Credit Crunch Villains

[Nicky_Hatton]

1. sub prime does not mean people don't have the ability to repay. last time i checked, around 8-10% of these people were in default so obviously plenty of people are paying. sub prime means higher risk. the media blew this whole "giving loans to people who can't afford them" **** outt've proportion. there were a lot of stated loans but very few were given out to cashiers financing $500K, etc.

2. interest rates and payments have not been affected at all as a result of this. if anything, they dropped slightly because of the sub-prime collapse.

3. the average homeowner isn't affected in a bad way unless they can't afford their home. for the other majority of homeowners, they're just seeing the value stabilize. it'll eventually go back up. if anything, a lot of people in sub-prime loans are now able to get low fixed rates that they would have never qualified for.

4. there are many of other factors besides homeowner's ability to repay that have contributed towards this situation.

5. the banks ARE writing off these losses and going out of business.

6. you're saying the problem is that too many people got on the property ladder by lax qualifications yet are complaining that tightening these standards will prevent you from getting on the property ladder. yet all they're doing is going back to down payment and ability to repay rules so, if you don't have that, how are you any different than these people who you're saying shouldn't have had loans in the 1st place??

1. - Ulitmately it does. If this weren't the case there wouldn't be no credit crunch!

2. How have mortage repayments dropped? There is no way they've dropped. What business sense does that make for a company that is in a lot debt, to then lower mortage repayements on the people that actually pay the mortage. Of Course they're going to exploit these people, and they're going to have to take some of the flax. You have to remember that banks are businesses.

3. Yes, in the long run the market will stablise, but for now the majority of homeowners are in negative equity, which means their paying say 500,000 grand on a property that would retail at the moment for 400,000. Of course this won't affect the logn term, when house prices shoot up again due to demand increasing/population. But at the moment, who knows when this is?
It must suck to be an OAP downsizing their house right now... or anyone in general looking to move.

4. I nevr proclaimed that to be the sole factor but at the end of the day it is the major factor. These bundles of "bad" debt that are being stacked high and sold on to other banks, means that they won't get their money. And thus trust between banks is somewhat broken.

5. Well what banks have then? Fannie Mae, and Anny mac have been somewhat nationalised along with Northen Rock. Besides the Frehman brothers what other banks have written of debt and folded? There's loads more banks and mortage lenders that probably have lots of sub prime mortages.

6. I'm talking about the current climate, and if it were to continue in the forseeable future I probably after graduating University wouldn't be able to get on the property ladder... as who would give me a mortaage at this moment in time? Even with a steady income, companies are more tight with the mortages despite people able to pay because they have less money to loan out, due to the debts...
Of Course they need to tighten the mortage lending rules. Well no, not tighten actually stick with the basic rules and principles of; can they repay it, ahve they got a fixed income. Is the mortage price X times their yearly salary. Most mortage lenders did this, until some mug decided to offer bankers bonuses based on how much mortages the company has... therefore in an attempt to gain a larger bonus they would accept more mortages, even if they didn;t meet previous requirements. The bonus culture has to stop.

[Spare Moody]

1. - Ulitmately it does. If this weren't the case there wouldn't be no credit crunch!

well, in the end, somebody's inability to pay is what makes a mortgage note go south. but that is NOT what a subprime loan is. FHA loans have a higher default rate than subprime loans, yet they scrutinize the most for the ability to repay.
the whole mess involves a lot more than homeowners unable to repay. you have bundles that can't be sold, are sold at a discounted loss, and then backed by ****ty insurance packages. all these factors are major contributors as well.

2. How have mortage repayments dropped? There is no way they've dropped. What business sense does that make for a company that is in a lot debt, to then lower mortage repayements on the people that actually pay the mortage. Of Course they're going to exploit these people, and they're going to have to take some of the flax. You have to remember that banks are businesses.
because the alternative is to take a massive loss through a foreclosure sale. by converting a high interest rate to a low fixed rate you may not be making as MUCH profit, but you're still over the discount rate being charged to you. so, now that we've acknowledged that "banks are businesses", we can acknowledge that profit is better than loss.

you can also just take a look at the rate trends within the last 3 years, available on any financial website.

3. Yes, in the long run the market will stablise, but for now the majority of homeowners are in negative equity, which means their paying say 500,000 grand on a property that would retail at the moment for 400,000. Of course this won't affect the logn term, when house prices shoot up again due to demand increasing/population. But at the moment, who knows when this is?
It must suck to be an OAP downsizing their house right now... or anyone in general looking to move.
the majority of homeowners are NOT in a negative equity position. the majority who did more than 90% purchases or refinances in the last 5 years are but that does not represent the majority of homeowners.
and this circumstance doesn't suck for everyone looking to move. most won't cash out as much equity in the sale and won't pay as high a price for the new purchase. in the end, it's a wash.

4. I nevr proclaimed that to be the sole factor but at the end of the day it is the major factor. These bundles of "bad" debt that are being stacked high and sold on to other banks, means that they won't get their money. And thus trust between banks is somewhat broken.
there were many other factors even within these "bad" debt loans besides ability to repay. credit leniency, waiver of asset verification, and high loan-to-value acceptances to name a few.

5. Well what banks have then? Fannie Mae, and Anny mac have been somewhat nationalised along with Northen Rock. Besides the Frehman brothers what other banks have written of debt and folded? There's loads more banks and mortage lenders that probably have lots of sub prime mortages.
what other banks have completely folded???
http://ml-implode.com/index.html#lists to name a few.
you hafta have the government step in for institutions like Fannie/Freddie because there is no private entity that can handle portfolios that size. ****, a private entity couldn't even START those 2 groups. we're talking several TRILLION dollars worth of mortgage notes. hell, i'm suprised that B of A was able to take over Merill.

6. I'm talking about the current climate, and if it were to continue in the forseeable future I probably after graduating University wouldn't be able to get on the property ladder... as who would give me a mortaage at this moment in time? Even with a steady income, companies are more tight with the mortages despite people able to pay because they have less money to loan out, due to the debts...
it's not that they don't have access to funds. it's that they're still trying to figure out a better and more reasonable means to grade. obviously ****'s really tight right now because it's in a panic so lenders are playing it safe by adhering to conforming loan standards. it will ease up a bit and you'll probably be in a more lenient position to buy within 5 years. but for right now, the focus isn't on building.....it's on putting out the fire.

Of Course they need to tighten the mortage lending rules. Well no, not tighten actually stick with the basic rules and principles of; can they repay it, ahve they got a fixed income. Is the mortage price X times their yearly salary. Most mortage lenders did this, until some mug decided to offer bankers bonuses based on how much mortages the company has... therefore in an attempt to gain a larger bonus they would accept more mortages, even if they didn;t meet previous requirements. The bonus culture has to stop.
debt-to-income ratios are the least effective means in grading a loan. and the bonus culture has absolutely nothing to do with any of the activities that happened in the secondary market.