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Thread: Home price drops exceed Great Depression: Zillow

  1. #141
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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by MaggieD View Post
    I actually agree with you. Bush sealed the deal. You'll get no argument from me. However, Bill Clinton championed the Community Reinvestment Act, and that was more than just the camel's nose under the tent. Low interest rates (like we're seeing now in spades) caused this bubble -- Clinton and Bush encouraged (arm-twisted) banks into loosening their lending standards so that people who couldn't buy lunch could buy homes. Clinton + Bush.
    The CRA really had nothing to do with the home construction and refinancing boom and resulting housing bubble that began after the recession of '01. Home sales were flat until Greenspan lowered interest to record levels and Bush pushed home ownership and set policies so everyone could own their own home.

    According to a study by the Federal Reserve, 94% of high-cost loans originated during the housing boom had nothing to do with Community Reinvestment Act goals. Lending to poor didn't spur crisis -Fed's Kroszner

    The Comptroller of the Currency. John C. Dugan, agrees: "CRA [the Community Reinvestment Act] is not the culprit behind the subprime mortgage lending abuses, or the broader credit quality issues in the marketplace. Indeed, the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA. A recent study of 2006 Home Mortgage Disclosure Act data showed that banks subject to CRA and their affiliates originated or purchased only six percent of the reported high cost loans made to lower-income borrowers within their CRA assessment areas."**
    Last edited by Dirty Harry; 01-24-11 at 09:35 PM.

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by Dirty Harry View Post
    The CRA really had nothing to do with the home construction and refinancing boom and resulting housing bubble that began after the recession of '01. Home sales were flat until Greenspan lowered interest to record levels and Bush pushed home ownership and set policies so everyone could own their own home.
    I wont' argue with you, Harry. As a Realtor, I was dumbfounded that people were able to buy homes with no money down, "state their income" instead of proving it, buy homes two months out of bankruptcy, negative amortization loans. I am willing to cast plenty of blame on Barney, though.
    The devil whispered in my ear, "You cannot withstand the storm." I whispered back, "I am ​the storm."

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by MaggieD View Post
    I wont' argue with you, Harry. As a Realtor, I was dumbfounded that people were able to buy homes with no money down, "state their income" instead of proving it, buy homes two months out of bankruptcy, negative amortization loans. I am willing to cast plenty of blame on Barney, though.
    It was a feeding frenzy with all the artificially created demand for homes. They couldn't build them fast enough. But Fannie and Freddie didn't cause the Bubble either:
    Fannie Mae and Freddie Mac were victims, not culprits

    Posted by: Aaron Pressman on September 26, 2008
    There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.

    Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

    Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.

    There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.

    The study identifies five causes of the subprime meltdown:
    -Convoluted loan products that consumers didn’t understand.
    -Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
    -Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
    -Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
    -Significant errors in the models used by credit rating agencies to assess subprime-backed securities.

  4. #144
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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by Dirty Harry View Post
    It was a feeding frenzy with all the artificially created demand for homes. They couldn't build them fast enough. But Fannie and Freddie didn't cause the Bubble either:
    Fannie Mae and Freddie Mac were victims, not culprits

    Posted by: Aaron Pressman on September 26, 2008
    I humbly admit to being righteously educated. Great post. Thank you, Dirty Harry. I cannot disagree one iota with the five causes listed. Makes absolutely perfect sense to me. I'm marking this as a favorite. Nice job.
    The devil whispered in my ear, "You cannot withstand the storm." I whispered back, "I am ​the storm."

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by MaggieD View Post
    I humbly admit to being righteously educated. Great post. Thank you, Dirty Harry. I cannot disagree one iota with the five causes listed. Makes absolutely perfect sense to me. I'm marking this as a favorite. Nice job.
    It was a major blame game. The data and evidence tells the real story.

  6. #146
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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by Dirty Harry View Post
    It was a feeding frenzy with all the artificially created demand for homes. They couldn't build them fast enough. But Fannie and Freddie didn't cause the Bubble either:
    Fannie Mae and Freddie Mac were victims, not culprits

    Posted by: Aaron Pressman on September 26, 2008
    I consider the assessment a half truth. While Fannie / Freddie didn't write "sub prime" loans. They do plenty of Alt-A (alternative documentation) loans that lower borrowing standards and also require less documentation, including income verification. According to Wiki they own 350 billion in these alt-a loans in 2008. So this program is plenty culpable.
    From the ashes.

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    Re: Home price drops exceed Great Depression: Zillow

    Actually at this point I think it's an out and out lie. Fannie / Freddie do (did?) buy subprime.
    From the ashes.

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by Phoenix View Post
    I consider the assessment a half truth. While Fannie / Freddie didn't write "sub prime" loans. They do plenty of Alt-A (alternative documentation) loans that lower borrowing standards and also require less documentation, including income verification. According to Wiki they own 350 billion in these alt-a loans in 2008. So this program is plenty culpable.
    Here's my question : Is that 350 billion of straight loans, or is it 350 billion of those loans packaged and sold of as derivatives???

    If it's the latter, then this 350 billion ACTUALLY represents a potential 'bailout debt' of 35 TRILLION because of the typical derivatives leveraging around 100:1.

    This hasn't happened yet, but the house and senate, as well as the president haven't seen a bailout of an industry that they ddn't love, so when fannie /freddie say they need another bailout, 35 trillion could be the number they are asking for, and would mean a near instantaneous doubling + of the national debt...

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by BmanMcfly View Post
    Home price drops exceed Great Depression: Zillow | Reuters



    Oh wait a second, I thought the recession was over in 2009...
    CBC News - Money - Recession declared officially over

    Yet home prices have fallen for 53 consecutive months... that's more then 4 years of straight decline.

    So, how long before these prices bottom out and start to stabilize again?? How much more is your mortgage then the value of your house?? How low will the bottom be??

    How long before people stop trusting the experts that keep saying 'don't worry, the worst is over'???

    What's been the solution? THey are on 'QE2', and there are already rumors of a QE3... which is essentially printing money to cover the day to day expenses. That's about as effective as maxing out both your credit cards, so you get a third card so you can balance the debt with a higher limit... and then having rumors circulating of your plans to get a fourth credit card in the near future.... except worse because it's going out as 'taxpayer covered'...

    Does this concern anyone else as it does me?
    It doesnt bother me...Im actually glad it is happening. In fact it HAS to happen. The market is finally being allowed to correct itself. It should have been left alone back in 06.

    Yes...its going to sting a bit..especially those that WAY overspent on houses. Price we pay. (and yes...Ive got a few investment properties that are at the barely break even point...thank goodness for not attaching anything to my primary residence!)

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    Re: Home price drops exceed Great Depression: Zillow

    Quote Originally Posted by Dirty Harry View Post
    It was a feeding frenzy with all the artificially created demand for homes. They couldn't build them fast enough. But Fannie and Freddie didn't cause the Bubble either:
    Fannie Mae and Freddie Mac were victims, not culprits

    Posted by: Aaron Pressman on September 26, 2008
    EVERYONE shares some guilt here. Banks made stupid loans and their investors should pay the price. People made stupid home purchases and they should pay the price. The government responded poorly. One of the biggest scourges is the get rich quick home flipping industry. Granted...they (ok...we) were just taking advantage of the existing market. Doesnt mean it didnt aid in driving prices through the roof.

    People that made those foolish out of reach ARM loans should have rengotiated with their bank by now. If they tighten their belts and ride things out, 5-10 years from now their property values SHOULD climb back up to an appropriate market value.

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