Meet Lady Subprime

Discussion in 'Politics' started by sargon20, Jan 13, 2009.

  1. sargon20

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    Yes yes it's all the fault of those borrowers who bought KNOWING they couldn't afford the house. Isn't that the line? No personal resonsibility. They signed those documents.



    Meet Lady Subprime


    [SIZE=-1]By Richard Cohen[/SIZE]
    [SIZE=-1]Tuesday, January 13, 2009; A15[/SIZE]

    The French have the comely Marianne, the British have the fetching Britannia, and we have the welcoming Lady Liberty. May I now suggest, at least for the duration of the current recession, a new feminine emblem of our times: Marvene Halterman of Avondale, Ariz. At age 61, after 13 years of uninterrupted unemployment and at least as many years of living on welfare, she got a mortgage.

    She got that mortgage less than two years ago. She got it even though at one time she had 23 people living in the house (576 square feet, one bath) and some ramshackle outbuildings. She got it for $103,000, an amount that far exceeded the value of the house. The place has since been condemned.

    This tale, unfortunately as American as apple pie, was recounted recently in the Wall Street Journal. Since the story ran over a long, holiday weekend, it is possible that you, not to mention the occasional member of Congress or, God forbid, the various government regulatory agencies, missed it. It is the only possible explanation for why there have been no executions, never mind arrests.

    Halterman's house was never exactly a showcase -- the city has since cited her for all the junk (clothes, tires, etc.) on her lawn. Nonetheless, a local financial institution with the cover-your-wallet name of Integrity Funding LLC gave her a mortgage, valuing the house at about twice what a nearby and comparable property sold for.

    According to the Journal, Integrity Funding then sold the loan to Wells Fargo & Co., which sold it to HSBC Holdings PLC, which then packaged it with thousands of other risky mortgages and offered this indigestible porridge to investors. Standard & Poor's and Moody's Investors Service took a look at it all, as they are supposed to do, and pronounced it "triple-A." "Double-A" must mean no running water.

    At each step of this mortgage process, a moral crime was committed. Halterman's interest rate would have ballooned to 15.25 percent, when in all likelihood 1 percent would have been a reach for her. (Her welfare and disability payments totaled about $3,000 a month.) After paying off all her debts and the usual fees, Halterman got $11,090 at the closing.

    After processing her mortgage, Integrity cleared nearly as much: $9,243.

    We turn now to Bernard Madoff, the accused swindler who allegedly ran a $50 billion Ponzi scheme. The English language lacks sufficient words of contempt for this man who leveraged the teachings of Maimonides -- the sacred obligations of philanthropy -- to swindle charities of money for the poor. His victims were rich and not so rich, one-time Masters of the Universe and one-time schoolteachers, now equally broke, a leveling of wealth that not even Lenin could have envisaged.

    The wreckage is immense.

    But think: Was there a better Ponzi scheme than the one that ensnarled countless underfinanced homeowners? Who has gone to jail? Nobody. Who has paid back the huge amounts of money made in financial services? Nobody. Where's the former financial genius who has vowed to return his bonus -- or donate it to charity -- because he was overseeing a huge dream factory that produced nothing more than a stack of three-dollar bills as high as the sky? "Here, sorry, I didn't earn it." Words you will never hear.

    How was Madoff's alleged scheme so different? He could go to jail. The other guys are scot-free. But they had to know that Halterman could not pay off her mortgage. They had to know that she could not afford a 15.25 percent interest rate. It didn't matter. One institution sold to another, taking its fees, passing along this Ponzified paper like it was a hot potato -- don't hold it for too long or you'll get burned -- and then offering it to the vaunted, all-knowing and downright perfect Market, our secular god.

    Ah, Halterman, you are our unintentional Marianne, our Britannia. You represent the consequences of a Congress that was both deluded and bought. You personify succeeding presidencies (Clinton, Bush) that sniffed the glue of deregulation. You embody a public that fervently believed in the free lunch of ever-rising housing values and a financial system that figured out that the buck didn't really ever have to stop . . . until it did.

    The little house on West Hopi Street is slated to be torn down. Pity. For as little as $18,000, its apparent value at the moment, it could be bought by the government and turned into an appropriate monument to our era: The American Museum of Greed. Don't bother joining. We are all charter members.
     
  2. B_starinvestor

    B_starinvestor New Member

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    A bank, or mortgage company, can't 'value' a house. An independent appraiser assesses the value.

    no surprise here

    That's impossible. It is against the law to earn more than 7% in origination/broker/yield spread premium fees on a subprime loan. Complete lie and utter fabrication.

    Agreed.

    Like infants fighting over Pinata candy...The guy that brought the Pinata is the criminal.

    Madoff broke the law. Fake statements. Fake accounts. Embezzlement. Those are crimes. Banks simply did what the gov't told them to do. That's not illegal. Catching on?

    What did the unemployed lady do with the $11K cash?
     
  3. sargon20

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    You continue to be such a useful tool for the plutocrats.

    There’s no shortage of blame for the mortgage crisis that drove the economy into the ditch.

    But here’s a fresh culprit: the 2005 bankruptcy reform act, which was strongly pushed by the credit card industry.

    So say three researchers at the Federal Reserve Bank of New York, who argue that the legislation shifted risk from credit card lenders to mortgage lenders, helping trigger the surge in home foreclosures.

    U.S. mortgage meltdown linked to 2005 bankruptcy law
     
  4. sparky11point5

    sparky11point5 New Member

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    Star, you should actually read the WSJ article.

    Would You Pay $103,000 for This Arizona Fixer-Upper? - WSJ.com

    I think the Journal did an outstanding job at showing how the blame was systemic -- borrower, originator, appraiser (who valued the shack at over $130,000 with no provable comparable sales), banks, credit rating agencies, and Wall Street banks. Some readers (check out some of the comments on the article) focused their blame on Halterman (the borrower)- she lied!, she is a predatory borrower!

    Yet, Halterman was doing nothing different than many homeowners over the last decade. She was using the 'equity' in her house to make for lack of income. People at the entire range of income did this. What did she do with the $11K? She bought *food*.

    Almost everyone in this chain profited. Look at the enormous profits made by Integrity Lending (snicker). The people who really lost out are the borrower (she lost her house as meager as it was), the pension fund that now owns the securitized mortgage, and the US taxpayer that has bailed out everyone else. The originator, appraiser, Wells Fargo, and others all pocked the fees and moved on.
     
  5. B_starinvestor

    B_starinvestor New Member

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    I agree..everyone was involved. The hypnotized OP blames it all on Wall Street.
     
  6. sparky11point5

    sparky11point5 New Member

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    No. Star, you should re-read the OP. He is complaining that people are focusing on the borrower for an unfair share of the blame. At the end of the day, she is poor and has shown very bad judgment, but she has also suffered a lot in this debacle.

    Did you see what happened to the owner of Integrity Lending? He now works for a venture capitalist. Besides losing his (poorly managed and possibly fraudulent company) I don't think he has really suffered.

    This is similar to your definition of a 'predatory borrower' in another thread. If you actually understood how the mortgage market works, you would see that this makes no sense. In other words, the entire mortgage market and process is about repackaging debt and risk. The people responsible for perpetuating this Ponzi scheme does include the borrower, the originator, appraiser etc. But, what really, really fueled the process was the billions (with a B) of money that was made in the secondary markets and securitization.
     
  7. B_starinvestor

    B_starinvestor New Member

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    Sparky, do you really think most people are blaming the borrowers? C'mon. 98% of people blame Wall Street and banks.

    It sounds like he was a con and a fraud. If charges haven't already been brought, I'm sure they will be.

    Sparky, I had a majority ownership stake in a mortgage company from '98 - '08. Does that qualify me as one who might understand the mortgage market?


    After a loan is closed, repackaged and resold in the 2ndary market, it has no affect on the borrower. The same car can be sold 58 times, it has no affect on the original owner. What really fueled the problem was that the ratings agencies assigned such high quality ratings to the paper...that an unbelievable amount of funding was available to the public. Those agencies were responsible for 3/4 of this problem. Banks/Wall street had sooooo much paper they could sell....and they sold it. No way should that much have been available...this also drove real estate prices up along with a handful of other things that I've written about extensively in other posts.
     
  8. sparky11point5

    sparky11point5 New Member

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    Yes.

    Read some of the comments on the WSJ article, for example. Also, I think the conservative focus on low-income lending is another example. I have yet to see any analysis that this was a significant part of the problem. Even today, go to JPMorgan and look at the online form for mortgages, and note the "No documentation" option. Over-borrowing was endemic, and it was facilitated by mortgage industry.

    <self-credentialling snipped>

    After a loan is closed, repackaged and resold in the 2ndary market, it has no affect on the borrower. The same car can be sold 58 times, it has no affect on the original owner. What really fueled the problem was that the ratings agencies assigned such high quality ratings to the paper...that an unbelievable amount of funding was available to the public. Those agencies were responsible for 3/4 of this problem. Banks/Wall street had sooooo much paper they could sell....and they sold it. No way should that much have been available...this also drove real estate prices up along with a handful of other things that I've written about extensively in other posts.[/QUOTE]

    OK Peace.
     
  9. lucky8

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    Doesn't everyone know already the ratings agencies are the real culprits? I still don't understand how re-rating all that junk paper was legal...
     
  10. B_starinvestor

    B_starinvestor New Member

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    Worst part is this...

    borrowers foreclosing
    Wall Street a ghost town
    appraisers/realtors/title agencies - starving to high hell
    Banks..massive layoffs, stocks under the toilet, in the septic tank

    Ratings Agencies....nothing. Whistling Dixie. Still carrying on..life is good.
     
  11. faceking

    faceking Well-Known Member

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    holy shit... another educated poster....

    what the fuck are you doing here????!!!!
     
  12. lucky8

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    Yes, it appears the TARP was only meant to shore up the balance sheets, all that money, gone, never to be seen again. Still waiting for them to actually put money into the economy, rather than just fixing the negatives on balance sheets...lenders who are foreclosing are just plain stupid. They ALL need to rework these mortgages and KEEP their customers so they can have at least some money coming in, rather than throwing them out on the street. It's better to have a little bit of money coming in than none at all
     
  13. Notaguru2

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    Subprime loans were a patsy. A very SMALL percentage of those loans defaulted. The bulk of Fannies problem higher up the credit chain. At least, from what I've read.
     
  14. sargon20

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    Yep they fell down on the job. But they won't ever have to pay a dime for their spectacular failures, no one will go to jail, there will be no fines and no one will get fired.
    Moody’s, which judges the quality of debt that corporations and banks issue to raise money, had just graded a pool of securities underwritten by Countrywide Financial, the nation’s largest mortgage lender. But Countrywide complained that the assessment was too tough.

    The next day, Moody’s changed its rating, even though no new and significant information had come to light, according to two people briefed on the change who requested anonymity to preserve their professional relationships.

    Moody’s had assigned high grades to many securities containing Countrywide mortgages. Those securities and mortgages, issued during the lending spree of recent years, later soured — leaving investors with large losses and homeowners and communities struggling with foreclosures.

    That was not the only time Moody’s softened its stance on Countrywide securities. It elevated ratings several times after Countrywide complained, the people briefed on the matter say.

    Debt Watchdogs: Tamed or Caught Napping?

    So the company investors count on for objective data is in bed with the very entity they are supposed to be policing. Sweet. Sweet. The free market hard at work....hard at work screwing the investors.
     
    #14 sargon20, Jan 14, 2009
    Last edited: Jan 14, 2009
  15. B_starinvestor

    B_starinvestor New Member

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    2600 some posts for Sargon....we finally agree on something.
     
  16. sargon20

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    That is scary. Really scary. Though I blame the borrowers for about 10% of the mess vs. your what?? 90% blame??
     
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