Bad Movie Logo
"A website to the detriment of good film"
Custom Search
HOMEB-MOVIE REVIEWSREADER REVIEWSFORUMINTERVIEWSUPDATESABOUT
Welcome, Guest. Please login or register.
Did you miss your activation email?
March 28, 2024, 06:53:23 PM
713371 Posts in 53058 Topics by 7725 Members
Latest Member: wibwao
Badmovies.org Forum  |  Other Topics  |  Off Topic Discussion  |  Lenders in hole continue digging « previous next »
Pages: [1]
Author Topic: Lenders in hole continue digging  (Read 3576 times)
lester1/2jr
B-Movie Kraken
*****

Karma: 1109
Posts: 12268



WWW
« on: April 08, 2008, 09:15:09 AM »

 the sub prime crisis was created when the federal reserved printed up more money (called "lowering interest rates"  which fueled the malinvestment in real estate.  so the federal reserve was called upon to solve the problem by....printing more money!  It's like the scorpion who stabs the beaver or whatever it is that tries to help him across the river.  Unfotunately, these guys just have a pavlovian mindset that turns them into criminals when they have more money than they should. still,  you'd figure with all the gloom and doom in the media on the economy they would clean up their act for at least a little while.


Wachovia is still making loans called option ARMs. These loans involve an offer to a borrower to pay less per month than is required to repay the loan. Each month, the money left unpaid is added to the loan's principal. Then, at some contractual trigger price for principal, the loan's monthly payment jumps. The borrower may have to pay twice what he had been paying. He may pay even more than double.

Why would anyone agree to accept such a loan? Two reasons: (1) he expects his income to rise sharply in the next year or two; (2) he is a person who does not read or understand contracts and also believes in something for nothing. 

 

We are now in a recession. The number of people who can expect big increases in their income next year is a small and declining figure. But Wachovia is still making option mortgages.

But aren't option ARMs the most vulnerable to default of all mortgages? Yes.



 Wachovia made no bones about its desire to continue to make option ARM loans. Where? In California.

California? Where housing prices are plummeting? Yes.



The present subprime mortgage crisis has been in full swing since August, 2007. Why in March was Wachovia still making these loans – in California, Missouri, or anywhere else?

link

« Last Edit: April 08, 2008, 09:28:05 AM by lester1/2jr » Logged
Captain Tars Tarkas
Bad Movie Lover
***

Karma: 76
Posts: 411



WWW
« Reply #1 on: April 08, 2008, 11:10:18 AM »

Most option ARMs were taken by people who bought into the real estate koolaid that their homes will increase in value by 50% by the time the bigger payments come due, and then they upgrade to a bigger house.  You can have fun tracking the mortgages exploding on blogs like

http://www.irvinehousingblog.com/
http://housingpanic.blogspot.com/
http://www.doctorhousingbubble.com/


Prices near here are getting close to reasonable, my wife and I might be able to afford a house soon.


There are more ARM loans that will come due all year, and then other fancy types of loans will start popping in 2009.
Logged

lester1/2jr
B-Movie Kraken
*****

Karma: 1109
Posts: 12268



WWW
« Reply #2 on: April 08, 2008, 02:18:44 PM »

I'm not knowledgeable about the mortagage business.  these ARM things  seem like middle class sub primes.  except they stopped doing sub primes and continue to do these.
« Last Edit: April 08, 2008, 02:25:42 PM by lester1/2jr » Logged
Zapranoth
Eye of Sauron and
Frightening Fanatic of Horrible Cinema
****

Karma: 256
Posts: 1405



« Reply #3 on: April 09, 2008, 12:58:29 AM »

Not quite on your topic, lester, but I'll try.

I agree that those kind of loans are unwise to offer in this present market.

I also think that it's a heterogenous group who takes ARMs and such loans.   We argue about this in my family sometimes.  Do people really understand how screwed over they could be by a variable interest rate loan when they get it?  Do people just become greedy and make a bad choice?    I think all of the above are what happen, on a really huge scale.

My wife and I paid for a small percentage of our house with a home equity line of credit with a variable rate, and when that sucker jumped two points, we poured money into it until it was gone.  Never again will I take a loan like that.  But -- we had bought a house that only costs a fraction of our income to pay for, so this wasn't a big panic for us.  We would not have agreed to buy our whole mortgage under those kinds of terms, but I can halfway sympathize with some of the people who did... especially those with marginal incomes, who are harder-hit by all the other rising costs.

Then there are the whiny-ass people making six figures who worked in lending, who are carping about how they won't be able to keep the house in Malibu, etc, yap yap yap.  If you worked in the lending industry and got laid off and couldn't see it coming, I got news for you:  we have little to no clue about the industry and we saw it coming!  So no sympathy from me -- greed pays its own dividends.
Logged
lester1/2jr
B-Movie Kraken
*****

Karma: 1109
Posts: 12268



WWW
« Reply #4 on: April 09, 2008, 09:54:28 AM »

if you are buying a house these days, it is paramount to hire an attorney
Logged
trekgeezer
Frightening Fanatic of Horrible Cinema
****

Karma: 0
Posts: 4973


We're all just victims of circumstance


« Reply #5 on: April 09, 2008, 10:06:47 AM »

I'm totally stupid about this stuff, but from what I've seen and read  in various news reports one the problems with this subprime business is that they were loaning people more than the house cost. The borrowers would then turn around and use the excess money to buy cars or other items.

The foreclosures are now happening because the rates went up and the borrower was stuck paying off a loan that is way more than the house is worth.

I feel little pity for the lenders or the borrowers in this mess, it just boils down to greed on everyone's part.

I remember when they started those ARM loans back in the 80's.  My wife and I assumed a VA loan on the first house we bought at 13.5% in 1982, the interest rate on a new VA loan would've been 16.5%.  Someone tried to talk us into one of those ARMs and thought it was a bad idea back then.

Logged




And you thought Trek isn't cool.
lester1/2jr
B-Movie Kraken
*****

Karma: 1109
Posts: 12268



WWW
« Reply #6 on: April 09, 2008, 10:16:55 AM »

in the link, the author refers to them as 'walking backward loans".  basically, they made them to people hoping they would live in them for a while then default.



I agree about thelenders and borrowers, but when the likes of Alan Greenspan are out there telling you this is the new good way, it's no surprise many played footsoldier in this war on rationality.
Logged
ulthar
Frightening Fanatic of Horrible Cinema
****

Karma: 368
Posts: 4168


I AM serious, and stop calling me Shirley


WWW
« Reply #7 on: April 09, 2008, 10:49:24 AM »


I'm totally stupid about this stuff, but from what I've seen and read  in various news reports one the problems with this subprime business is that they were loaning people more than the house cost. The borrowers would then turn around and use the excess money to buy cars or other items.

The foreclosures are now happening because the rates went up and the borrower was stuck paying off a loan that is way more than the house is worth.


Exactly.  It has nothing to do with fixed vs variable rates.  It has to do with money mismanagement, whether that money is obtained from a loan, lines of credit, writing bad checks or whatever.  It comes down to personal responsibility - people CHOSE to borrow more than they could afford; just because a lending institution offers a plan, does not mean anyone has to take it.

When we bought our current house, we only planned to be here 3 - 5 years (we are going on 6 now, but are thinking about moving in a year or so).  We got a variable rate mortgage because, due to the caps ands such, there was NO WAY we'd pay more with this loan than with a fixed rate.  And we haven't; we've paid less.

A lot of times, these things are designed for very speicific uses - like us, living in this house only for a few years (during which most of the payment is interest, not principle, though we do make principle-only payments).  If some folks, greedy as Trek said, tried to 'play the system' and live higher than their means, that's their problem.
Logged

------------------------------------------------------------------------------------------------

Professor Hathaway:  I noticed you stopped stuttering.
Bodie:      I've been giving myself shock treatments.
Professor Hathaway: Up the voltage.

--Real Genius
trekgeezer
Frightening Fanatic of Horrible Cinema
****

Karma: 0
Posts: 4973


We're all just victims of circumstance


« Reply #8 on: April 09, 2008, 10:53:51 AM »

The bad thing about this  is that we taxpayers always end up having to bail the greedy bastards out.  Remember Savings and Loan debacle when George Sr. was the president.
Logged




And you thought Trek isn't cool.
lester1/2jr
B-Movie Kraken
*****

Karma: 1109
Posts: 12268



WWW
« Reply #9 on: April 14, 2008, 08:32:37 AM »

surprise surprise  the afformentioned lending entity is now bankrupt.
Logged
Pages: [1]
Badmovies.org Forum  |  Other Topics  |  Off Topic Discussion  |  Lenders in hole continue digging « previous next »
    Jump to:  


    RSS Feed Subscribe Subscribe by RSS
    Email Subscribe Subscribe by Email


    Popular Articles
    How To Find A Bad Movie

    The Champions of Justice

    Plan 9 from Outer Space

    Manos, The Hands of Fate

    Podcast: Todd the Convenience Store Clerk

    Faster, Pussycat! Kill! Kill!

    Dragonball: The Magic Begins

    Cool As Ice

    The Educational Archives: Driver's Ed

    Godzilla vs. Monster Zero

    Do you have a zombie plan?

    FROM THE BADMOVIES.ORG ARCHIVES
    ImageThe Giant Claw - Slime drop

    Earth is visited by a GIANT ANTIMATTER SPACE BUZZARD! Gawk at the amazingly bad bird puppet, or chuckle over the silly dialog. This is one of the greatest b-movies ever made.

    Lesson Learned:
    • Osmosis: os·mo·sis (oz-mo'sis, os-) n., 1. When a bird eats something.

    Subscribe to Badmovies.org and get updates by email:

    HOME B-Movie Reviews Reader Reviews Forum Interviews TV Shows Advertising Information Sideshows Links Contact

    Badmovies.org is owned and operated by Andrew Borntreger. All original content is © 1998 - 2014 by its respective author(s). Image, video, and audio files are used in accordance with the Fair Use Law, and are property of the film copyright holders. You may freely link to any page (.html or .php) on this website, but reproduction in any other form must be authorized by the copyright holder.