The Mortgage Fiasco ... Not My Fault!

[MJ DeMarco]

<div class="bbWrapper">Last night Dateline had a story on the Mortgage Fiasco ... they profiled 3 people who received mortgages and defaulted on them ... 2 were severely unqualified and 1 maybe so. <br /> <br /> When asked, <i><b>&quot;How much responsibility do you take&quot;</b></i> all 3 unanimously took very little responsibility, if not, NONE. One woman (Delores) took ZERO responsibility and called herself a victim. (She got $1.3 million in mortgages essentially being broke). One woman was a retired principal and failed to read any of her documents. The other woman had her lender fraudulently change her income from $1500 month to $7800.<br /> <br /> All 3 claim victim hood (the latter I can see, but the other 2?)<br /> <br /> Excerpt:<br /> <br /> <a href="http://www.msnbc.msn.com/id/21134540/vp/29804594#29804594" target="_blank" class="link link--external" rel="noopener">msnbc.com Video Player</a><br /> <br /> <br /> <b>The first step in having a wealthy mindset is to take responsibility for your actions (and lack of actions &quot;I didn&#039;t read the documents&quot;). </b>If you watch the video and listen to this woman&#039;s language, everyone else is to blame -- she&#039;s a victim (her words) and its as if mortgage lenders put her into mortgages at gunpoint.<br /> <br /> While the realm of greed traces to all parties, you still have a choice. If a junkie is on the sidewalk giving away free Heroin, you still have the choice to say NO. Most people did not.</div>

 

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[AlwaysCurious]

<div class="bbWrapper">Maybe I see it too simplistic but I think this is mostly an educational problem. People need to be taught resonsibility in their younger ages either at home or in school. If there is no immediate negative feedback on e.g. too much debt on credit cards on spending and spending, no wonder that there is no feel for guilt or responsibility. The bad thing is, that without this negative feedback you don&#039;t learn anything for the future.</div>

 

[Bobo]

<div class="bbWrapper">Responsibility is not taught any longer. The prevailing sentiment of the day is that those who are successful are successful due to either luck or graft and that those who are not are the victim of bad luck or the successful. The recent hysteria over bonuses to top executives at bailed out companies is a warning shot. Next, punitive taxes against the top 1%, then 5% then 10% will be in vogue because 99, 95, then 90% of the population are being spoonfed a false premise.<br /> <br /> The premise is that wealth is finite and that if the wealthy get more it must be coming from the mouths of the poor. Anyone with an IQ of room temperature and the literacy of a third grader can quickly discover that this batch of steaming bovine excrement is utter nonsense.<br /> <br /> The hope is that 51% have some brain activity and enough common sense to ask questions.<br /> <br /> We constantly hear whining about rights and what people are entitled to. The difference between a producer and a parasite is that the producer understands that inherent in every right is a commensurate responsibility.<br /> <br /> Sadly, that is not taught. Our grandparents knew it intuitively, our parents had a better life because of it and were able to make our lives easier. Sadly that was no favor - life hasn&#039;t gotten too hard, America has gotten way too soft.<br /> <br /> I&#039;m not optimistic.</div>

 

[andviv]

<div class="bbWrapper">so, how do we profit from it?<br /> <br /> It is a reality. A trend that seems to be going up at alarming rates.<br /> <br /> Ideas on how to profit?<br /> <br /> For example, I recall a couple of years ago somebody came up with a site called &quot;just walk away&quot; where they were teaching people how to walk away from their homes. I thought it was irresponsible and terrible, but then realized they were just profiting on a trend. People will walk away whether there is a website or not. Why not give the masses what they want and profit at it?<br /> <br /> I&#039;m pretty sure there are more and more lawyers getting ready to sue the banks and lending institutions, so they will make millions on class action lawsuits. Also, the same mortgage brokers that made millions in lending fees are now making money on loan modification fees.<br /> <br /> What else is out there?<br /> <br /> Ideas anybody???</div>

 

[hakrjak]

<div class="bbWrapper">I made more money during this period in history than any other... My networth went from negative $40k to + $160k in a few short years... (I&#039;m the guy who even lost his life savings &amp; then some during the &quot;dot-com boom&quot; when others here were making millions...)<br /> <br /> When I hear stories like this about people losing everything, it just confirms my belief that 95% of the people out there will find a way to fail, and stay dependent on others their entire lives. Dependent on the government, their family, friends, the company they work for, etc....<br /> <br /> It really didn&#039;t take a rocket scientist to realize that it was time to stop buying $1.2mil houses in Southern California, or lofts in Las Vegas, when people&#039;s salaries could no longer even come close to being able to afford them....<br /> <br /> If you managed to lose money during one of the loosest lending periods in our history, where you could borrow a virtually unlimited amount of cash on a handshake -- Then you definitely did something wrong.<br /> <br /> Cheers,<br /> <br /> - Hakrjak<br /> <br /> p.s. -- I have the same exact stories that a lot of these &quot;victims&quot; have about mortgage brokers writing my income in for me, and doing crazy things to qualify me for loans I didn&#039;t deserve to get -- but the difference is that I used those situations as opportunities to make money, and never considered myself taken advantage of...</div>

 

[Jill]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="andviv" data-source="post: 86437" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86437" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86437">andviv said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> so, how do we profit from it? Ideas anybody??? </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> Well, they have to go somewhere. So the obvious (I think) is rental properties. And if they&#039;re downsizing, as many are, then self-storage. I&#039;m sure there are more creative ideas out there. But according to Maslow, shelter is a big one, apparently.</div>

 

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[MJ DeMarco]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="andviv" data-source="post: 86437" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86437" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86437">andviv said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> so, how do we profit from it?<br /> <br /> Ideas anybody??? </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> Andres,<br /> <br /> It really is simple and it is the point of this post. Take responsibility. Don&#039;t be like these people. If you do what most people won&#039;t, you will live like most people can&#039;t. <br /> <br /> And above all, TRUST but VERIFY. It&#039;s easy to trust, not so easy to verify.</div>

 

[hakrjak]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="Jill" data-source="post: 86441" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86441" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86441">Jill said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Well, they have to go somewhere. So the obvious (I think) is rental properties. And if they&#039;re downsizing, as many are, then self-storage. I&#039;m sure there are more creative ideas out there. But according to Maslow, shelter is a big one, apparently. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> Ditto -- Buy up cheap housing right now to use as rentals. You&#039;ll cashflow great as things are today, and when the economy improves you can either raise rents or flip out of the properties for big capital gains.<br /> <br /> Cheers,<br /> <br /> - Hakrjak</div>

 

[bflash98]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="andviv" data-source="post: 86437" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86437" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86437">andviv said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> so, how do we profit from it?<br /> <br /> It is a reality. A trend that seems to be going up at alarming rates.<br /> <br /> Ideas on how to profit? </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> We should create bumper stickers that say &quot;I&#039;m a Victim Credit Crisis 2008&quot;. As well as t-shirts that say &quot;I&#039;m a victim&quot; on the front and &quot;Credit Crisis 2008&quot; on the back. Lighten everyone&#039;s mood maybe</div>

 

[mobi]

<div class="bbWrapper">One thing was very clear in that Dateline story ... ethics and morals in America have been replaced with greed. From the borrowers like Delores to the loan brokers and executives on Wall Street, everyone &quot;knowingly&quot; looked the other way in their pursuit of money, wealth and possessions. There are real victims in this Mortgage Fiasco ... but none of them were featured in that story. Anyone &quot;knowingly&quot; committing fraud should be charged and heavily fined (90% of their net worth) .. perhaps a class action lawsuit against the investment bankers should also be filed. <br /> <br /> Who really believes S&amp;P was deceived into handing out higher ratings than was warranted?<br /> <br /> Did the rocket scientists really believe the housekeeper made $12K a month?<br /> <br /> Any those people that &quot;claimed&quot; they knew what was going on ... why didn&#039;t they speak up before? They could have contacted Dateline, setup a web site, etc.</div>

 

[MattThomas]

<div class="bbWrapper">We&#039;re missing an element to this story though. Yes, I think individuals should take responsibility for getting in over their heads in debt, BUT there is some fault with bankers. <br /> <br /> Sub-prime mortgage products and other &quot;exotic&quot; debt instruments were originally created to suit the more &quot;sophisticated&quot; investor. However, they began being marketed to people with less than stellar credit ratings. Soon enough, these mortgages (while being sold on the secondary mortgage market) carried premiums because they appeared to grant a higher return to investors, so even many Prime Borrowers were being sold Sub-Prime mortgage products.<br /> <br /> So yes, customers should take part of the blame because anyone making any financial decision should do their due diligence and understand what it was they were getting into, but there was a lot of deceit and lying in the mortgage industry that should absolutely shoulder some of the blame.</div>

 

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[imirza]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="bflash98" data-source="post: 86447" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86447" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86447">bflash98 said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> We should create bumper stickers that say &quot;I&#039;m a Victim Credit Crisis 2008&quot;. As well as t-shirts that say &quot;I&#039;m a victim&quot; on the front and &quot;Credit Crisis 2008&quot; on the back. Lighten everyone&#039;s mood maybe </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> Thats actually an excellent business idea. T-shirts saying &quot;Countrywide foreclosed on my house&quot; . &quot;I am a victim of Citibanks predatory lending policy&#039; , &#039;Bank of America stole my home&#039; <img src="/community/imgs/emoticons/em-rofl.png" class="smilie" loading="lazy" alt=":rofl:" title="ROFL :rofl:" data-shortname=":rofl:" /></div>

 

[Edge]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="MattThomas" data-source="post: 86476" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86476" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86476">MattThomas said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Sub-prime mortgage products and other &quot;exotic&quot; debt instruments were originally created to suit the more &quot;sophisticated&quot; investor. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> Sorry, but referring to these as &quot;exotic&quot; is really just another excuse. Really, how confusing is an adjustable rate mortgage, or the pooling and making securities of mortgage paper.<br /> <br /> The only thing exotic about them was the level of fraud underneath the BS appraisals and stated income.</div>

 

[hakrjak]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="Edge" data-source="post: 86500" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86500" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86500">Edge said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Sorry, but referring to these as &quot;exotic&quot; is really just another excuse. Really, how confusing is an adjustable rate mortgage, or the pooling and making securities of mortgage paper.<br /> <br /> The only thing exotic about them was the level of fraud underneath the BS appraisals and stated income. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> The thing I always thought was stupid was when they came out with all of these &quot;exotic&quot; programs like the 1,3, 6, and 12 month option arms... A seemingly PERFECT program for flippers -- Because you could keep money in your pocket, and not have to spend as much making payments... But the banks quickly (After about 6 months) banned flippers from using these programs, and forced us back into the 30 yr fixed programs, because apparently they weren&#039;t making enough money on our loans since we only held them a short time (Gee, I thought the $2-3k in closing costs was plenty of profit for them, but I guess not...)<br /> <br /> So while the program was quickly recognized and utilized by sophisticated investors like myself and others here, the banks didn&#039;t want sophisticated investors using that product, and instead make the direct choice to target regular consumers with this product. That, in my opinion -- Was probably one of their biggest missteps in this whole debacle.<br /> <br /> Cheers,<br /> <br /> - Hakrjak</div>

 

[Bobo]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="JScott" data-source="post: 86494" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86494" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86494">JScott said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Exactly! <br /> <br /> My wife and I decided this week (after a frustrating incident with some buyers) that in the future, no matter what happens with our deals -- whether good or bad -- it&#039;s OUR FAULT. Never the buyers, never the other agents, never the lenders, never the contractors. Just ours. <br /> <br /> Sorry about the long rant, but hope this helps someone... <img src="/community/imgs/emoticons/em-smile2.png" class="smilie" loading="lazy" alt=":)" title="Smile :)" data-shortname=":)" /> </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> Excellent point but I would alter the wording just a tad. Fault is an overused word these days. It isn&#039;t the fault you decided to accept, it&#039;s the R word - responsibility. It isn&#039;t your fault that not everyone conducts themselves to the same ethical standards you bring to a deal but when they don&#039;t, it is your responsibility to deal with it and learn from.<br /> <br /> Once you arrive at the conclusion that there are some people on this planet who were born without remorse or any sense of honor you start gaining a bit of circumspection when analyzing any situation that depends on someone else.<br /> <br /> I saw it phrased less eloquently but much more concisely on a bumper sticker:<br /> <br /> Mean People Suck!<br /> <br /> Good post J.</div>

 

[rcardin]

<div class="bbWrapper">If it wasn&#039;t for &quot;exotic loans&quot; few of us in Real Estate would still be in business. It takes hard cash, exotic loans, or exotic deals to make money in real estate. <br /> <br /> Bring back the exotic loans it made it much easier on investors.</div>

 

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[hakrjak]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="rcardin" data-source="post: 86510" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86510" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86510">rcardin said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> If it wasn&#039;t for &quot;exotic loans&quot; few of us in Real Estate would still be in business. It takes hard cash, exotic loans, or exotic deals to make money in real estate. <br /> <br /> Bring back the exotic loans it made it much easier on investors. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> Amen! The more exotic the lending, the more money I made. These politicians keep talking about trying to &quot;un-freeze&quot; the credit markets, but they don&#039;t seem to understand that it&#039;s going to take returning to the &quot;good old days&quot;, atleast in some ways -- to make this happen! You can&#039;t un-freeze the markets when you are now rejecting 90% of the loan applicants. House prices are so low right now, if a bank makes a loan and has to foreclose on that loan -- They will be in a much better position to make money on appreciation and equity than they would have 5-10 yrs ago. Wake up brainiacs!<br /> <br /> Cheers,<br /> <br /> - Hakrjak</div>

 

[Russ H]

<div class="bbWrapper">Interesting points all around.<br /> <br /> I have a somewhat different perspective.<br /> <br /> Over the past few thousand years, loans have been given to those who:<br /> <br /> 1. Put up some collateral (i.e., have some of their <b>own</b> &quot;skin&quot; in the game),<br /> <br /> 2. Can prove they have enough funds/income to service this new debt (not an easy thing), and<br /> <br /> 3. Have shown they are responsible and committed to paying their bills on time.<br /> <br /> *******<br /> <br /> The financial crisis we now find ourselves in was, in part, caused by banks/lenders who loaned money to people who:<br /> <br /> 1. Did not put up any (or very, very little) collateral.<br /> <br /> 2. Did not have any realistic means to service this new debt, and/or<br /> <br /> 3. Did not have the best credit history (i.e., had been flaky in the past, or had no track record of making these kinds of payments on a regular basis).<br /> <br /> ********<br /> <br /> It didn&#039;t take a genius to see what was going to happen next (although, I must admit, I chose to ignore the signs, as did billions of other people): <br /> <br /> These mortgages were headed towards default, esp if the property they secured went down in value.<br /> <br /> ******<br /> <br /> What made it the Perfect Storm? <br /> <br /> Bundling up lots of these questionable mortgages into mortgage-backed securities w/AAA ratings and selling them to unaware (or just greedy and naive) investors-- while more savvy investors took short positions on these sales, BETTING ON THEM TO GO DOWN IN VALUE.<br /> <br /> Once RE values started to decline, the effects were exponential: The brokerage houses (like Lehman Bros) insurance companies (like AIG) who underwrote many of these shorts went upside down-- fast.<br /> <br /> And the lenders, who had given these meaningless loans to people who did not have the capacity (or motivation) to pay them, ALSO went upside down-- fast.<br /> <br /> And the value/market price of RE went down even faster.<br /> <br /> ******<br /> <br /> So now, we have a LOT of people/companies screaming &quot;It&#039;s not my fault!&quot;.<br /> <br /> So many people saw the signs, and tried to tell us.<br /> <br /> But we were so caught up in the heady thrill of rising markets, we chose not to listen to them.<br /> <br /> -Congress and the executive branch didn&#039;t listen.<br /> -Lenders didn&#039;t listen<br /> -Brokerage houses didn&#039;t listen<br /> -Investors didn&#039;t listen<br /> -Home buyers didn&#039;t listen<br /> <br /> -You and I didn&#039;t listen <br /> <br /> So who&#039;s fault is this mess, really?<br /> <br /> -Russ H.</div>

 

[AroundTheWorld]

<div class="bbWrapper">What are the stages of grief? I know denial, and anger are in there...<br /> <br /> Those two, at least for a time, will cause us to blame someone else. It is the human condition.<br /> <br /> Maybe this is the event that the citizens of the US needed to turn look at the three fingers pointing back at themselves. <br /> <br /> Life will go on - - - and so will these human cycles. <br /> <br /> What are YOU going to do with YOUR life?</div>

 

[MattThomas]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="Edge" data-source="post: 86500" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=86500" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-86500">Edge said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Sorry, but referring to these as &quot;exotic&quot; is really just another excuse. Really, how confusing is an adjustable rate mortgage, or the pooling and making securities of mortgage paper.<br /> <br /> The only thing exotic about them was the level of fraud underneath the BS appraisals and stated income. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> The term exotic is a relative term since the Fixed Rate, 30 year mortgage is considered the standard in the US.<br /> <br /> And, yes, to us entrepreneurs and money-minded people, ARMs and Alt-As seem pretty easy to understand. But to less savvy banking consumers, this could get a little confusing, being that mortgage brokers will often use deception and promises such as &quot;you will be paying a lower payment&quot;, then mumble under their breath (until the rates go up). Should consumers trust mortgage brokers? No? Is it their fault for trusting them? Yes. Should mortgage brokers be allowed to lie to consumers? Absolutely not. Thus, both the consumer and the banks are to blame. <br /> <br /> On pooling mortgages into securities, this was absolutely fraud, and there was a TREMENDOUS amount of misinformation about mortgage-backed securities. Mortgage-backed securities were often traded in the Over the Counter market, where the contents of these securities were either not discolsed, or hidden very, very well. So, it was hard for ANYONE to understand what exactly was contained in these things. It was hidden by design to prevent lenders and securitizers from being caught.</div>