Anonymous said...

There are no consequences for making bad decisions anymore.

There are consequences - it's just that government will distribute the downside onto the shoulders of other people.

This will encourage everyone to take more risk with the confidence that if the risk works out they will take the upside. If the risk does not pan out the downside is broadly shared.

This will continue until everyone takes some much risk that the system collapses.

Then the game will start up again after a generation or so.

9/02/2007 11:15 AM  
Anonymous Anonymous said...

I don't agree the government does not know the impact the housing bubble bursting will have because I am convinced that the housing bubble was manufactured to spur consumption the same as the yen carry trade was created so that Japanese citicizens had an income opportunity when their social services declined/vanished. This was a scam and the politicians and media were silent or promoted the housing bubble so for media and politicians to scream for government intervention can only mean that this is about creating a new opportunity for graft.

9/02/2007 1:17 PM  
Anonymous Anonymous said...

I am as incensed as you at the possibility that those who overpaid (for whatever reason they chose to) and now choose (or must) walk away from the house are going to get any government subsidy or tax forgiveness.

Fortunately, I don't see more than crumbs being tossed at the problem. The bankers will unleash their lobbyists and ensure that such programs have minimal effect. Why, imagine how much more readily people will be willing to walk away if they know in advance that they won't see a 1099 for the forgiven amount? Imagine the volume of overpriced homes being dumped back to the lenders. Imagine their inability to find any other suckers willing to overpay when the now more stringent loan requirements include putting your own cash on the line and being able to afford a fixed 30-yr loan payment. No no no no! The banks don't want to see that property returned to them.

What the banks will want to see are subsidies to borrowers, to ensure that foreclosures are what we don't get. But, the gov't cannot afford to bail out the millions of homes coming down the pike...

So it will be all talk, lots of pandering and posturing up until election time, and very little action. Then the next president will find he wins an economy in recession, falling tax receipts, bloated budgets, rising costs of borrowing, yet a Fed needing to drop rates to induce yet more consumer borrowing.

Rock and a hard place. Take your pick, America.

9/03/2007 6:53 PM  
Anonymous Anonymous said...

And for a little light comic relief, a borrower turns the tables on his lender, courtesy of _The Onion_:

I'm Not Locked Into This 5.75% 30-Year F.R.M. With You—You're Locked Into This 5.75% 30-Year F.R.M. With Me

9/04/2007 9:09 PM  
Anonymous Anonymous said...

Will the government pay me for the $200 I lost by buying the Apple iPhone when it was first introduced, instead of waiting until today, when Steve Jobs decided to shave $200 off the price?

9/05/2007 9:27 PM  
Blogger roughtrader said...

A note to the first poster. You entirely incorrect when you say that the other side of debt is credit. The reason so many of these high risk loans were issued is because the banks didn't have to bear the brunt of direct exposure to that risk. Instead, these mortgages were repackaged and sold on the secondary market. Theses CDOs, as they are called were purchased by the like of wall street hedge funds who are now quietly but urgently lobbying congress to bail them out of bad trading positions.

Quant financial analysts are in the process of trying to discover the correct prices of the credit derivatives. The wall street machine is finally realizing they are worth nothing but steaming piles of s**t, and there goes your so-called credit.

The wealth has evaporated. There is no capital available to restitute stupid homebuyers who should have INHERENTLY known that there is no free lunch and the piper has to be paid if you gamble with high leverage.


9/06/2007 9:50 AM  
Blogger Forensic Mortgage Loan Audit said...

it's funny, months ago when we were actively reporting fraud waste and abuse to all these agencies, (all documented), all we got was.... NO, its the borrowers fault; that's not our field of responsibility;here's your report back, mail it somewhere else; there is no enforcement budget; so on and so forth....NOW what do they have to worry about right?
Just take a look at China's response to economic /financial crimes....
-the death penalty. google that.
for public safety and awareness pls. visit our site: where we post the grim details in their face!!!

9/10/2007 9:39 AM  
Anonymous Anonymous said...


12/13/2007 11:07 AM  

Post a Comment

<< Home