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The risk lurking in the US mortgage market

By Patrick following x   2018 Mar 29, 11:42am 847 views   8 comments   watch   sfw   quote     share    


Low interest rates. Easy credit. Poor regulation. Toxic mortgages.

These were just a few reasons regulators gave for the collapse of the US housing market a decade ago. Since then, regulators have improved the standards that lenders use when Americans apply for mortgages.

But today increasing danger lurks in the mortgage market, and economists say it could put the financial system at "even greater risk" when the next recession strikes or too many borrowers fall behind on their mortgage payments.

A growing segment of the mortgage market is being financed by so-called non-bank lenders — financial institutions that offer loans to consumers but don't provide saving or checking accounts.

Borrowers with poor credit have increasingly turned to these alternative lenders instead of traditional banks. The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up.


http://money.cnn.com/2018/03/08/news/economy/housing-economics-nonbank-lenders-brookings/index.html?iid=EL
1   mell   ignore (2)   2018 Mar 29, 11:49am   ↑ like (0)   ↓ dislike (0)   quote        

It is fascinating how bond rates have edged even lower despite the fed rate hike. Some has to do with the volatility in the market lately and the potential for a steeper correction but still, I did not expect rates to stay that low. Maybe there simply is so much cash slushing around on the sidelines that is not committed to stocks, but I see not let-up in easy lending and 0%, jumbo etc. loans and even the massive return of CDOs - now called slightly different maybe ;) to not spook investors - as long as rates do not rise significantly. So far the Fed strategy has worked somewhat (for them, not necessarily for those having to buy inflated assets), have to give it to them as much as I hate the countries exploding debt. No crisis in sight so far.
2   HeadSet   ignore (1)   2018 Mar 29, 3:09pm   ↑ like (2)   ↓ dislike (0)   quote        

The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up.

No safeguards or regulations would be needed if the government gets out of the loan guarantee. No institution would make questionable loans if that institution was on the hook for all losses. House prices would fall to what people could afford with 10-15 year mortgages. Bankers and Wall St would be less rich, but the rest of us would benefit.
3   APOCALYPSEFUCKisShostikovitch   ignore (32)   2018 Mar 29, 3:10pm   ↑ like (0)   ↓ dislike (0)   quote        

Time to disband Fannie and Freddie.

Never should have been created because markets are perfect.

If you can't pay for a house with cash, you deserve to be homeless, exactly as the Founding Fathers believed.
4   mell   ignore (2)   2018 Mar 29, 4:10pm   ↑ like (0)   ↓ dislike (0)   quote        

APOCALYPSEFUCKisShostikovitch says
Time to disband Fannie and Freddie.

Never should have been created because markets are perfect.

If you can't pay for a house with cash, you deserve to be homeless, exactly as the Founding Fathers believed.


Despite your sarcasm that's exactly what needs to happen. No the markets are far from perfect, but yes, people deserve to be homeless if they leverage up for a crap-shack when they could easily make ends meet by renting. Why should buying a a house (while bragging about your investment stating that prices ALWAYS GO UP because you're so smart) be protected by the taxpayer? The US housing market is a total socialist/crony capitalist scam and that's why houses have become so expensive, like bread in Venezuela. Socialism never works.
5   mell   ignore (2)   2018 Mar 29, 4:14pm   ↑ like (1)   ↓ dislike (0)   quote        

Why the fuck should Patrick pay for someone else's mortgage risk via higher taxes and socialized bailout debt? In fact the more over-leveraged crap-shack buyers losing their homes the better, only hard life lessons will change that parasitic behavior. Remove all mortgage interest deduction and eliminate free capital gains (currently up to 250K/500K) as well. Housing should be treated like every other investment / good, enough with the cronyism.
6   JH   ignore (0)   2018 Mar 30, 8:18am   ↑ like (0)   ↓ dislike (0)   quote        

Problem is that Patrick is NOT paying for someone else's mortgage risk. He is paying for the risk inherent in Scrooge Moneybag's investment in Jason's overleveraged shit shack. The bank will kick Jason to the curb and bail out Scrooge. The risk is not truly socialized as intended--with some exceptions, generally only the 2b2f are bailed out.

This lurking risk is great news for potential buyers.
7   mell   ignore (2)   2018 Mar 30, 10:51am   ↑ like (1)   ↓ dislike (0)   quote        

JH says
Problem is that Patrick is NOT paying for someone else's mortgage risk. He is paying for the risk inherent in Scrooge Moneybag's investment in Jason's overleveraged shit shack. The bank will kick Jason to the curb and bail out Scrooge. The risk is not truly socialized as intended--with some exceptions, generally only the 2b2f are bailed out.

This lurking risk is great news for potential buyers.


Not entirely true. Scrooge gets bailed out but Jason too, and Patrick is paying for both. There are countless threads of people advising to buy a home fully leveraged as little - zero if possible - down as possible and make money flipping it or living in it for a while, and if things go south to immediately stop paying and squatting as long as you can, which is a very long time, and/or apply for bailout programs. People who don't pay for their houses should be out as soon as renters who don't pay their rent and their landlord is evicting them. Bailing out Scrooge is a problem in itself, but it takes two to Tango and the meme of the "surprised" poor home-owner is utter bs. They pulled this shit also with the so-called "poor" and black (race card!) victims by claiming predatory lending just to justify bailouts. If you can't walk into a bank and come out WITHOUT signing a contract that puts you in debt for the rest of your life, completely over-leveraging you (and worse making false statements on your application) then you should not be allowed to vote. Period.
8   APOCALYPSEFUCKisShostikovitch   ignore (32)   2018 Mar 30, 10:54am   ↑ like (0)   ↓ dislike (0)   quote        

Cities in flames!

Millions displaced!

Non-stop armed combat!

CANNIBAL! ANARCHY! is our ONLY! HOPE!




The Housing Trap
You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.
115 pages, $12.50

Kindle version available


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