Mortgage Rescission Could Be Class Action Nightmare for U.S. Banks
National News • July 7, 2008
A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when ...
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Subject: how did this happen.....
Posted On: July 8, 2008, 12:33 pm CDT
Posted By: MBB
Comment:
Everyone had a hand in this mess...EVERYONE! Executives and "Professional investors" dreamed up these risky loan programs so that they could beef up their bottom line and satisfy the insatiable appetite of hedge fund/pension managers, securities brokers, and let's not forget the greedy individual investor. The logic went that "property values will ALWAYS increase! After all God isn't making any more land." And while the "supply/demand" angel is rooted in logic but cheep financing threw a monkey wrench into the equation.
With cheep financing more people than ever before could afford to buy a house. As those buyers flowed into the market the supply of properties became scares, pushing up values. Furth more, cheep financing made it possible for people to buy more house than they otherwise could have. As a result loan amounts got bigger. But there were some people shut out of the market because they could not get financing due to a troubled credit history, lack of employment or otherwise. To keep the market rising and satisfy the demand of these "risky" borrowers a "subprime" market was created. And if you were an executive or securities investor this "subprime" market was great because the perceived risk of these borrowers translated into higher interest rates, which would ultimately lead to higher returns. The risk involved in the "higher returns" was diminished by rating agencies that gave these risky securities an "AAA" rating. This made the sale of these securities easy and further pushed up demand. As the demand increased loan underwriters were under pressure to produce more loans. In order to produce more loans they needed to loosen the underwriting guideline. As underwriting guidelines were loosened more buyers entered the real estate market adding to the momentum of appreciation.
It was all coming up roses! Values continued to increase, buyers continued to enter the market and builders were ramping up production.
UNTIL....The bottom fell out. As rates began to climb and adjustable loans began to reset borrowers that had homes began to struggle to make payments and because financing was becoming more expensive less buyers entered the market and those that did could not afford to purchase as much house as they once could. At this point the trend began to reverse. The borrowers that were struggling to make payments found themselves unable to sell or refinance due to declining values leaving foreclosure as the only exit strategy. Buyers were now having a more difficult time securing more expensive financing and sometimes decides to wait for prices to come down or exited the market all together. This caused inventories to build which accelerated the decline.
So while many people overstated income or otherwise committed fraud to secure financing in my opinion it is the executives and security brokers that drove the housing market into oblivion. Ultimately, causing investors to loose money, home owners to loose their homes and the American public to loose confidence in the financial system and the economy at large. The whole process was driven by GREED; pure unadulterated greed.
Subject: how did this happen.....
With cheep financing more people than ever before could afford to buy a house. As those buyers flowed into the market the supply of properties became scares, pushing up values. Furth more, cheep financing made it possible for people to buy more house than they otherwise could have. As a result loan amounts got bigger. But there were some people shut out of the market because they could not get financing due to a troubled credit history, lack of employment or otherwise. To keep the market rising and satisfy the demand of these "risky" borrowers a "subprime" market was created. And if you were an executive or securities investor this "subprime" market was great because the perceived risk of these borrowers translated into higher interest rates, which would ultimately lead to higher returns. The risk involved in the "higher returns" was diminished by rating agencies that gave these risky securities an "AAA" rating. This made the sale of these securities easy and further pushed up demand. As the demand increased loan underwriters were under pressure to produce more loans. In order to produce more loans they needed to loosen the underwriting guideline. As underwriting guidelines were loosened more buyers entered the real estate market adding to the momentum of appreciation.
It was all coming up roses! Values continued to increase, buyers continued to enter the market and builders were ramping up production.
UNTIL....The bottom fell out. As rates began to climb and adjustable loans began to reset borrowers that had homes began to struggle to make payments and because financing was becoming more expensive less buyers entered the market and those that did could not afford to purchase as much house as they once could. At this point the trend began to reverse. The borrowers that were struggling to make payments found themselves unable to sell or refinance due to declining values leaving foreclosure as the only exit strategy. Buyers were now having a more difficult time securing more expensive financing and sometimes decides to wait for prices to come down or exited the market all together. This caused inventories to build which accelerated the decline.
So while many people overstated income or otherwise committed fraud to secure financing in my opinion it is the executives and security brokers that drove the housing market into oblivion. Ultimately, causing investors to loose money, home owners to loose their homes and the American public to loose confidence in the financial system and the economy at large. The whole process was driven by GREED; pure unadulterated greed.