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Thread: House flippers triggered the US housing market crash

  1. #21
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    Quote Originally Posted by Panzareta View Post
    Then why did you vote for Trump who profited directly from the bubble popping?
    Because I profited directly from the bubble popping.

    The best thing that could happen is that the federal government gets out of the mortgage business. Fannie and Freddie are still out there everyday buying up mortgages and turning them into derivatives.

    Fannie, Freddie, FHA, all the other government mortgage programs and the mortgage interest deduction for federal income taxes all need to go, the resulting market will be much more stable.

  2. #22
    Cat-tastic Babba's Avatar
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    Quote Originally Posted by Libertine View Post
    Because I profited directly from the bubble popping.

    The best thing that could happen is that the federal government gets out of the mortgage business. Fannie and Freddie are still out there everyday buying up mortgages and turning them into derivatives.

    Fannie, Freddie, FHA, all the other government mortgage programs and the mortgage interest deduction for federal income taxes all need to go, the resulting market will be much more stable.
    You're dead wrong.

    Federal Reserve Board data show that:

    • More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
    • Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
    • Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.



    The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.
    Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
    Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy Washington Bureau
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  3. #23
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    What was crazy too was people could get mortgages with little to no money down and NO income verification (private lenders) It does not take a genius to figure out that was not going to end well.

    The Big Short was an excellent movie that explained a pretty complicated situation. Watch if you ever get the chance.

  4. #24
    Veteran Member bajisima's Avatar
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    Quote Originally Posted by labrea View Post
    And lenders are back to encouraging homeowners to use their homes as ATMs.
    Especially young people with scams. Actually saw one where they said you could take equity out of your home and roll in your student loans so you only have one payment. Sounds great to a na´ve kid but they don't realize you are putting your house up for collateral essentially and any default you lose it all.
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  5. #25
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    Quote Originally Posted by HayJenn View Post
    What was crazy too was people could get mortgages with little to no money down and NO income verification (private lenders) It does not take a genius to figure out that was not going to end well.

    The Big Short was an excellent movie that explained a pretty complicated situation. Watch if you ever get the chance.
    Add to that people actually believing those lenders. The 20 percent down was generally the rule, and all of a sudden it was afterthought. Another good example what it means to buy/spend beyond ones income.
    Thanks from HayJenn

  6. #26
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    Quote Originally Posted by bajisima View Post
    What worries me now that we are helping our daughter look for a home is we are seeing the same thing again. Most starter/moderate range homes have bidding wars and investors with cash end up buying them, putting a small amount of cosmetic work into them and then selling them again for a way higher price a month or two later. She put a bid in for a decent home that had older wood floors and dated wallpaper figuring she would fix it up over time. She was outbid by an investor. Two months later that same house went up for sale again so we went to the open house. The guy basically painted over the wallpaper and put Pergo flooring down. He was offering over 150k more for it. It already had multiple bids when we were there. Its crazy and it was a massive ripoff. I feel for those who will buy it as it was well above the appraisal rate, but with so low of inventory people jump at it. Then there are all those McMansions from a decade ago, who is going to want all those??? I see serious default there as well.
    To me, the bold calls into question that problems can be pinned exclusively on profit-seekers. People are out there wanting to pay these inflated prices. Maybe they're stupid or irrational, but even so, if the people are out there wanting and willing to pay the asking price, the prices are going to be supported at that level. The deeper question is why are they willing to pay it if it's a ripoff, and are bad lending requirements coupled with weak mortgage securitization regulation artificially pumping demand at these inflated price levels?

  7. #27
    the "good" prag pragmatic's Avatar
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    Quote Originally Posted by Neomalthusian View Post
    To me, the bold calls into question that problems can be pinned exclusively on profit-seekers. People are out there wanting to pay these inflated prices. Maybe they're stupid or irrational, but even so, if the people are out there wanting and willing to pay the asking price, the prices are going to be supported at that level. The deeper question is why are they willing to pay it if it's a ripoff, and are bad lending requirements coupled with weak mortgage securitization regulation artificially pumping demand at these inflated price levels?
    Saw a lot of "profit seeking speculation". Based on the oft repeated faulty premise that real estate values will continually rise.

    And the speculators were encouraged/propped up with near zero down payments and low interest variable rate mortgages. Hell, what could go wrong???!!! Buy the house, low payments for a few years until the ARM runs out, sell for a big profit from the appreciation!!


    Dang.....it sure sounded good when the realtor was selling them the house.
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  8. #28
    Veteran Member bajisima's Avatar
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    Quote Originally Posted by Neomalthusian View Post
    To me, the bold calls into question that problems can be pinned exclusively on profit-seekers. People are out there wanting to pay these inflated prices. Maybe they're stupid or irrational, but even so, if the people are out there wanting and willing to pay the asking price, the prices are going to be supported at that level. The deeper question is why are they willing to pay it if it's a ripoff, and are bad lending requirements coupled with weak mortgage securitization regulation artificially pumping demand at these inflated price levels?
    Well I think it has multiple facets. Some people think housing will always rise and its the best investment (my in laws told me you can NEVER lose buying a home) or its just that they think people will pay anything and they see profit. I also think for investors there could be motive either way, they do this as a business so if they profit great, but if they end up losing its a tax write off. Its not like its their home and they will be out on the streets. Its possible some see these kind of flipping as a more reliable thing than buying stocks.
    Thanks from labrea

  9. #29
    Veteran Member bajisima's Avatar
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    Quote Originally Posted by pragmatic View Post
    Saw a lot of "profit seeking speculation". Based on the oft repeated faulty premise that real estate values will continually rise.

    And the speculators were encouraged/propped up with near zero down payments and low interest variable rate mortgages. Hell, what could go wrong???!!! Buy the house, low payments for a few years until the ARM runs out, sell for a big profit from the appreciation!!


    Dang.....it sure sounded good when the realtor was selling them the house.
    The other issue is in many markets its cheaper to own than rent. If you can get into a first starter home with little down and low interest rates vs paying $2000 a month for a place that has a lease they see it as an investment in their future. I suppose for most people they don't see it as something they will lose down the road, to them it will be their home. Few see a crashing market or loss of income when they buy a home.

  10. #30
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    Quote Originally Posted by Jets View Post
    Add to that people actually believing those lenders. The 20 percent down was generally the rule, and all of a sudden it was afterthought. Another good example what it means to buy/spend beyond ones income.
    On the leading edge of the crisis was the number of adjustable rate mortgages scheduled to reset at a higher interest, and the inability of borrowers to renegotiate the interest rate.
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