I hope none of today’s guests will be “blaming the victim first.” Parents have for generations told their children “spend more than you can afford on a house because your income will go up while your mortgage stays fixed.” And it was not a bad bet because rising real estate prices acted as a floor whenever buyers bet wrong. In other words, consumers were actually perfectly rational in paying more than they could afford. It is the politicians and financial class that are to blame for this mess. Unlike consumers (the vast majority of whom do not have a degree in economics), they could have, should have and in likelihood DID, see this miserable bubble in the making.

Parents have for generations told their children “spend more than you can afford on a house because your income will go up while your mortgage stays fixed.” And it was not a bad bet because rising real estate prices acted as a floor whenever buyers bet wrong. In other words, consumers were actually perfectly rational in paying more than they could afford.

Oh come on!

My wife and I have been homeowners since the early 1980’s. Anyone in this real real estate market could see that lending standards were getting looser while people were becoming more and more leveraged the last 2+ decades! So it was not rational to fantasize that this house price bubble would never pop. We’ve been prepaying principle and putting extra money IN at closings for over 20 years in order to ensure that we were as minimally-leveraged as possible. We’re just engineers and designers, not financial experts, so if our common sense saw this coming ANYONE could have seen it!

Also what do you mean “mortgage stays fixed”? Many of the people getting foreclosed took out ARMs. Furthermore, it doesn’t matter how fixed your mortgage stays if your income falls. My wife and I have a dual income so the banks would have happily qualified us for a ridiculous mortgage but we said “no” – we calibrated our mortgage on being able to comfortably pay it on the lower of our two incomes (mine). And since then we’re refinanced it so low we can carry it on unemployment benefits if we have to! But this meant we deliberately bought “less house” than many of our peers. We all make our choices in this world.

Let’s have the courage to call it like it is!Wall street is a sophisticated machinery,build to suck up the nation wealth for the top 10% in command of world affairs!!!The bailout is a scam to lubricate the machine for a new cycle of financial swindling; just like the previous bailout of the savings and loans. History will record this crisis as the tipping point of the fall of western dominance. Soon we will be speaking chinese!

It is the politicians and financial class that are to blame for this mess. Unlike consumers (the vast majority of whom do not have a degree in economics), they could ha

I’m sorry for making a second posting here but your last comment, above, was really disturbing.

It is the ethos of an authoritarian society that the common people can’t think for themselves – they need to be led and controlled by the betters.

The ethos of a free society and a democracy is that the common people CAN think for themselves and they should not subjugate their free will to the specialists and “experts”. We got into the Iraq war because too many people just assumed that Presdident MUST know what he’s doing, after all, he’s the President.

You do no need to be an economist to make sensible financial decisions for you and your family! You DO need to be well-informed. I read the Wall Street Journal and The Economist. Anyone who can read the sports pages (I’m a big NFL fan) can grasp numbers and statistics and trends and patterns well enough to read publications like that. And anyone responsible for their family’s financial well-being has an obligation to do so. People need to turn off American Idle and read a good newspaper.

We spent the entire 90s, “ending welfare as we know it,” and telling low to moderate income folks to join the economic growth that was taking place. All the while, traditional banks were moving out of low to moderate income neighborhoods leaving a credible lending vacuum. Predatory lenders, (many owned by CitiCorp, General Electric, GMAC and other “reputable” corporations) move in with these exploding mortgages packaged to attract investors (401ks, IRAs) and not held to the same standards of traditional lenders (deregulated) and then we blame the very people we told to join in the economy.

It amazes me how some people look down at low income people, who traditionally maintain their end of the bargain regarding mortgages, as long as it is fair and not designed to make corporations rich.

Rep. Barney Franks, Chairman, House Finance Committee, has received PAC donations in excess of 100k from Sub-prime mortgage lenders. Rep. Spencer Bachus, ranking member, House Finance Committee 200k. Sen. Christopher Dodd, Chairman, Senate Banking Committee, has received over 85k for his Presidential campaign committee and other PAC donations, Senator Richard Shelby, ranking member, senate banking committee has received 80k from these Sub-prime lenders. This is why it was rushed through…someone is trying to cover their backsides before the election…at least Shelby stood on principle and voted no for the $700 billion bailout.

We learned in the 70s to follow the money, but the media is so in the pocket of these parent corporations that we can’t get to the truth. And when the history is written, not too many of those really responsible will actually get blamed. Shame, shame, shame…not enough people know their names…I hope NPR will stand up and make them famous…

They say, With Liberty comes Responsibility!!

If people had the liberty or freedom to choose any type of house or any amount of mortgage it was implied that they took the loans/houses with implied responsibility of repayment.

Those who ignored it, paid the price in foreclosures et al.

Secondly, they also say, A Stitch in Time, Saves Nine, when the authorities both in the banks as well as in the govt. should have acted, they kept mum, hence snowballing the entire issue and thus here we are!!

Finally, those who dont learn from history, it gives a pretty good leason in repeating itself!

I keep hearing numbers like $50 to $70 trillion as the size of credit default swap market, which we now learn is riddled with problems. How can $700 billion even make a dent in a problem of this magnitude?

It sounds like the financial system needs some global oversight and serious restructuring to bring it back down to earth. I hope we can keep some semblance of a functioning economy and society in the process, without the kind of runaway inflation that might make 70 trillion a number that actually relates to the value of something real.

Here’s an unpopular point of view: Just as W’s election and subsequent actions as president were, at least in part, the result of a collaboration among all of us (ouch!), so the credit crisis is a collaboration between lenders, borrowers, and the rest of us who cheered the bubble along because it was making us money through our investments, no matter how modest our investments. You, too. Me, too.

We are stuck with the very modern American habit of talking about “values” when our most glaring “value” is the “bottom line” at home and at work. Our “self-worth” is measured in signs of wealth. The bubble was irresistible; the crash was inevitable. We all did it. The problem goes far beyond pumping value into the global system. It’s rethinking the unsustainable way of life Americans have developed and have managed to sell to so many other cultures.

PW…you are right…not a popular POV and I’ll tell you why. GWB won by the election by the skin of his teeth, so there was not a mandate or implicit collaboration. Also, don’t assume that everybody is a part of the investor class. Some Americans just make it, earn it and save it the old fashioned way. Lastly, this “everybody was doing it,” mentality is what is wrong with our nation. Nobody wants to hold anybody accountable. Its so much easier to say everybody was doing it versus looking our leaders in the eye and telling them they lead us in a wrong-headed direction.

Wadell — we don’t disagree. But one mostly hears rants against Bush or Barney or whoever but so little about the role we all played in making this happen. There really is a collaboration and until we understand (and reverse) the roles we all played, we won’t get free of this mess.

As Susan Wachter just mentioned, there are people who were given extraordinary incentives to wrire bad loans.
THese loans are documented proof of thier complicity.
The paper trail is deep an long but complete and irrefutable. Even for NINA loans.
THe CEOs of Countrywide (Mozila), WAMU etc. and people all the way down the chain of command need to be prosecuted in same way ENRON execs were.
Secondly regulations should protect ignorant consumers from predation using such loans. The average consumer is not as sophisticated as the people who invent these products. They are at a diadvantage. Regulation should protect them form this.

It’s the capital reserves, stupid!

The mortgages and mortgage backed securities are not the full – or even most of – the problem. It is the Credit Default Swap debacle that has introduced the high degree of “leverage” that is causing the credit crunch. No one knows how much of these truly toxic, highly leveraged liabilities anyone has on the books. Unlike any regulated insurance product, these carry no capital reserve requirements on the issuer. Insurance without capital is called Fraud. Plain and simple.

Paulson’s plan does little to fix the CDS problems. However, supporting homeowners by helping them avoid default actually will prevent CDS liabilities from coming home to roost. Preventing foreclosure prevents bonds from going bust, which prevents CDS contracts from getting called in.

Tom,
Please, please…..get Warren Buffet on your show. We need a voice of reason…..and reality. Elected officials are not providing any answer. I can’t help but wonder if a voice of reason will help this situation. This is insanity!!!! Everyone I talk to….people we do business with, anyone I chat with, grocery store clerks, absolutely everyone is scared beyond belief.

BTW, we have a house on the market. We listed it in Dec of ‘06. We are currently carrying two mortgages. It is a rural property, and when we listed it, we were told it might take quite a while to sell it because it is rural. Nine months later the sub-prime crisis began. It has now been almost 2 yrs. I don’t believe it is rentable. I don’t know what to do now. We are still making payments on both houses and have no intention of defaulting, no matter what it takes. My concern is that with the financial crisis one of the mortgage holders is going to call the loan. Help-please get someone on your show that knows what they are talking about.
Anyone and everyone I have heard on any tv or radio show, in my humble opinion does nothing but INCREASE panic!

Here’s another important listen, not just to the talk but to the comments which follow the talk.

http://www.newamerica.net/files/naf100608a.mp3

Why doesn’t anyone question the fundamental unfairness of how most mortgages are front-loaded with interest, a fact which prevents borrowers from accumulating equity in a timely fashion?
Perhaps the Government should mandate that mortgages should be “designed” like more traditional loans like automobile loans.

I agree Joan…people are not being held accountable, so all we get are these pontifications of and about the crisis, but no heads rolling. Too many of these sub prime lenders have parent corporations that also own media outlets. GE who owns WMC Mortgage also owns NBC, CNBC, MSNBC. No wonder we can’t get to the truth…everybody’s paid for…~~~W

10/06/20008

ARE WE THERE YET?

There is a small fish tank in the bedroom of my daughter, it has only one gold fish. The fish swims around, and around and around. Sometimes I ask my daughter, what if the fish thinks the the tank is the whole universe?

In my poem ” Shooting Star”, is a verse,
” everyone alone
in their own space and time,
I would’a called you again,
If I had another dime.”

That “everyone alone in their own space and time now seems prophetic.

Does the fish think that the bowl is the whole universe? Probably, well if you consider how our leaders and more specifically the financial wizards of the Wall Street have acted over the last few years. If you consider how ignorantly have the people of the FED have behaved.

Even now, the latest morons of the financial circles, Hank Paulson and Ben Bernake and the guy with the MBA, whatever his name is, think that they are alone in the universe and they are on controls and they know how to fix it.

It really goes back to what I have told you all along, that “life is a game of connect the dots, if you don’t connect all the dots, and don’t connect the in the right order, you will miss the whole picture”.

by the time this is all over, we will be back to the real savings, real interest rates, real down payments and real credit. So how long will it take? Well, ten years or may be twenty, we have to learn to live in reality, oh that is if there will be any free societies left standing.

Why I say that, well the amounts of debts involved requires that either the federal governments, the world over, turn over all the earnings and taxes to private individuals, to pay off the cumulative debts, or alternately confiscate all private property.Other than that what are the choices?

Is it not what I have been warning you about for years?

you can read more on my blog

I love how people are seriously talking about the taxpayers bailing out individual homeowners who should have known better and understood the loan they were getting into. If you are stupid enough to take out a variable rate mortgage to save 1% when 30year fixed loans were at an all time low then you SHOULD loose your house. So now these same people that took out an ARM, took out a home equity loan, overspent for the last 4 years, and are now crying “victim” and are waiting for a bail out (while the rest of us were conservative and paid more to fix our mortage and did not overspend) are going to get another hand out. Why do we keep rewarding overspending, stupidity and greed – and punishing conservative people that are doing the right thing?

Where is the credit coming from…she asked where is the credit coming from…thin air…the FED prints the money out of thin air…Ron Paul railed against this…most of us are going to look back at this year as the restart point of the USA. Does anyone wonder why the Europeans are bailing on the US? The US practically carried Europe over the finish line last century and now that we need them to prop up our economy for a little while they’re bailing. Why? Could it be the mentality…if you are not with us you are against us edict coming home to roost…I got to stock up on some canned goods…it ain’t gonna be pretty…

Many folks used their equity to buy vacations, trucks, and other ‘consumer’ items. When the equity was not really in the home, then they crashed and burned.

Appraisers should not be affiliated with any bank or lending institution. Banks artifically inflated valies in the properties so they could sell the loan…

Second mortgages should not be tax free if used for consumer items; remember credit cards used to be tax free?

Jaffe feels that our housing market will get back on track and we will return to the fixed rate, 30-year 20% downpayment mortgage that kept our housing market humming for decades.

The problem is that incomes have not increased anywhere like the growth in house prices, so fixed rate, 30-year 20% downpayment puts housing in many urban markets out of reach of the vast majority of families. And as we have seen, that has not led to much of a price adjustment (think of Boston, SF, NYC, Chicago, LA, etc.)

If you want an incite into the greed at play here watch the Congressional Hearing of Lehman Brothers Finances.

This CEO is one of the reasons we are in this mess.

In Richard S. Fuld’s own words he estimated that he was paid about $350 million between 2000 and 2007 even as the company headed for disaster was appropriate.

Then this little chestnut: The congressional panel unearthed internal documents showing that on Sept. 11, Lehman planned to approve “special payments” worth $18.2 million for two executives who were terminated involuntarily, and another $5 million for one who was leaving on his own.

This is part of the problem, there are no penalties for failure and there should be.

with these exploding mortgages packaged to attract investors (401ks, IRAs) and not held to the same standards of traditional lenders (deregulated) and then we blame the very people we told to join in the economy.

I’m sorry, but just because the bank is willing to give you enough rope, you are not obligated to hang yourself. I routinely get notices from my credit card company telling me that they’ve raised my credit limit -first $8000, now $11000. I think the most I’ve ever actually had on my credit card is a small fraction of that, and it’s automatically paid in full every month, so I don’t pay a penny in interest. Bottom line: just because “predatory lenders” are willing to write you an insane mortgage doesn’t mean you have to get one.

Just as W’s election and subsequent actions as president were, at least in part, the result of a collaboration among all of us (ouch!), so the credit crisis is a collaboration between lenders, borrowers, and the rest of us who cheered the bubble along because it was making us money through our investments, no matter how modest our investments. You, too. Me, too.

Speak for yourself! I’ve been speaking out against this fiscal insanity for years. Letters to my elected officials, letters to the editor (many published), etc. And, as I mentioned above, I’ve also run my own life in a fiscally conservative manner. “We” didn’t all stand idly by while this built up. The bubble was NOT “irresistible” – plenty of people resisted it and spoke out against it. Saying we “all” fell for this is like saying we “all” fell for the Iraq War – that’s nonsense. What did YOU do?

“People need to turn off American Idle and read a good newspaper.”

Or maybe just listen to you?

You’ve demonstrated on at least three occasions that you start lecturing people when you don’t know what you’re talking about, so while your latest hubris is opinion and can’t be completely refuted, you’re still being pompous.

Do you accept the possibility that there are people on this planet more intelligent and capable than you?

When my teenaged daughter was 2 years old, we took her to the state fair. A hawker at a game booth offered her a free game, so she excitedly took her turn, after which she was presented with her prize. It was an 8-inch tube made out of yellow fake fur, with two googly eyes and a pink felt tongue at one end and a “Made in China” tag at the other. My first reaction was “What must the Chinese think of us if there is a demand in our country for such crap.” My second thought was “what is wrong with this picture that people’s lives depend upon producing this crap?” When the global economic system depends upon trashing the planet to buy and sell crap, whether it’s stuffed furry tubes or flashy cars or ostentatious houses or whatever, sooner or later it has to collapse. I agree with Wadell – it won’t be pretty.

Don’t forget the criminal intent of the person who >accepted< a loan based on false information.

The problem is that incomes have not increased anywhere like the growth in house prices, so fixed rate, 30-year 20% downpayment puts housing in many urban markets out of reach of the vast majority of families.

You mentioned Boston – house prices in Boston have fallen about 12% since September 2005, according to S&P case Schiller. In many Boston suburbs, such as where I live, they’ve fallen farther.

I think this housing bubble has farther to deflate. Compared to the long-term trend, house prices in many places are still above the trend line.

The fact that house prices in some communities are out of reach of most families simply means that most families won’t buy there. So what? There are plenty of wealthy communities in Massachusetts, Connecticut, California, etc, where most families can’t afford to buy. It’s self-correcting because if Boston cannot attract moderate income people to staff businesses and government services like teachers and firemen, it will become a less desirable place to live and prices will come down.

But we MUST get back to conservative lending pcactices like 20% down, fixed rate mortgages to prevent this in the future.

I have someone who works with me who asked me for my advice and I had to tell her I have no idea. Here’s the situation. She’s trying to sell her house, and she has a buyer. But the bank won’t process the sale because they want to clear all their foreclosure files first, and they won’t or can’t tell her how long she has to wait. In the meantime, she’s continued to pay her mortgage, but the bank has told her that if she wants to move her house, she should default on her mortgage so that they will foreclose on her house and she can get rid of it. Of course, then her credit will be ruined, and she won’t be able to buy the house she wants to buy right now. To my uneducated eye, this looks like the most ridiculous, immoral situation the bank is asking of her. Does anyone have any resolution to this? Is it part of the bailout discussion? Thanks for any help or direction for advice.

“Speed bumps” to protect the housing market from overheating? That’s the role of a buyer agent in individual real estate transactions. Unfortunately, over the past 15 years, the real estate lobby pushed state legislatures nationwide to remove speed bumps by legalizing conflicts of interest inherent in “designated agency.”

BLOG POST: Misleading home buyers: Conflict of Interest? What conflict of interest?
http://tinyurl.com/2vmcwg

From my day-to-day experience as a buyer agent in Greater Boston, I know there have been countless “bidding wars” over the past decade. Conflicts of interest and manipulative business practices made those bidding wars worse. Now the cost is being passed on to society as this case study demonstrates:

“My so-called buyer’s agent (who promptly switched roles at contract signing without explanation), initially advised me to bid $750,000 for my house of choice, which was listed at $699,900. When I told her that such an offer was beyond my price range, she was quite adamant that I not offer anything under the list price. When I finally backed out the deal because of her bait and switch scam, I later heard that the house in question sold shortly afterwards for $682,000—in other words, nearly $70,000 less than the bid suggested by my so-called buyer agent.”

“This type of price inflation (caused by seller’s agents masquerading as buyer’s representatives) must have a very distorting impact on housing costs. The economic fallout is enormous: ordinary citizens are forced to move out farther in search of decent, affordable places to live, which leads to a host of problems connected with traffic congestion, suburban sprawl, etc.”

“As I perceive it, the real estate cartel’s use of dual agency [a.k.a. "designated agency"], which works to the detriment of the average consumer while enriching dishonest agents through the practice of double-dipping, contributes significantly to the manifold problems we see in the residential housing market and therefore should be fully exposed.”

This case study is an example of what’s wrong with dual agency / designated agency, and why I believe designated agency laws should be repealed and “blind” bidding wars should be managed with regulatory “speed bumps.”

So, if Congress, policy makers, and consumers are asking what factors contributed to the overvaluation of housing markets, shouldn’t dual agency and blind bidding wars be included in that investigation? My hope is that others will agree that it’s time to expose systemic flaws and conflicts of interest in the residential brokerage practices, and the cost of blind bidding wars, not just to individual buyers but to tax payers.

This three minute audio post proposes four regulatory reforms to protect consumers — buyers, sellers, and tax payers — in the future. Please listen, comment, and / or join us for a TweetUp in Boston to listen to the rebroadcast of this program, 7-8pm in Boston.

AUDIO BLOG POST: What regulatory reforms are needed to protect real estate consumers?
http://tinyurl.com/4gq5cq

Thank you WBUR for your continued coverage of this subject!

It’s about time SOMEONE is saying something about this. Thank you. I knew something was wrong when I first heard about these interest only payment loans when they first became available.

Someone has been profiting on this ad I’d love to see names named and heads rolling. These people who profited illegally should charged, jailed and their assets seized to help pay for this “bailout”.

How did we get to this point anyway where companies can’t exist without getting credit? What happened to capital?

Then this little chestnut: The congressional panel unearthed internal documents showing that on Sept. 11, Lehman planned to approve “special payments” worth $18.2 million for two executives who were terminated involuntarily, and another $5 million for one who was leaving on his own.

This is part of the problem, there are no penalties for failure and there should be.

But whose job is it to exact those penalties?

The shareholders of many of the collapsed firms have seen their holdings in those companies virtually wiped out! I think Lehman Brothers is selling for like 15 cents a share right now.

But the shareholders are the ones who elect the boards of most of these companies, which approves these ridiculous compensation packages. So as long as information was not withheld from shareholders, then I think justice has been done. And if information WAS withheld from shareholders in violation of SEC reg’s or corporate charters then we’ll see some nice legal action and the exec’s might have to give that money back to shareholders or they might even go to jail.

Bottom line is that companies should be free to do whatever they want with their money and if they want to waste it on insane compensation packages to put the shareholders stake at great risk this is up to the shareholders. (BTW, I’m currently involved in a shareholder’s revolt trying to replace part of the board of another company – not in the financial industry – and I think we have the numbers, so it is possible for shareholers to act effectively if they want to)

None of the above comments even mentioned the major role played by the real estate cartel itself in the origin of this financial crisis. I specifically refer to its harmful deceptive practices such as dual agency and affiliated businesses arrangements (ABAs), which put the unwary consumer at a severe disadvantage and have contributed to the inflation in property values, which were ultimately bound to crash, much like the Florida land scams in the early twentieth century.
Over the past few decades these fraudulent practices (colluded with by unethical appraisers, mortgage lenders, home inspectors, title companies, etc.)have been shafting millions of average citizens. The mainstream media, so-called regulatory agencies and public interest groups, and government officials at every level have condoned or ignored this widespread fraud despite the warnings of Ralph Nader and other consumer advocates.
If you want to see a concrete example of what I mean, go to Google and type in my name “Joel Stern”, then “Weichert”, and you’ll find numerous blogs and websites that describe the lawsuit I brought in 2005 against a major real estate corporation for violation of the Maryland consumer protection code statutes regulating mandatory written disclosure of the agent’s status. As a result of a common bait and switch scam, I lost the representation of a sham buyers agent at the very last moment. My case is typical of the experience of the vast majority of home buyers and sellers every year. Yet the real estate industry remains the proverbial elephant in the room that nobody has the courage to expose, much less combat.
Doesn’t it strike you as exceedingly odd that not a single major real estate corporation has gone belly up during this crisis, while several huge banks and insurance companies have folded?
It is the real estate cartel that should bailout the failing economic institutions, NOT the millions of unsophisticated people who have been victimized by that cartel’s devious practices.

I have someone who works with me who asked me for my advice and I had to tell her I have no idea. Here’s the situation. She’s trying to sell her house, and she has a buyer. But the bank won’t process the sale because they want to clear all their foreclosure files first, and they won’t or can’t tell her how long she has to wait.

I assume her house is not already in foreclosure because you said she hasn’t (yet) defaulted. Have you left something out, like is there a second mortgage in default or is there a title problem?

She needs to get a good lawyer and also talk to the state banking commission where that bank is licensed. I’ve never heard of a bank refusing to provide a settlement number and settlement date for a property that’s not currently under some sort of sort of legal dispute.

I beleive that now is the time to figure out what happened and, if we’re going to bail the offending companies out, to regulate the problems out of existance along with giving them all our cash for nothing. Waiting until the problem is fixed will just mean that we can fall back in the same hole!

I missed the first 1/2 hour of the show so do not know if you discussed the role played by mortgage brokers in this debacle, but I can tell you that in south Florida, they were plunderers of the first order. Virtually unregulated at any level, and paid premiums for selling high risk loans, they took advantage of thousands of lower income and/or overextended homeseekers or refinancers without taking on any risk whatsoever. They completed minimal paper work, found someone to close and buy the loan and went on to the next poor sucker. I am an attorney and a former Realtor and have spent a good part of my career working for housing opportunities for low and moderate income persons. To blame such persons or those who advocate on their behalf for the greed and avarice of Wall Street and their minions, and the other institutions that supported such greed is alarming!

I would like to know what Schechter thinks of the allegations about Barney Frank’s role in this mess. I was a big Frank fan and voted for him when i lived in his district. I htink there is some merit in the charge that Frank fought off more regs for fannie mae and freddie mac. What’s your take? And was Frank compromised by his relationship with an official at Fannie Mae?

Bottom line…

We need a value added society, not a consume until we drop society. We need to build…

It is the real estate cartel that should bailout the failing economic institutions, NOT the millions of unsophisticated people who have been victimized by that cartel’s devious practices.

I agree that we have to look more closely at the conflicts of interest and incentivization schemes of the real estate industry. But I still don’t agree with your conclusion, above.

The bottom line is STILL : how much money are you willing to pay for that house?

In the end there is a buyer who has to decide how much he can afford. “No” is one of the shortest, easiest-to-say words in the English language. Before I buy a car or a house I stand in front of a mirror practicing saying “no”, so it just rolls sweetly of the tongue.

It’s not the real-estate agent’s fault if people buy more house than they can afford, or if they agree to ARMs that will result in interest charge INCREASES in a few years.

Obama’s ties to the terrorist community are to blame for the financial crisis.

His middle name is Hussein. Gwen Ifill moderated a debate.

Jeremiah Wright will be the next Secretary of Education.

Michelle Obama hates America.

I am an attorney and a former Realtor and have spent a good part of my career working for housing opportunities for low and moderate income persons.

Part of the problem is that houses and their mortgages are a huge financial responsibility requiring upfront capital, consistency of income, and a degree of financial knowledge that many low income people simply do not have. For many poor people owning their own house makes about as much sense as owning their own yacht.

The mantra that “everyone” should own their own home is unreasonable and unrealistic and it’s part of why we are in this mess.

The correct way to make home ownership accessible to more people is not to lower mortgage standards (which is easy, all they had to do was loosen some regulations), but instead, to raise incomes, reduce income disparities, and address health insurance access (all of which is hard).

I agree with Mr. Schecter that greed and fraud on the part of lenders was a big part of the problem. However, there was also quite a bit of greed and fraud on the part of some borrowers. I started looking into buying a house in the middle of the bubble and was strongly put off by the “investors” (speculators) and flippers with dollar signs in their eyes with whom I would have had to compete for property, had I chosen to buy. This wasn’t just about low income families grabbing what they incorrectly perceived as a good opportunity, as Mr. Schecter implied. Many people were intentionally buying more than what they needed for their own use because of the same greed that Mr. Schecter indicts Wall Street with. Many people willingly lied to get the loans that they did. Yes, let’s investigate and punish lender fraud, but don’t deny the fraud on the other side.

I agree with Mr. Schecter that greed and fraud on the part of lenders was a big part of the problem. However, there was also quite a bit of greed and fraud on the part of some borrowers.

As I said in the thread you meant to post this to, it is unlikely that we’d be in this mess today is all the mortgages written in the last 10 years were 20% down with a fixed-rate mortgage and a solid financial history. That’s why I contend that lowering lending standards was the dominant factor here.

All the other stuff – subprime games on Wall Street, speculators and flippers, etc – would have been too attenuated by by that barrier to entry to really get going. For one thing, you can’t lie about or repackage subprime mortgages is there’s no such thing as a subprime mortgage in the first place.

I liked the last caller’s question, “what is being done with the 700 billion beyond buying failing mortgages?” He noted that less than half of 700 billion would cover all of the failing mortgages. If that is true, and you add in the Fannie, Freddie and AIG rescue, why are the subsequent derivative securities still at risk and why do they need to be purchase?

The explanation that it is “how they were sliced and diced” and that it is “Complex” is getting old.

The best explanation as a taxpayer is that that they are not at risk once the underling mortgage payment is assured and that they will safely mature or be resold when a market for them can be reestablished.

However, if some derivatives are still at risk after the mortgages are secured; please present an example or two of how that works. Please don’t let it be that some of the derivatives are based on a bet that the mortgages would default.

Bottom line is that companies should be free to do whatever they want with their money and if they want to waste it on insane compensation packages to put the shareholders stake at great risk this is up to the shareholders. (BTW, I’m currently involved in a shareholder’s revolt trying to replace part of the board of another company – not in the financial industry – and I think we have the numbers, so it is possible for shareholers to act effectively if they want to)

It was not their money, it was the money of investors. It is pretty clear that the free market model has not worked. We have had 30 years of this.
Regulations need to be brought into play here.
I am not advocating for so much regulation that it suffocates these markets but clearly something needs to be done.

I am responding to Peter Nelson’s reply to my earlier posting today about the role of the real estate cartel’s fraudulent pratices (conflicts of interest) in the origin of the housing crisis.

In the ordinary course of things, the average person goes to a real estate agent for PROFESSIONAL guidance, just as he goes to a tax preparer for assistance in navigating his way through complex tax codes.

I sought the assistance of a buyers agent not only to find me a house, but to NEGOTIATE on my behalf, to guide me thorugh the maze of obscure real estate laws, to help me with mortgage lenders, recommend appraisers and home inspectors, and determine a fair bid. I believe these expectations are reasonable. What I–and countless other victimzied consumers in the housing market–did nto realize was that sham buyers agent frequently switch roles at the very last minute to negotiate the best deal for the seller. If I had known of this devious conduct, the transaction would not have gone through in the first place.
The upshot of the matter is, in many cases the artificial inflation of property values nationwide resulted from the incompetence, or downright fraud, of sham buyers agents in collusion with mortgage and title companies (such as Weichert’s empire) in artificially jacking up housing prices.
To cite my own example: the buyers agent who switched roles uruged me to offer $50,000 over the list price ($699,000) for my house of choice; the house subseqently sold for $682,000–a difference of nearly $70,000.

If the average citizen who is unversed in the intricacies of mortgage loans, disclosure regulations, home inspections, title company procedures, and numerous other aspects of real estate transactions cannot rely on the advice of the supposed professionals whose services he engages throughout this laborious process, I don’t see why he, rather they, should bear the ultimate repsonsiblity for any financial difficulties or legal complications that may ensure.
I stand by my concluson that the nefarious conflicts of interest that have defrauded the public ever since the introduction of dual agency two decades ago, contrary to all ethical sense and common law traditions, have played a major role in the current mortgage and housing crisis. And it is the companies that made obscene profits from the gullibility and misplaced trust of their clients that ought to pay back their ill-gotten gains.

Joel your so right this happened to me and I have a 30 year fixed.

My broker had the inspector in her back pocket and when I brought up problems the the inspector did not find that I did on the same inspection I was shot down by her.

The whole thing almost feel apart. I wanted to back down and she threatened me with legal action.

In the end part of this deal was my fault and I take ownership for my errors. However this broker was not acting in my best interest. By the way she knew how to take this up the edge of legal malpractice. I was duped.

I now own a house I can’t sell that turned into a money pit. Saving grace is my mortgage is not to high as I pured all my equity from a condo sale into the house.

I lost 10 years of equity, but I still have a roof over my head.

Dear Tom, I only heard a portion of your show this morning, on the Banking and Housing crisis. One of your guest, I believe it was the professor from Dartmouth, gave some valid reasons for the crisis, however he and others have tried to put part of the blame on the Community Reinvestment Act (CRA).

I was a banker for 38 years. For the last seventeen years I was President and CEO of two different banks that had to comply with CRA. Although the regulations were sometimes challenging to interpret, the fundamental principle underlying the legislation is to insure that banks reinvest in the communities from which they gather deposits. Nowhere does the Act or its regulations encourage banks to make sub-prime loans. It does require banks to serve all segments of the socio-economic population they serve.

Many lender may have chosen to serve the more challenging parts of this market by making sub-prime mortgages and selling them into the secondary market, but I believe they would have made those loans irrespective of the legislation passed by Congress. The fact that the securities created by Fannie, Freddie, Countrywide and other lenders were not properly regulated was the problem.

The last Bank i worked for decided to get out of the practice of selling loans in the secondary market. Although we underwrote our loans to meet their requirements we held 100% of them in our portfolio. The fee income from secondary market activities was very lucrative for many of the lenders, and it was tough to give it up, but we knew then-1995-that it was the right thing to do.

The sub-prime mortgage crisis is only the tip of the iceberg. The next shoe to drop may well be the home-equity line of credit portfolios and securities followed by the credit card portfolios and securities. I doubt the full magnitude of either of these have been figured into the estimates of losses that can be expected in this credit crisis.

In all three cases it was easy for lenders to make a loan commitment to a borrower and pass on the risk to a bond holder. As stated earlier the fee income was too tempting. If we are going to fix this problem we need to keep in mind that those who make the credit decision and lend the money need to have some “skin” in the game, if we truly hope to avert this problem in the future.

I sought the assistance of a buyers agent not only to find me a house, but to NEGOTIATE on my behalf, to guide me thorugh the maze of obscure real estate laws, to help me with mortgage lenders, recommend appraisers and home inspectors, and determine a fair bid. I believe these expectations are reasonable.

I don’t think they are at all reasonable.

First of all, the concept of “buyer’s agent” makes so sense because they are not incentivized right (at least not around here, unless things have changed since we bought our current house). The buyer’s agent does not make more money by getting you a better deal, so just on the face of it why on EARTH would you allow them to negotiate for you?! Out of curiosity, what did YOU perceive his/her motivation would be to get you a lower price? Were you paying them separately, based on how much below the asking price they got for you?

Also, using the real estate agent to help you get financing is an obvious conflict of interest.

Finally, the use of the agent to help you find an appraiser or house inspector is such a blazingly obvious conflict of interest that I’m beginning to be suspicious of your whole story!

When we buy houses we just use the agent to show us around because she has a key. We do everything else ourselves, including, if necessary, getting our own lawyer to review the documents. (it’s amazing how many people don’t understand that the closing lawyer is working for the bank). We find our own financing and we hire an independent inspector to inspect the property. When it comes to negotiation we just use the agent to pass messages. Agent’s commissions are paid as a percentage of the P&S so they have a strong disincentive to lower that number.

With all due respect, your expectations of your real estate agent seem awfully naive.

As I said in the thread you meant to post this to, it is unlikely that we’d be in this mess today is all the mortgages written in the last 10 years were 20% down with a fixed-rate mortgage and a solid financial history. That’s why I contend that lowering lending standards was the dominant factor here.

Sorry, I didn’t realize there was a separate thread for Mr. Schecter’s interview. I’d like to respond briefly to your point, though.

I totally agree with you that the corrosion of lending standards was a necessary condition for the bubble and subsequent collapse to occur. My point, however, was that many borrowers exhibited just as much greed and fraud when the standards were relaxed as the lenders that Mr. Schecter rightly crucified. I am not trying to argue that reckless borrowers were the primary cause, just that they were by no means the innocent victims that Mr. Schecter implied (some were truly victims, but many were complicit).

“With all due respect, your expectations of your real estate agent seem awfully naive.”

There you go being a pompous jerk again. The very best real estate agents understand that if they represent you to the best of their ability, you’ll use them again if you sell your house and recommend them to family and friends. The good ones don’t think of the buyer-agent relationship as a one off transaction.

You may not agree with this, but you’re awfully obnoxious to tell someone that does believe this that he or she is being naive.

BTW, you know the when some writes or says “with all due respect,” what follows is going to be disrespectful.

Two points about today’s show:

1) Blaming the the Community Reinvestment Act for our current situation is ridiculous. Apparently this is now the Republican’s main talking point as I’ve seen it regurgitated in various media by various “experts”.

I am not a big fan of the government telling businesses to whom to lend, but (as Republicans like to point out in other contexts) if you don’t like the rules, then don’t play the game. If the banks didn’t want to lend to them, then stay out of their neighborhoods or forego FDIC.

I’d love to see numbers on how many loans that banks claimed to be making for CRA compliance went bad. This is totally absurd.

2) These people who are saying that now is not the time for blame have something to hide. Now is exactly the time to figure out what went wrong and who is responsible otherwise you can’t fix the problems. We need to hold those politicians who were not doing their jobs accountable.

The Republican party is not doing itself any favors by blaming the poor and trying to dodge accountability in the eyes of fiscally conservative, independent voters or for that matter Reagan Democrats. It seems they are so out of touch with the rest of America that they can only say things that make sense to their base. To the rest of us they sound like lying cowards.

My final reply to Mr. Nelson regarding the role of buyers agents.

We obviusly have dismetrically different points of view regarding the role of the buyers agent.
I believe it is ENTIRELY reasonable for a person untutored in real estate law and other intricacies of the home purchase and selling practices to rely on the advice of a licensed professional who, morever. boasted of 20 years’ experience as an agent, just as it is reasonable for a person who is unfamiliar with convoluted tax laws to expect a minimum level of competence from his accountant, or for a plaintiff or defendent in a lawsuit to expect a certain basic integrity and competence on the part of his attorney.
In case you are not aware, Mr. Nelson, negotiation IS one of the essential and integral duties of a buyers agent in my understanding. This is particularly true for a client who has moved into an area from a different city, state, or even a foreign country and who may be totally unfamiliar with the housing prices or general real estate market trends in that area. I conside it quite logical and eminently reasonable for such a person to seek the assistance of a licensed, experienced, competent, and honest professional not only to find a suitable property within his financial range but to represent him in negotiations. Nor do I think it untoward for a client who engages the services of a buyers agent–who by state law and the NAR’s own ethical code has a fiduciary OBLIGATION to place his client’s interest before his own (consult the NAR code is you don’t believe me)to rely on the agent’s guidance when seeking the most appropriate title company, appraiser, mortgage lender, and home inspector. That is PRECISELY the role that the buyers agent is obligated to perform. This role is especially crucial, I reiterate, when the client is unfamiliar with local market conditions.
If the buyers agent–whose advice is sought and relied upon by his cliet and can have very important financial and legal consequences in the real world–cannot be held to the same minimum standards of competence and integrity as an accountant, tax preparer, physician, car mechanic, or other licensee, what on earth is his purpose? To show houses and then let his client sink or swim according to the latter’s knowledge of obscure consumer protection statutes and hidden conflict so interest that may cost him a small fortune later on?
I suggest you read the article that nationally syndicated columnist Ken Harney wrote about my lawsuit against Weichert (March 18, 2006; it can still be found on Gooogle by typing in my name, then “Weichert”). Harney correctly points out the crucial fiduciary role played by buyers agents in the negotiating process. If you have any further doubts on that score, Mr. Nelson, I suggest you get in touch with some of the countless people who have been shafted over the past two decades by incompentent or fraudulent agents acting contrary to the best interests of their “naive” clients.
With all due respect, the problem lies not so much with the ignorance, gullibility, or naivete of consumers in the housing market as with the lack of accountability of agents who, through gross incompetence or willful deceit, betray their clients’ trust. Harney’s 2005 article on the shocking findings of the NAR survey, and reporter Susan Wornick’s 1997 article in the Boston Globe regarding widespread flouting of consumer protection statutes by real estate agents in that city, are just two of the many studies you can find to corroborate my argument.
Either buyers agents should perform the statutory tasks assigned to them, or suffer the consequences of dismissal for incompetence or prosecution for breach of fiduciary trust.

There has been little mention of those homeowners whose situations changed drastically from the time they bought to the time they tried to sell their homes. Mobility is very important to Americans, and it has been drastically curtailed due to this housing crisis in which they can’t sell their homes.

The moral outrage expressed by many regarding the housing crisis at the Main Street level is misguided or irrelevant in many cases,

A personal situation: I am recently married, and my husband and I (separately, before we knew each other) bought our homes 2 years ago, in 2 adjacent states. We both have good jobs, graduate degrees, and excellent credit, and yet now we are in a very tough spot with no good solution. We haven’t been able to sell our homes, and now that we are living together in mine, he found a new job that is 2 hours from his old home, so we can’t live in his home. We also can’t live in my 500-sq-foot condo much longer, because we now have a baby on the way. Even with 2 good incomes, we can’t afford to pay for 3 places. Our situations changed more than we could possibly have imagined when we bought our homes. Yes, we could have stayed unmarried and postponed having a baby, but at age 39, I don’t know anyone who would make that choice for financial reasons.

So the housing crisis is not just about personal fiscal responsibility or victims of predatory lending. Situations can change drastically, and I think that the entrapment of many Americans in their homes (unable to take a new job, move to another city or state, etc.) has largely gone ignored and will have a substantial impact on the economy.

believe it is ENTIRELY reasonable for a person untutored in real estate law and other intricacies of the home purchase and selling practices to rely on the advice of a licensed professional who, morever. boasted of 20 years’ experience as an agent, just as it is reasonable for a person who is unfamiliar with convoluted tax laws to expect a minimum level of competence from his accountant, or for a plaintiff or defendent in a lawsuit to expect a certain basic integrity and competence on the part of his attorney.

I told you why I didn’t think it was reasonable – because the incentives are not structured to reward that behavior.

In some polyannish world where everyone is a boy scout and an altar boy hight-sounding mottos and principles might matter, but in the real world you “follow the money”.

If the buyers agent–whose advice is sought and relied upon by his cliet and can have very important financial and legal consequences in the real world–cannot be held to the same minimum standards of competence and integrity as an accountant, tax preparer, physician, car mechanic, or other licensee, what on earth is his purpose

Again, Joel, it comes down to how they are incentivized. The way the “buyer’s broker” gets paid does not incentivize them to work in your best interest. Also, the work of those other professions can be checked by a third party, whereas “negotiations” are subjective. And buyer’s agents don’t have to worry about losing your business because how often does one buy a house?

In the investment world it is common knowledge that if you hire an investment advisor she needs to be fee-only. If you hire one who makes money on commissions, transaction fees, or anything else they have an incentive OTHER than your best interest. In fact even the commission-based investment advisor is better incentivized than the buyer’s broker because hopefully, if they do well by you, they’ll get your ongoing business. But how often do you buy a house?

So really Joel, while I hope you win your case, I still think your expectation that high-falutin’ principles provide an adequate reward system for good results is naive. The ONLY way the concept of a buyer’s broker makes sense is if she is paid directly by the buyer, either with a flat fee or a free structure that rewards a successful negotiation.

My wife and I have never used a buyer’s agent for all the above reasons. We deal with the seller’s agent. Sure, it’s an adversarial relationship because they are incentivized to get the highest price they can, but at least it’s a direct relationship and everyone knows exactly where everyone stands and whose side they’re on.

The “buyer’s agent” concept simply doesn’t make sense the way it’s currently set up.

The “buyer’s agent” concept simply doesn’t make sense the way it’s currently set up.

Your right about that. I had a separate lawyer, my mistake was using the recommended home inspection company.

Look Peter your coming across as snob and a no it all.
But behind this vale of oneupmanship are some plain truths. Be educated, take a real estate course.
find a good lawyer.

I did some of what you did but I also used a real estate agent because I was selling my condo to buy up as they say to a house. Boy was I wrong, my old 2 bedroom 850 square foot condo is worth the same today as my 3 bedroom 1.5 bathroom house.

From my experience I have learned a few things:
1- never trust your real estate agent they are only out for them selves.
2- Don’t use home inspectors, instead find good electricians, plumbers and engineers to inspect the house. It will cost a few hundred more to do this but your spending a huge amount anyway and they will do a better job. Home inspectors are not trained well enough in my state (Massachusetts) to do a proper job.

Greetings, Peter and Jeff,

I was going to sit on the sidelines and let this conversation unfold without posting anything that sounds self-promotional but the misinformation in recent posts demands a response.

First, there is some truth to your assertion that the current two-sided real estate commission does not align buyer agent compensation with performance. That’s why some in the industry offer rebates and others are calling for commissions to be divorced. If that single reform came out of this crisis, conflicts of interest would be reduced, competitive options would increase, and consumers would save billions of dollars. For more information, see post above regarding “designated agency” and blog posts written 2-3 years ago below:

$60 Billion question: How do consumers uncouple real estate commissions?
http://tinyurl.com/68nlae

10 Mega-tends push real estate commissions to a tipping point
http://tinyurl.com/r2nnd

Contrary to both of your statements, some real buyer agents, not counterfeit buyer agents or “designated agents,” actually do save their clients money by (1) rebating some or all of the buyer agency fee built into sales prices, and (2) by helping their clients shop wisely, time the market, and negotiating aggressively on their behalf. For tangible evidence, see Wall Street Journal article on our 100% commission rebate, our menu of fees & rebates, and map of client savings totally over $1 million during a twelve month period:
http://tinyurl.com/5po4pd

I know of at least one other buyer agent in Chicago who has helped clients save more than $1 million in a single twelve month period and there are probably others. More importantly, new referral sites like http://www.ProOffer.com and conversations like this could bring performance based compensation into the real estate industry.

My guess is that both Peter and Jeff would agree that reform is long overdue!

Do Americans, under unregulated free markets, really have such low expectation of our professionals as to expect schemes, scams, and outright fraud?

We should set up nationwide investigations to get the money back so as to infuse it into the economy, and to reimburse those that have been stolen from.

I think it alot depends on what type of income the typical first time homebuyer (who is probably a young couple)is making, and the stability of that income. If they aren’t able to buy into the market, nobody is moving up. The health of the middle class is very important to all of us for many reasons, but especially in housing. No jobs, or low paying jobs, is going to cause housing prices to fall for pure lack of buyers, unless there are a whole lot of investors out there competing for income property.

I used to live in Jamaica Plain in Boston.
That market was all about greed and speculating on one level and people just wanting to buy a home.

I saw things and heard things in conversations that were completely screwed up. Small 850 sq foot two bedroom flats going for almost half a million. That is absurd as these things were built for low wage workers in the early part of the 20th century. In fact most of this housing stock was not built to last this long.

Now those same flats are still expensive, around 320k.

They should be about 150 to 180k.

Mr. Nelson’s response to my latest comment regarding the statutory and ethical duties of buyers agents is a frank apology for the kind of unrestrained corporate fascism that has victimized countless millions of consumers in the housing market ever since the introduction of the legalized fraud known as dual agency, contrary to all common law tradition dating back to 14th century England. I cite Mr. Nelson’s central point:

“In some pollyanish world where everyone is a boy scout and an altar boy high-sounding mottos and principles might matter, but in the real world you ‘follow the money.’”

Well, if one were accept that line of reasoning, Mr. Nelson, why not just discard all consumer protection codes and statutues regulating the ethical practices of various professions and companies? Why not let drug companies use inferior adulterated products instead of high-quality ingredients, since the patient should have no expectation of an efficacious remedy?
Would you give an untested and unregulated medicine to anyone in your family, Mr. Nelson?

Similarly, would you depend on the advice of a shyster lawyer whose only principle is “follow the money” even if his dishonesty and incompetence are contrary to your interest?

Such examples could be multiplied ad infintum. The brutal truth of the matter is, the principles of predatory unrestrained capitalism that you accept as a “realist” are precisely what have led to the current economic debacle. Unless a certain measure of integrity and competence, enforced by impartial oversight, is restored and vigilantly maintained, the type of fraud that has cost millions of people their homes and life savigns is sure to reoccur. That may not matter in the least to you, Mr. Nelson, but I believe that my viewpoint would be shared by the vast majority of average citizens who do not have access to high-priced lobbyists and lawyers to protect their assets and livelihoods–unlike real estate agents whose incompetence and deceit have harmed their clients in manifold ways.
The real estate cartel is the country’s largest lobby and has the influence in state and federal government, the mass media, so-called regulatory agencies (such as impotent real estate commissions), and other public insttitutions to have laws written in its (not the public’s) interest and clearly regards itself beyond all ethical and legal restraint. My case is a pefect illustration of this. I lost my lawsuit against the Weichert Company for consumer fraud because the Maryland statutes governing disclosure just happened to be written the attorney (Alvin Monshower) whose law firm represents Weichert and other major real estate companies in Maryland. In my view, anyone who passively accepts such blatant conflict of interest and the consequent defenselessness of average citizens to uphold their legitimate consumer rights as an inevitable, if not totally desirable state of affairs, and regards any attemtpt to rectify this situation as “pollyannish” and utopian, is morally obtuse and, to use Eugene Deb’s felicitous phrase, a “Mammon worshipper.”

I’ve read the posts and am quite impressed with all the comments. The main theme that makes the largest impact with me is the admission of all of us taking responsibility for this horror show. I own a real estate company and a mortgage company which in todays economy means I’m about 3 clicks away from hauling freight across country or bagging groceries at my local supermarket. Years ago I became one of the first Buyer Agents in the state of MA. That was a lot of laughs after going through threats, shunning and an extremeley huge expense of RE sign replacement. This state fought new agency disclosure laws for 11 years and you can guess the trade group responsible for most of the lobbying. The Real Estate industry is a huge engine that provides fuel for the appraisal, banking, building, home inspection, newspaper advertising, title Insurance, home Insurance and God Bless us all, the legal industry. This engine runs on one source of fuel, Sales at all costs. I’m still trying to figure out how Dual Disclosed Agency, Designated Agency (in all guises) and Facilation works. I’m trying to figure out which consumer advocate group lobbied for these genius changes. And please don’t tell me the Realtor Organization is looking out for the best interest of the consumer. The news media says sub-prime is the culprit but has no real commentary for the failure of Freddie Mac and Fannie Mae, which is your Conventional Guideline Bible for the secondary market. We are all responsible, including the consumers that thought that a mortgage with a 100% LTV (no down payment)seller paid closing costs) and an approval based on a ststed income W-2 program was a wonderfull thing. Don’t forget the 125% refinance programs. Basically if you had a reasonable pulse, you were approved. I do remember not going ahead with some approved mortgages because I felt they were overstating their income and could not afford the payment. While all of this was going on, I didn’t hear of any complaints, excepting the possibility of the Bank being closed where related business’s cashed their checks. While Wall Street was thriving in their asset backed securities Market, so were the rest of the real estate and financial world. Real Esate Brokers started to get in the lending business or had a relationship with mortgage companies that made the RESPA Laws have the validity of a Catholic not eating fish on Friday. I wonder how you designate that disclosure. A 700 Billion Bail Out still leaves the feeling of who or what is getting bailed. This is compared to other up and down cycles we’ve gone through but it is the most devastating as yet. The market will adjust without bail out bandaids. The FDIC days were an example of that. The fear being sold to us is that if we do nothing, mortgage funds will dry up. Hmmmnn.. have they checked the bucket lateley. The other good one is there will be no more credit or lending. Now thats an interesting scenario, perhaps all the homes will convert in to garages and Wall Street will change in to a cash only giant mall. Please, whats next, the only bank giving mortgages will be “The Moscow Food Handlers Credit Union? We have to eat the financial bullet like we usualy due and pay for our sins, it’s that simple. I like the quote if one congresmman who stated that we’ve been working on Baseball Steriod Abuse for 2 years and now we can do a 700 Billion dollar Bail Out in Two weeks. By the way, 90% of the voter responses before the vote on the bail out demanded that their Conressman and Senators not do it. How does that Agency Relationship Work? We’ll talk about Oil Later.

Wait a minute, do I get this right? It’s all the irresponsible people get into this big mess, including the home owners living beyond their means, and they are the ones are being bailed out, how about the good responsible citizens who have been saving all their hard working money to put down on their house and financed the prime rate loan? Can we refinance our house the same low rate like those sub-prime loan home owners?

If the answer is NO, I am going to change my principals and morals just to survive in this crazy morality deficiency society! Unbelievable!

To Joel Stern —-

Well said, thank you for articulating what I have been wanting to say.

Peter Nelson said: “Oh come on!

My wife and I have been homeowners since the early 1980’s. . .”

Thanks for the anecdote, Peter, but I don’t think it really addresses my core point. If pme accepts that home prices would continue to increase, or at the very least not decrease, as supposedly sophisticated lenders and brokers represented, it would not necessarily be irrational to spend more on a home than one can afford presently on the assumption that the buyer’s increasing income will eventually make it affordable. The reason that institutionally held misconceptions about future prices were so important is that mortgagees would NOT be inclined to take the chance that their income might NOT rise enough to make the home affordable unless they could rely on the (it turns out utterly faulty) presumption that home values would at least NOT decrease. The use of ARMs rather illustrates my point. Mortgagees were rationally willing to bet that their income would eventually increase enough to cover an eventual fixed rate mortgage because they assumed that if their income did NOT increase enough, they would at least be able to cash out in the event the ARM adjusted to an unaffordable level. Still, congratulations on the good judgment of you and your wife. You are a fine Americans.

There is nothing wrong with betting on the future appreciation and use leverage in order to maximize your profit. That is as long as you bear the consequences. In other words, this should be and should remain between you and your lender. If lender wants its pound of flesh afterwards you better get yourself a good lawyer. I am against any kind of bailout for subprime borrowers. They stood to win the most through the use of borrowed money and they are the ones who stand to loose the least because it was all borrowered money. If any part of the $700 bil is used to rewrite mortgages I am voting against the politician(s) who supported the idea. I am leaning democrat, but I will not hesitate voting against them if they push this through. Period.

This whole crisis and bailout is against justice.

What about the good citizens have at least “tried” to save up our hardworking money to do everything is right and sensible, are we going to get lower mortgage rate?

I can’t wait the election day to come, I have seen Bush and the whole administration for 8 years, I can’t stand another minute to watch him on TV or listen to his voice, no more!

And what’s up with the word “nuclear” that all the Republican all of a sudden have trouble to pronounce, are they all born with same genetic tongues? This is a classic example that people follow people blindly even if it’s wrong.

Blame Realtors – False MLS Data with No Quality Control. Appraiser giving an appraisal that will close the Deal and the National Association of Realtors Turning a Blind Eye. Realtos Lobby AGAINST the best interest of the Consumer. I am a Real Estate Broker Owner – I QUIT the NAR in Jan. or 2008. The Realtors are offering NO protection in Your Real Estate Transaction and there are no measures out there for changing this. The Only Insurance you Really Can Count on is Knowledge of What Really Goes on Behind the Closed Doors of Your Real Estate Transaction.

Blame NAR. Do a little research into what they lobbied into law between 2003-2005. The zero-down on FHA backed loans in particular. There were legislatures worried about a high rate of default among FHA borrowers, but Weicher insisted that the FHA “won’t be competing with anyone; we’re reachong into a market not now being served.” NAR is the third bigggest contributer to polital campaigns. They did this to us under the guise of having our best interest in mind.

I love you christopher brown