Can you name 5 completely different causes for the foreclosure mess?
March 15, 2010 by
Filed under realestate trends
I want 5 different reasons or more if you have them…since we all know you cant really place the blame on one or two things.
I especially want to hear about nationwide macro economic trends of concern that may be contributing factors
http://promo.realestate.yahoo.com/no_slowdown_in_foreclosure_filings.html
1. Consumer greed
2. Media hype
3. Mortgage company greed
4. Minimal regulation
5. Fraud
Macro economics:
1. Low interest rates
2. Minimal inflation
3. The massive appreciation of prices in states like CA allowed homeowners to sell, pay off their mortgages and have more than enough money to buy up houses in under valued markets (i.e. Phoenix)
4. This in turn created speculation and price inflation
5. And also dried up the existing supply of housing
6. Spurring building binges and sprawl
7. Perpetuating the cycle.
8. And also allowed existing homeowners to borrow against the equity in their newly appreciated homes.
Now go to the five reasons I posted first.
Number one is Bill Clinton. He changed the rules on subprime lending.
1.) creative financing on loans without verifying actual affordability of the client……
2.) people using equity to do home improvements, buy things, consolidating bills… now that the equity is gone people are unable to sell the homes for less than what they owe…
3.) high energy costs taking up much of home owners income..
4.) fraudulent lending practices by unscrupulous lenders
5.) people buying more home than they could afford
stupid buyers…..buy what they can’t afford
greedy Realtors…sell at any cost to the buyer
poor school systems,,,,didn’t teach basic math
lending institutions…..suckering in stupid people with adjustable rate loans.
poor parents….not teaching their kids to manage their money
Greed and the easy buck on the part of the investors, consumers, brokers, mortgage companies – lax government controls and regulations, no proactive initiatives to prevent it and very naive, if not plain stupid, understanding on the part of the consumers.
Simply put, when banks loaned mortgages – if they felt that you couldn’t afford the payments, they simply didn’t loan you the money – and this is no longer the case with freelance mortgage lenders and refinancing companies.
It’s really tragic that so many people fell for this scam and are now losing their homes. It must make the lenders very proud…
Iraq
Federal Reserve
Bush’s economy
Credit Card Debt
National Debt
Why is this in the politics forum, should be Finance.
unscrupulous lending practices.
dishonest appraisers.
Seminar liars.
extended period of economic prosperity
greed
Shylock said it all–just about. The thing I notice most (and I’m just a country-raised Southern biscuit-baking mama) is we have turned into a very greedy immediate reward society. We want it now now now. Reminds me of the first Willy Wonka movie where that lil girl sang “I want it NOW!”
One example: The weddings today are outrageous. They rival what only the very wealthy people had in the years past. They expect (demand!) big diamonds and expensive lavish gifts and are quite angry if they don’t get them.
Look at some of the old old movies. People didn’t live like we live today. I know time marches on and we are the techie society and we buy one electronic and next year, there’s a newer more sophisticated more advanced model, so we toss the old and buy a new one.. The effect this is going to end up having on our environment.. makes me shudder.
We are greedy and spoiled raising even more greedy and spoiled and unappreciative children. (Ok this is making me sound like my mother and her mother and her mother’s mother) But it’s true. The sky’s the limit to people’s wants and their children’s “wants”. They don’t seem to care the price or how high their charge cards or home equity loans go.
Ok, getting off soapbox and going to bake some biscuits. Happy Thanksgiving all, and Amen, let’s eat!
1. Greed among the lower level workers/participants in the industry. Appraisers over-valued homes, Realtors listed them for these prices, and loan officers provided loans at higher values. Homeowners lied to increase their income and qualify for homes they knew they couldn’t afford.
2. Finite energy supplies and growing populations/demand, causing an increase in costs. Prices have risen for food (grown on farms using oil-powered machines and oil-based pesticides and processed in industrial plants), gasoline (rising demand, falling quality of oil from imports), and home energy (natural gas-fired power plants), to name a few concerns.
3. Devaluation of the dollar, causing imported goods to increase in price, contributing to higher energy prices. Also caused by the federal government borrowing money and printing money, thereby devaluing the dollar further.
4. Convoluted investment instruments used to package subprime loans and sell them on the market to hedge fund investors and pension funds. Now, with so many foreclosures, it is doubtful who even owns the loans in default, as they have been bought and sold so often by institutional investors.
5. Overuse of credit, either cashing out equity, home equity lines of credit, or frequent credit card use, combined with an unexpected financial hardship, such as a loss of job or medical expense. If credit is relied on to prop up the family’s budget, and then a payment is missed, one of those shaky supports falls away, interest rates increase, and it gets more difficult to keep on top of that bill and others. Miss a few payments, multiply the same experience by numerous homeowners, and you see how that can affect markets.
Alan Greenspan, not wanting to regulate the housing market
2,) Greed, on the part of loan officers wiling to write loans knowing that while the buyer was not qualified, nobody would detect the fraud and they would be paid commissions and fees.
3.) Republicans who foster a laizez faire – deregulation climate. The last time this happened it was the failure of the Savings and Loan industry under Reagan.
4.) The housing bubble created a market demand that overheated the housing market.
5.) Naive buyers who did not make prudent purchasing decisions.