mortgage crisis explained...

[Jeff_in_Atl]

OK for all of those who wonder why we are in the financial mess we are in read this link. Pay special attention to the section with the date of January 31st 1995. (The bill was passed in 1994 with a democratic congress, senate, and president.)
http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Now for all you people that read this
http://thehill.com/leading-the-news/...008-09-16.html
Now you know that either Pelosi is either ignorant or lying. Either way she needs to not be in congress or any political office.

[sneitzel]

I have a slightly more cynical explanation...

Small financial institutions and brokers figured out they could grant loans on $500+K homes to people making $30K a year telling them "see the payment is only $800 a month right now which is less than you're paying for rent."oh by the way your payment may go up in the future but don't worry about that because you will be building equity in your home which will offset any increase in payment sign here, here here and here, initial here here..... They collect their fees, hold the loan for a month (tops) then and then sell them to the big boys (Fanny and Freddie etc.) leaving them to deal with the $#it. F&F etc. didn't bother to check most of the loans or qualifications, they had an agreement with the brokers to buy their loans period. Saves F&F time and money, they get the interest for the next 30+ years and didn't have to spend the resources now. Bottom line is everybody knew it was a shaky house of cards but nobody thought they'd ever be the ones to get caught under it when it fell.

Just my $.02

[Jeff_in_Atl]

I have a slightly more cynical explanation...

Small financial institutions and brokers figured out they could grant loans on $500+K homes to people making $30K a year telling them "see the payment is only $800 a month right now which is less than you're paying for rent."oh by the way your payment may go up in the future but don't worry about that because you will be building equity in your home which will offset any increase in payment sign here, here here and here, initial here here..... They collect their fees, hold the loan for a month (tops) then and then sell them to the big boys (Fanny and Freddie etc.) leaving them to deal with the $#it. F&F etc. didn't bother to check most of the loans or qualifications, they had an agreement with the brokers to buy their loans period. Saves F&F time and money, they get the interest for the next 30+ years and didn't have to spend the resources now. Bottom line is everybody knew it was a shaky house of cards but nobody thought they'd ever be the ones to get caught under it when it fell.

Just my $.02

Yes but before the rules change that wouldn't have been allowed. The mortgage company could not make that loan. Basically the rules change got rid of the oversight. Funny how everybody is now saying there needs to be more oversight.

[sneitzel]

Yup, I'm with you on all that stuff.

I just think accepting "They (the govt) told us we could.." is letting them off too easy.

[TODD 2000 V6 CAMARO]

I agree with you both. When my wife and I were shopping for a home a few months ago. I got pre qualified for a mortgage loan of up to $350,000. There was no way we could ever possibly afford that. I dumbed it down the the $140K that we paid for the house we ended up buying. We are living comfortably at that amount, but we would have been completely screwed even if we had gone a little higher. If things stay as they are, we really need to have realtors out there that will thoroughly inform their clients about how this game works before even stepping foot outside the office to look at houses. Too many just leave that up to the brokers they are contracted with. And of course the brokers are the ones who will stick a person in the financial doom that was discussed earlier. It really comes down to making sure that buyers are well educated before they get any preconcieved notions about what they can afford.

[Jeff_in_Atl]

http://www.bloomberg.com/apps/news?p...d=aSKSoiNbnQY0

http://www.city-journal.org/html/10_...on_dollar.html

[Christopherrr]

Good stuff Jeff!

[sneitzel]

http://www.investopedia.com/articles....asp?viewall=1

Credit goes to FARK.com for pointing out the article.

Also hotlinked on FARK the Stick Figure version, vey funny. (WARNING: NSFW Text/Language)
http://docs.google.com/TeamPresent?d...uth=true&pli=1

EDIT:
NSFW = Not Safe For Work

[Jeff_in_Atl]

http://www.investopedia.com/articles....asp?viewall=1

Credit goes to FARK.com for pointing out the article.

They should have rewound a little further. I wish I had some money to buy some property.

Also hotlinked on FARK the Stick Figure version, vey funny. (WARNING: NSFW Text/Language)
http://docs.google.com/TeamPresent?d...uth=true&pli=1

EDIT:
NSFW = Not Safe For Work

Pretty funny.

[sneitzel]

I wish I had some money to buy some property.

I bought my house originally as a business investment with a buddy of mine. When he got married I bought him out and refinanced. At the time I almost went with an ARM but the broker tried to pull a fast one on the rate and fees right at the end so I ended up with a conventional loan. I'm very glad about that now...

Pretty funny.

and yet sadly accurate.

[Jeff_in_Atl]

Another link
http://www.youtube.com/watch?v=H5tZc8oH--o
and another
http://www.youtube.com/watch?v=cMnSp...eature=related

[FroSSty]

Dow 10,365.45 -777.68 -6.98% Ouch...
http://finance.yahoo.com/

[Rhode Island Red]

Dow 10,365.45 -777.68 -6.98% Ouch...
http://finance.yahoo.com/

If anything, don't be surprised if it fully recovers this week. Best to ignore yo-yo like drama of the ups and downs and look at the longer term.

the money path since 2001:

2001 internet bubble --> $ put into real estate --> everyone that shouldn't, gets in on the real estate rush! --> smart $ starts to pull out when the real estate market maxes out and time-to-sell increases --> 2006 subprime ARM's start to kick in, cooling off real estate market and foreclosures start to increase--> 2nd half of 2007: market forcasters show future timeline of expected-to-happen foreclosure to peak in 2008, that will bring down stock market as well --> Now: as result of massive amounts of foreclosures, banks cannot withstand the fallout of so many foreclosures while smart $ goes to historically safe havens of bonds and gold until the bad signals pass.

[Joe 1320]

Also worthy of note, the stock market has a history of going in the toilet during an election year.

[Steel2686]

Also worthy of note, the stock market has a history of going in the toilet during an election year.

Exactly.

Plus that drop was mostly due in part to the bailout rejection. Wall Street likes to panic. Always have. Always will.