A question.

[fancycwabs]

Does the housing crisis strike anyone else as largely fictitious?

I mean, obviously people are losing their homes, and one major lending corporation seems to have suffered a collapse, but aren't the numbers driving the interest-rate increases arbitrary, designed to screw homeowners over based on the inability to refinance as their interest rates grew beyond their ability to pay?

Did Bear Stearns fail because it couldn't walk the fine line of screwing their customers just enough to get them to keep paying mortgages, but still enough to keep the investors from pulling their money out of Bear Stearns and investing it in a company who could screw its customers even better than Bear Stearns could?

After all the COFI hasn't really changed THAT much over the past few years--it certainly hasn't hit percentages I saw (7.5%) when I bought my own house seven years ago.

Are we, as a nation, going to wind up paying a lot of money to bail out real-estate speculators, instead of letting them suffer the consequences of their folly?

Comments

[fancycwabs.livejournal.com]

While I agree that there are first-time homebuyers who have been victimized by this, one would think that they understood the risks of taking out an ARM or (God forbid) an interest-only loan on a house that they couldn't afford. Furthermore, I'm not blaming them. The credit market that's punishing them for their poor credit could easily charge them an affordable interest rate, but would rather send them into default, foreclosure, and occasionally bankruptcy.

Why futz with the numbers in order to do more damage to the overall economy, especially when the Fed has adjusted the numbers to the lowest levels in memory, at the risk of runaway inflation?

[mosesandcompany.livejournal.com]

The thing is, I can understand - to a certain degree - the argument from the lenders that charge these high interest rates. If consumers with poor credit scores want a loan, the lender has to do something to mitigate his risk. A high interest rate is part of how they go about doing that - they do what they can to try and ensure some sort of return from their loan.

That said, it seems quite evident that substantially more restraint needed to be used in determining who got a loan and who didn't.

[mcduff.livejournal.com]

If the people at large Wall St banks got caught with their trousers round their ankles on this, I think it's a bit much to assume that your average blue collar joe moving from a trailer to his first real house is going to be any better at this shit than they are. Sometimes the risks aren't apparent, especially if a slick talking guy from the bank is saying "here's the mortgage that's best for you, look, it's really cheap and gets you a bigger house!"

Anyway, you're operating under the assumption that poor people getting screwed is some kind of flaw. That's what the system is designed to do, enable the rich to skim off the poor. If a poor family loses their home because they can't keep up the repayments, this means a bank or a person with a lot of stable assets can buy that property for cheaps, rent it out and then make a profit by selling it on the upswing. This is not a "crisis" for the rich people who make the decisions, it's only a problem because working class white males in Cleveland may not vote Republican this year, and that would upset lots of people in pinstripes.

Don't for a second think that bankers are as upset about this as the poor buggers losing their homes.