April 04, 2008
The Crooked Citizen takes a Mortgage
.
John and Jane, brokers, sit in their mortgage originator store front office. They spy a couple reading their window adverts.
"Come in, come in. And how are you lovely folks today?"
"Good." "Good."
"May we ask you if you rent or own?"
"Ah, you rent. $900 a month and it's tight. We see." (They huddle a moment.)
"Folks, we've assessed your case and our thinking is if you sign right here for a thousand a month mortgage, we'll see that you get a quarter of a million dollars to get that home you have your eye on. How's that?"
"Don't you have to write down all your credit card debt?" "No. Your application looks great, just as it is."
"And what will your mortgage and mortgage rate be at the end of the initial term? No one can say for sure but the standard operating procedure is that you come back and refinance with the new higher value of your home". "Everybody does, just SOP, right Jane?"
"SOP, everybody does."
"You're curious how we get paid. Well, it comes from the lender's part of the deal. It isn't a lot but we get to put good folks in great homes. That's a big reward right there."
"All set? See ya later. You're welcome, thank you."
John and Jane high five, laughing!
"What a couple of con artists those two are, borrowing a quarter mil on their credit record."
John and Jane, brokers, sit in their mortgage originator store front office. They spy a couple reading their window adverts.
"Come in, come in. And how are you lovely folks today?"
"Good." "Good."
"May we ask you if you rent or own?"
"Ah, you rent. $900 a month and it's tight. We see." (They huddle a moment.)
"Folks, we've assessed your case and our thinking is if you sign right here for a thousand a month mortgage, we'll see that you get a quarter of a million dollars to get that home you have your eye on. How's that?"
"Don't you have to write down all your credit card debt?" "No. Your application looks great, just as it is."
"And what will your mortgage and mortgage rate be at the end of the initial term? No one can say for sure but the standard operating procedure is that you come back and refinance with the new higher value of your home". "Everybody does, just SOP, right Jane?"
"SOP, everybody does."
"You're curious how we get paid. Well, it comes from the lender's part of the deal. It isn't a lot but we get to put good folks in great homes. That's a big reward right there."
"All set? See ya later. You're welcome, thank you."
John and Jane high five, laughing!
"What a couple of con artists those two are, borrowing a quarter mil on their credit record."
Labels: 1929, application enhancement, bankruptcy, CDOs, foreclosures, Great Depression, mortgage brokers, sub prime
August 27, 2007
Congress and Fed Collude to Cause Mortgage Crisis
.
Lessons of Great Depression give way to greed.
The history behind the mortgage fiasco and bank liquidity is a complex long intertwined affair.
After the Great Depression new financial regulations were put in place. For one, banks were barred from equity deals or brokerage operations. Then, fairly recently, Congress and the Fed gave in to the natural greed of the banks and let them return to brokerage/equity dealings. It is in no way surprising that subsequent to dismantling safeguards the present catastrophe should occur. It is axiomatic to allowing banks to invest in speculative fashion outside of regulated asset lending scenarios.
As many have said there is a tie-in here to the S&L debacle.
Congress and the Fed deregulated the S&Ls to give in to the natural greed of the big banks. Prior to deregulation the S&Ls were allowed to pay one half percent more for savings than other banks. That attracted long term secure savings/ assets to the S&Ls which they lent out long term in mortgages. It was a stable arrangement and as a side affect the money stayed local. Coveting these assets the big banks, Congress and the Fed made a devil's pact allowing S&Ls with no experience in non mortgage financing to go deregulated into risky areas. They crashed but the big banks got their hands on the trillions in mortgage assets which became speculative assets, leading to excess and our present liquidity crunch.
My point is that Congress and the Fed have bent to the greed of the big financial institutions and systematically dismantled well thought out needed protections, apparent from The Great Depression.
Now, John and Jane Doe will have to pay higher interest rates for their car loans, etc until the banks eroded capital (much of which was stripped off as fees to individuals) is replaced.
This is simply more organized theft (!**!) like CEO salaries which are actually a form of embezzlement.
Lessons of Great Depression give way to greed.
The history behind the mortgage fiasco and bank liquidity is a complex long intertwined affair.
After the Great Depression new financial regulations were put in place. For one, banks were barred from equity deals or brokerage operations. Then, fairly recently, Congress and the Fed gave in to the natural greed of the banks and let them return to brokerage/equity dealings. It is in no way surprising that subsequent to dismantling safeguards the present catastrophe should occur. It is axiomatic to allowing banks to invest in speculative fashion outside of regulated asset lending scenarios.
As many have said there is a tie-in here to the S&L debacle.
Congress and the Fed deregulated the S&Ls to give in to the natural greed of the big banks. Prior to deregulation the S&Ls were allowed to pay one half percent more for savings than other banks. That attracted long term secure savings/ assets to the S&Ls which they lent out long term in mortgages. It was a stable arrangement and as a side affect the money stayed local. Coveting these assets the big banks, Congress and the Fed made a devil's pact allowing S&Ls with no experience in non mortgage financing to go deregulated into risky areas. They crashed but the big banks got their hands on the trillions in mortgage assets which became speculative assets, leading to excess and our present liquidity crunch.
My point is that Congress and the Fed have bent to the greed of the big financial institutions and systematically dismantled well thought out needed protections, apparent from The Great Depression.
Now, John and Jane Doe will have to pay higher interest rates for their car loans, etc until the banks eroded capital (much of which was stripped off as fees to individuals) is replaced.
This is simply more organized theft (!**!) like CEO salaries which are actually a form of embezzlement.
Labels: 1929, CEO embezzlement, Great Depression, Savings and Loan fiasco redux
