[emersonbiggins]

$this->bbcode_second_pass_quote('TommyJefferson', '
')I agree with GG. Contracts so complex and illegible that they can only be understood by a person with a magnifying glass and advanced specialized education borders on fraud.

[TreebeardsUncle]

Hi.
A couple things:

1.These folks who formed the sub-prime lending companies are the same ones that brought in the S&L scandle.

2. Along with the first generation of auto-centric suburban sprawl that came in during the 20's came the beginings of the residential mortgage lending industry. Before that people bought their houses or rented, instead of going into debt to occupy a building.

Would like to reiterate my 4 rules of investing.

1. A fool and his money are soon parted.

2. A fool is born every minute. (These people buy from Ford, GM, and Chrysler.)

3. There is no fool like an old fool. (These people keep the casinos in Nevada in business.)

4. There is no keeping a fool from his foolishness. (These people have taken out ARMS and lose their houses to foreclosure.)

[vision-master]

This ain't the 50's no more. How ya gonna live with the price of homes these days?

[snax]

Sub-primes have their place. They have obviously been misapplied and abused however. Enough said there.

Regardless of the bigger fool theory and predatory practices vs. legitimate use, I would agree that the tactics used to de-emphasize portions of contracts need to be addressed by legislation. 'Fine print' as the term goes needs to be a thing of the past in the literal sense. No more graying out or making the gotchas too small to read.

When you are talking about sub-prime loans however, many of the people who will default literally have nothing to lose financially. What little if any equity they give up could just as well have been sunk into rent payments, or they have already thrown themselves under the bus in other ways financially.

There will always be crooks no matter what however, so people should not delude themselves into thinking that because their loan is not sub-prime, that they are not being taken for a ride. Closing costs and junk fees can easily add up to more than some lenders would ever hope to get out of a standard sub-prime deal. Throw in possibly paying too much for a house during a rapidly appreciating (and subsequently depreciating or flat) market, and sub-prime loans are not the only thing to worry about, as buyers can still get stuck with paying far more than they should be.

[mmasters]

$this->bbcode_second_pass_quote('TreebeardsUncle', 'A')ctually, that is the way things are supposed to work. Governement is here to more efficiently enable the transfer of the wealthy from the many to the few. The next big rip off will be in taking money from old baby boomers and giving it to health insurance executives, pharmaceutical executives, and hospital and convalescent home administrators.
G

[gnm]

$this->bbcode_second_pass_quote('TommyJefferson', 'C')ontracts so complex and illegible that they can only be understood by a person with a magnifying glass and advanced specialized education borders on fraud.

[Cloud9]

On sub prime notes, is it the lender that is getting screwed or the mortgage company that buys the mortgage from the lender? If the lender is making loans that he knows the borrowers can't repay and then markets these notes as viable mortgages to mortgage companies, it seems to me that the mortgage companies would be looking at RICO actions against the lenders.

[TreebeardsUncle]

Actually, from the point of the view of the finance companies, defaults, foreclosures, and short sells are of no concern as long as the volume of transactions and the loan amount/transaction is maximized.
Just saw about a dozen adds in the Sacramento Penny Saver indicating the residential real estate market is in decline here: 5 by folks who are offering to buy houses, 4 about foreclosures -- 2 talking about how to avoid foreclosure, and 2 about buying foreclosed properties, 2 more about financing, and 1 saying the place must be sold. At least one of the adds noting sales of foreclosed properties offered 0% down. That is just the way to generate more defaults, foreclosures, and short sales. As soon as that property is closed on in this declining market, the buyer will immediately be upside down owing more on the property than the magnitude of the loan. The lending agencies must know this but consider immaterial as they pass off the hot potatatoes to FM, mortage backed security dealers, etc.

G

[gg3]

Bingo! Cloud 9 has it.

The brokerages package up the smelly loan portfolios and spray a little perfume on 'em, and sell them to real lenders as if they were legitimate financial instruments.

The real lenders, whoever they may be: bond market investors or whoever, get stuck holding the bag on repossessed properties.

Meanwhile the brokerage has gone out of biz and is nowhere to be seen.

Yeah it's really easy to screw around when it's someone else's money, as in, the actual lenders' funds being thrown about by these brokerages.

So it's a ripoffski at both ends, with an illusion of wealth all'round.

---

How I long for the legendary days of old when a banker was really a banker, a respectable conservative guy or gal who lived in the neighborhood and knew the people and the place, and knew how to take care of their savings accounts by writing loans to people who, long before TRW and the rest of 'em, s/he judged as being of prudent character.

There was no incentive to cheat because they'd all run into each other again and again on Main Street, and personal honor was at stake, not to mention family reputations.

And when something went wrong, people had friends and relatives and room for cutting each other just a bit of slack until times got better.

Well folks, in the 21st century we're either going to re-create that, or we're going to ride the present trend right over the edge of the cliff.

[The_Toecutter]

$this->bbcode_second_pass_quote('', 'S')o that would be any form from the IRS right?

[TreebeardsUncle]

Well, I think each financing transaction is now seen as a product in itself and, in keeping with the goal of American business to maximize the volumes of products rather than their quality, the volume and the magnitude of the loans are maximized in order to maximize the profits of the mortgage brokers (as stated on a recent link from theoilcrash.net). I don't think the lenders even see foreclosures as being a problem. Why else advertise foreclosed properties for zero money down in a declining market. They may as well be saying "Now, you too, over-indebted sucker, can end up upside down on your loan and enjoy the pleasures of foreclosure." No one ever lost money undestimating either the intelligence or the good taste of the American public.

Geoff

[TommyJefferson]

$this->bbcode_second_pass_quote('gg3', 'T')he real lenders, whoever they may be ...get stuck holding the bag

[drew]

Here's a quote from David Lereah:

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress."

He called it "very unsophisticated."

Here's one from one of his cronies:

Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. "If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing."

I guess my wife and I are morons for paying the house off last month.......


God, I'm dumb!

Drew

[PrairieMule]

Drew,

Funny you mentioned Lending Tree. Last month I had a broker call in with a borrower who went to Lending Tree first.

In 7 months, his credit was pulled over 200 times by Lending Tree.

True story.

[drew]

Why, and why 200 times?

Funny, too, I remember the adverts for the company on TV.

As for the scammie nature of the subprime business, there are always willing victims. I have a good freind who thought he could get a 170 k mortgage for ony 500 a month. It is obvious he gets his info from the tv. I guess he doesn't know what a negative amortization mortgage is either. Needless to say I set him straight on the numbers.

Drew

[PrairieMule]

$this->bbcode_second_pass_quote('drew', 'W')hy, and why 200 times?

Funny, too, I remember the adverts for the company on TV.

As for the scammie nature of the subprime business, there are always willing victims. I have a good freind who thought he could get a 170 k mortgage for ony 500 a month. It is obvious he gets his info from the tv. I guess he doesn't know what a negative amortization mortgage is either. Needless to say I set him straight on the numbers.

Drew

[emersonbiggins]

Hey PM, I currently get a quarterly credit report from Discover's ProfileProtect program. My FICO doesn't get hit by getting regular reports, does it? I'm straddled right around the 700 range right now, and that won't improve too much until I'm out of school and paying down some debt.

[PrairieMule]

$this->bbcode_second_pass_quote('emersonbiggins', 'H')ey PM, I currently get a quarterly credit report from Discover's ProfileProtect program. My FICO doesn't get hit by getting regular reports, does it? I'm straddled right around the 700 range right now, and that won't improve too much until I'm out of school and paying down some debt.

[emersonbiggins]

yeah, that figures - I actually have an $800 strip club story that I'd love to share sometime.
thanks for keeping me apprised on this stuff, PM. I'd love to hit 720 before getting that first mortgage, but I don't know how realistic that is.