--snip-- A close look at the data reveals a very different story — and one that gets far too little airing in public discourse. Far from paying our bills, the current generation of Americans — or some of them — have set records for default which probably have no parallel in the history of the human race. During the last five years, U.S. individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans. That works out at about $6,000 per household.
Furthermore, as our chart shows, the majority of that reduction hasn’t come from people paying off their loans, but from banks writing them off. The total debt reduction from the peak, says the Fed, is $954 billion. Loan write-offs, at $585 billion, account for 60% of that. In other words, for all the chest-thumping about how Americans are repairing their balance sheets and how we aren’t a nation of deadbeats, in the last five years Americans have walked away from $3 in debt for every $2 they’ve paid off.
1. This is recycled bullshit. it all goes back to the crap banks were doing
Edited on Tue Jan-15-13 11:27 AM by No Elephants
to get a huge bunch of mortgages, so they could buncle them and sell them to Wall Street, which then sold them as mortgage-backed securities in the U.S. and abroad. In the process, they drove up home prices, leading to the real estate bubble. They are the reason so many homeowners are so far underwater. So, right off the bat, cry me a river.
lenders are usually far the more sophisticated parties in the transaction, as to both finance and law. Lenders are almost 100% of the time the ones with the bargaining leverage and also they (or their lawyers) are the ones who drafted the loan documents. So, if there is something wrong from the transaction from their perspective, they have no one but themselves and their lawyers to blame. So, cry me another river.
Moreover, people are not walking away from loans because most states now have recourse mortgages. That means that, even if people walk away from real estate on which there are one or more mortgages, the lenders can sue them for the balance. And all other kinds of loans are also with recourse. And no taxpayers bailed them out or will bail them out, either.
So lenders can sue the borrower, which is the deal the lenders made. If the buyer is too broke to make a lawsuit worthwhile, whose fault is that? The lender is the one who decides who he, she or it is going to lend to. They deliberately failed to qualify borrowers because they were making a fortune selling bundled mortgages to investment bankers.
Many borrowers are paying off huge mortgages at ridiculously above market rates because their homes are badly underwater and they can't refinance because lenders got stricter since 2008 and/or their income is lower than it was when they bought the homes. If anything, people are doing short sales, with the cooperation of the banks. And those are the lucky ones.
Besides, the American taxpayer paid for a lot of these loans with TARP. That is why they were written off.
This is a recyled version of the cynical claims made by liars in 2008 that the crash was caused by some electrician who bought a house he or she could not afford.
It's complex to rebut, but it's bullshit nonetheless. I did too many posts rebutting this kind of claim back around 2008-2009 to have any interest in repeating the identical drill just because some is dredging up the same issues.
If anyone wants to search DU for posts by no elephants that mention "crap mortgage derivatives" and/or "mortgage back securities," you will find not only my posts but those of other DUers discussing the subject.
Who causes this whole problem: Lobbyists, Congress, Greenspan and Bubba Clinton, each of which/whom had a lot to do with repeal of Glass Steagall, then mortage lenders and Wall Street (who probably hired the aforementioned lobbyists) who created a real estate bubble and crashed our economy and that of several other nations.
Anyone who says otherwise either doesn't have a clue or is being deceptive.
I know this is not written very clearly, but, as I said, I did the drill too many times before to spend more time on it four years later.
Sorry, formercia. I am not ranting at you, but at the bullshit claims being made. They just find a way to bring up the whole 2008 bs again, despite all the information out there on what really happened.
3. I've looked at life from both sides now, from win and lose and still somehow...
I had a relative working for a law firm that was indirectly involved in the mortgage backed securities cesspool. Got paid very well (but lose his job early in 2008, as this stuff was falling apart.) Told his boss there was something very wrong with these deals. Boss replied, "If we don't do it, some other firm will."
Same exact thing that was said at an investment bank when one of their people who went public later raised the issue with them. That guy refused to have his division participate, but he didn't blow the whistle at the time, either. So, he had a little bit of a Pontius Pilate thing going on. Still, he was treated like a saint later because he would not let his division participate.
Everyone knew something was very wrong, from the original lenders to the appraisers who were over-valuing the homes to the lawyers to the accounting firms to the investment bankers who were offering the crap bundled mortgage backed securities to the public. In their way, they were a half step removed from Bernie Madoff, the only difference being he finally got prosecuted and they never will because the bullshit D of J said they broke no laws. Since when is failure to disclose degree of investment risk legal? That has not been the case since Joe Kennedy helped FDR and FDR's Congress write the nation's first securities laws.
On the other side, I had another relative who lost his job right around 2008--coincidence: his employer died--and, due to the economy, could not find work for a year. Has a wife and a young kid in grade school, who was maybe 7 in 2008. Used up all his savings trying not to lose his house because his wife threatened to leave him if he did, and take the kid with her. (She comes from another country and was threatening to take the kid and go live with her family there. My relative could not have even paid for a plane ticket to visit his kid.)
He got two part time jobs. He makes now a litte more than he used to make before his boss died, but is considered an independent contractor now, so no fringes whatever--no health insurance, no sick pay, no vacation pay, etc. Nada, zip.
His wife finally had to get a job, too, but because of language issues, she could only get one at a laundromat. And she is being paid under the table.
Even though interest rates are laughably low now, he is paying pre-2008 rates. He cannot get refinanced because standards are higher and because his wife can't prove income. Yet, in the life of the mortgage, he was late on only one payment--the one just before he got the two jobs. Still, the fuckers will not refinance him, even though he is making more than when he took the loan.
Caught every which way and threatened with losing his kid if he failed. He had a small stroke last year, which I am sure was from the stress. He has health insurance, but the only kind he could afford was lousy. The deductible and co pay are so high, he ended up paying for all the expenses of the stroke himself.
So, I've looked at it from both sides.
As for DU3, only a few days ago, I mentioned that I had used to learn so much here in my early years here, but that level of knowledge and thinking ability is rarely seen anymore. Still, it would be very disappointing if no one lashed into your source's framing of the issues.
9. I've only heard "qualifying the borrower," but folks probably say due diligence, too.
As to politicians, yes.
In 2008, I was defending Obama on a message board against a Hillary fan who owned the board. One of the flaps was that he had gotten a lower than market rate loan in Chicago. On that same board was a neocon banker, who, ordinarily would have attacked Obama. However, he said that banks' giving officeholders below market loans was simply standard operating procedure.
It's fine for the banks to offer, but should officerholders accept?
Dodd, who, of course, was on the Senate banking committee, got negative press for a below market loan from the now notorious Countrywide. IIRC, he was not the only one. I believe a Republican or two also got nifty loans from Countrywide.
In February 2011, despite "repeatedly and categorically insisting that he would not work as a lobbyist,"<20><21> Dodd was identified by The New York Times as the likely replacement for Dan Glickman as chairman and chief lobbyist for the Motion Picture Association of America (MPAA).<22> The hiring was officially announced on March 1, 2011,<23> with his salary estimated at $1.5 million per year.<24>
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