Comments about ‘Home equity loans’

There may have been some very legitimate reasons for people to borrow the equity in their homes. Don't be so judgmental and harsh. On the macro level, if we can find ways to help people work through these situations, it is good for the economy and for us all. It did not help that the financial institutions pushed through a bankruptcy bill in the early 2000s that took away the power of the courts to work through these issues on a one-by-one case as debtors sought a way to reorganize their affairs. This was a assault on Americans, driven by unchecked greed by the banks and other financial institutions, and one of the worst laws in the past 20 years.

Isn't it ironic that these same banks were forced into making sub prime housing loans to people who had no ability to repay them and then when millions of foreclosures invitably happened, the government got all worried and bailed out these same banks with tax payer money? And now Obama is penalizing them for doing exactly what the government forced them to do in the first place; loan money to people who could never service their loans. And some people still think the BANKS are the problem?

Yes that seems normal in America. Help Corporation, don't help commoners. Commoners dug their own graves, Corporations are owed our allegiance.

Except, Mountainman, your statements are erroneous. The mortgage crisis was not caused by the government "forcing" banks to make subprime loans. That's a myth perpetrated for political purposes. And how is Obama penalizing them? They still take their bonuses, paid for with the bailouts they asked for. Hardly a penalty. You can try to re-write history, but it won't work. And now we are in a position where we need to address this problem, not make up stories as to how it happened. The only consistent winners in all this are the bankers.

In 1968 I purchased my home for $19,000.00. At the last refinance the loan amount was $257,000.00 on a 30 year loan on a home valuated at 283,000.00. I was 74 at the time.

Over the years we have bought drums, dancing lessons, carpet, siding, several cars, a boat, and had money for all the other things we needed. We even put money away for retirement. We did not let our wealth sit idle. We lived the good life and the American dream.

Iâm not sure if we made a profit on the deal, but by doing it my way we had the things we needed and wanted at the time they were needed and did not have to be deprived of them while we saved up the amount.

If at my death, the bank loses money on my house, thatâs their problem. Not the taxpayers of America.

Both foolish borrowers and bad legislators, as well as rogue banks, should have to answer for their errors and crimes. Yet the choice was to punish the poor taxpayers instead.

I think the bad guys in this play are the bankers and lenders who bought and paid the politicians who passed the law for the government guaranteed home loans and then proceeded to lend money irresponsibly.

Every day I see commercials on TV about the reverse mortgage. Which is a lenders dream, loan out money that another person has to pay back.

Early on, we had a chance to participate in this scam. We would buy a two million dollar home and only have to pay the monthly utilities. Fear of the thing being too good to be true caused us to back out. However, we probably should have gotten on the gravy train to rob the taxpayers.

What I rarely hear about is the responsibility the homeowners themselves played in all this. If someone tells me I can afford something and yet I know full well I can't - I don't buy it. Seems like good ole fashioned common sense - common sense that apparently is woefully lacking these days. Yes, the banks were greedy and the regulations lax. But the public was also greedy... and stupid to boot.

@ Esquire. Go ask Janet Reno about her threatening banks with "investigation" if they didn't make home loans to otherwise unqualifed people. Better yet, do some research and you will see that Fanny Mae and Freddy mac were set up by the government to issue these sub prime, disaster waiting to happen loans! If I am not correct as you claim, then how do you explain the above?

I think it's fair to say that lawsuits by ACORN and other interested parties intimidated banks into making loans to individuals who would not have otherwise qualified. Public outcries of discrimination and racism as a result of the lawsuits gave the banks almost no choice but to try to absolve themselves of any guilt. So were banks forced to make bad loans? It depends on your definition of "forced."

I put a great deal of blame on the Federal Reserve's policy of artificially maintaining low interest rates and creating boatloads of fiat money. Home loans would not have looked so attractive if interest rates were allowed to find their natural levels. The Fed's intervention by interest rate manipulation is the source of excess credit and loose money. Get rid of the Fed's power to manipulate interest rates and the stock of money, and you eliminate the potential for these kinds of events in the first place.

Ultra Bob shows a fascinating bias: ha's willing to blame bankers who pay off politicians, but apparently politicians are blameless for accepting pay-offs? Why is that? Are they powerless against big business? If that's true, congress might just as well adjourn forever. Please explain, Bob.

@Mountanman 10:36 a.m. Feb. 10, 2012

Fannie Mae and Freddie Mac were not set up to issue sub-prime mortgages. Quite the opposite, in fact. The very definition of a "prime" mortgage is a mortgage that conforms to Fannie Mae or Freddie Mac standards and is thus something they would purchase.

The sub-prime mortgage boom was lead by private investors who invested in the private-issue mortgage-backed security of private investment banks such as Lehman Brothers. Private investors and private rating agencies believed the investment bankers when they said they could securitize mortgages and use "credit enhancements" to make investment-grade assets out of sub-prime mortgages.

The market bubble was driven by the decision of free-market players--not by government mandate.

I think that "Gildas" is on the right path.

Why are we bailing out people who made poor choices?

If I chose to take out a loan and didn't read the fine print or figure out what the true cost is to own a home, why should the government or the bank have to be held responsible for my bad decisions?

Are we giving out the loans to children who don't understand finances or who believe all of the refinancing commercials? Or, are we adults who should understand finances and understand advertisign?

The government is treating the US like a group of preschoolers who have to be rescued from their mistakes. If the government wants to fix things, and do it in an equal manner, they will let people suffer the consequences of their actions.

@Mountain Man. There isn't any federal law that states banks or credit unions must lend money to "sub prime" borrowers.

The word sub prime is misleading because a type of loan like, adjustable rate, for example is under the classification of sub prime even though the borrower may have great income and credit. Second home loans are also sub prime and borrowers must have excellent credit and income to even get these loans.

The real culprits of this economic downfall are the repeal of the glass/steagall act, credit default swaps and the lack of regulation of them, Mers(mortgage electronic registration system), and the easy money policies of the federal reserve, which their directors are elected by its members(banks)

Private interest and greed ruined this economy. We need sensible regulation that will discourage reckless behavior.

When this mess if fully figured out, it will show that the Government, in the quest for more votes, made financing a home part of that plan - to get more votes.

Follow the money. Follow the political favors required to "get that money". Look at the politicians who thought that making money available to the unqualified was an easy way to be re-elected.

History will show who was involved. ]

History will show why they were involved.

They can run, but they can't hide. Sooner or later, their role will be revealed.

@ Mike Richards 1:16 p.m. Feb. 10, 2012

You are partially right--for example, the government shouldn't have encouraged people to borrow money by making mortgage interest tax-deductible.

However, the bulk of the blame goes directly to the decisions of the free market. If you follow the money, the people who got rich out of this scheme were the Wall Street whiz-kids who invented mortgage-backed securities, credit enhancements, credit-default swaps, and other derivatives. Free-market investors believed the whiz-kids could deliver higher returns for lower risk, and invested in mortgage-backed securities. This made the capital available for the subprime mortgages, which lead to mortgage originators filling your mailbox with offers to refinance and take out second mortgages.

If you follow the money, it goes straight to Wall Street.

re: a bit of reality,

If you overlook the $5 TRILLION in additional deficit since Obama became President and the half-trillion during Bush's last year in office, then your claim may be true.

YOU and I paid for that folly. Our children will pay for it for the rest of their lives. Wall Street had little to do with it. They provided a service ORDERED by the Government. Now Mr. Obama is pointing his finger at Wall Street and trying to tell us that THEY are the criminals, that they are to be blamed, that they formulated policy and wrote regulation, that they, and not the government, caused this mess.

That's simply not true. The government caused this mess. The government told the banks that they MUST do. The banks had no choice if they wanted to continued to do business in America.

Just like Mr. Obama's grandmother, the banks were thrown under the bus when Obama could see a political advantage in blaming them instead of admitting that policies that HE promoted and that HE voted on caused the mess.

Earl of Sandy, Ut.

The way I understand it:

Greed is a normal, natural, primal instinct of every living thing. It came with the conception and was more properly named survival at that time. Having been thrust into this life through no fault of our own, we want to stay as long as we can.

After birth we start to grab up every thing we can in hopes of staying alive. Ever notice how every thing seems to go to the mouth of a baby? Bees make more honey than they actually need, and a lot of animals store up the necessities for later. So why would we expect that human beings are any different. Having more is a basic primal instinct.

The only difference between the bankers, the investors, the politicians or the lady next door, is opportunity.

The investors make their opportunities by controlling government.

Bankers and other businessmen make their opportunities by catering to the investors.

Politicians make their opportunities by becoming powerful and effective guides for government.

And ordinary little people make their opportunities by making the whole thing go round.

@Mike Richards:

The government did not cause this mess. However, the repeal of the Glass-Steagal Act, and the relaxing of regulations by Congress, at the urging of lobbyists from the Banking/Mortgage industry - including James Johnson at Fannie Mae, set the stage for the unbridled greed by bankers and investors which ultimately led to the collapse.

Other posters on this subject have correctly identified the Credit Default Swap and other mortgage securities as being among the most destructive elements of the collapse.

I highly recommend reading "Reckless Endangerment" by Gretchen Morgenstern, "Too Big to Fail" by Andrew Ross Sorkin, and "The Big Short" by Michael Lewis. These are non-partisan, highly detailed analyses - a financial post mortem, if you will - of the financial collapse. They are brutally frank in their assessment of the circumstances and root causes of the failure. Quite frankly, it is much more complex than I imagined, and many times more complex than any of the news outlets, pundits, or finger-pointing posters have declared.

I was eager to blame political parties, select congressmen, or other political reasons for the debacle, but after reading all 3 books, I couldn't. These regulatory changes took place during both Republican and Democratic presidencies and congresses, and most related legislation was passed by bi-partisan majorities. I believe that the politicians had no idea what they were doing, and were just appeasing the lobbyists - who knew full well the unbridled greed that was going to break loose. Many people in the financial world were made unspeakably wealthy by recklessly gambling with investor's money, and nearly collapsed the system in the process.

And now, we're stuck with the bill.

If you believe this housing bust was not caused by the federal government meddling in the housing market, forcing bad loans you have to believe that millions of resonably intelligent and previously successful bankers in complete contrast to the way bankers have done business for generations, suddenly, volunarily, wrote billions of dollars of very high risk loans that they knew would turn toxic! Why would any banker loan money they knew would cost the bank billions in the end? Now do you STILL think bankers are the problem?