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View Full Version : Fannie/Freddy Mac Bailout


Davian93
09-08-2008, 07:49 AM
http://money.cnn.com/2008/09/07/news/economy/velshi_comments/index.htm?cnn=yes

Just another huge mess that the next administration will have to deal with...this one being a $200 billion+ mess.

Who's fault is it though? the banks, the mortgage companies, speculators, people getting mortgages they knew they could never afford? Or all of the above.

It sucks because the housing market is like a hammer that keeps hitting the economy in the temple every time it tries to stand up and its hurting our national credit rating bigtime.

Gilshalos Sedai
09-08-2008, 08:31 AM
Lovely.

GonzoTheGreat
09-08-2008, 08:42 AM
Welcome to the wonders of socialism.

Isn't nationalisation of banks and such something that capitalists aren't supposed to do?

Davian93
09-08-2008, 08:43 AM
Welcome to the wonders of socialism.

Isn't nationalisation of banks and such something that capitalists aren't supposed to do?

Technically the U.S hasn't had a true capitalist economy since the Great Depression. The policies enacted under the New Deal gave us a mixed economy that incorporates some of the smarter ideas from socialism into a capitalist system...thus we have bailouts, safety nets, etc etc.

JSUCamel
09-08-2008, 08:57 AM
The policies enacted under the New Deal gave us a mixed economy that incorporates some of the smarter ideas from socialism into a capitalist system...thus we have bailouts, safety nets, etc etc.

Lies! Socialism is evil! If you support socialism, you support fascism, you communist bastards! GO DEMOCAPITALPUBLICANISM!

Anaiya Sedai
09-08-2008, 09:32 AM
ouch.

Zaela Sedai
09-08-2008, 12:19 PM
I can't believe how shit faced stupid people were when it came to buying homes...

if you can barely pay your rent DON'T BUY A HOUSE.

if your customer can't afford a house DON'T GIVE THEM A MORTGAGE

Seems pretty straight forward to me...Stupid bastards...

Davian93
09-08-2008, 12:24 PM
But Zae?!?! I look better if I approve more mortgages...

Sinistrum
09-08-2008, 12:25 PM
Joy. The government shields another group of idiots from the consequences of their stupidity. :rolleyes:

Davian93
09-08-2008, 12:31 PM
Joy. The government shields another group of idiots from the consequences of their stupidity. :rolleyes:

Isn't that the purpose of government?

Zaela Sedai
09-08-2008, 12:32 PM
Dav....~sigh~

LOL

Crispin's Crispian
09-08-2008, 12:53 PM
Well, everything would be fine if the housing market hadn't crashed. See, three years ago, it was looking like you could buy a house and watch it appreciate 10% or 20% every year. With that kind of market, ballooning ARMs or interest-only loans seemed like a good risk because you could always refinance with your (now much) higher equity.

But gosh, it didn't work out like that.

I blame the home buyers and the predatory lenders, because both sides should have known they were gambling. Unfortunately, somehow the lenders always seem to come out on top.

John Snow
09-08-2008, 01:11 PM
I can't believe how shit faced stupid people were when it came to buying homes...

if you can barely pay your rent DON'T BUY A HOUSE.

if your customer can't afford a house DON'T GIVE THEM A MORTGAGE

Seems pretty straight forward to me...Stupid bastards...

it was more the flippers than anything else. And speculators who would buy up a fistful of houses with no cash, planning to wait a bit. Them are sorta flippers too, I guess. Anyway, those are the people who are getting bailed out, more than the poor folks who saw housing payments in San Bernadino or Apple Valley cheaper than their rent payments. At least till the ARM hit the roof.

Sinistrum
09-08-2008, 01:18 PM
Isn't that the purpose of government?

Thus encapsulating why I HATE government.

Zaela Sedai
09-08-2008, 01:19 PM
I understand Snow...

It's just I want to believe that people aren't so niave that they think an ARM or god forbid interest only loan is a good investment for the long term...

Bryan Blaire
09-08-2008, 07:40 PM
Those loans were never intended to be offered to people that wanted a long-term house. Unfortunately they didn't continue to be sold to people that way. I remember when Gil and I were looking for a house, even our builder offered us two loans, one hybrid ARM/interest only loan (which was about $400 a month cheaper for at least three years) and my traditional VA loan. I just kinda looked at the builder and laughed at him, and he was confused as to why I thought it was funny.

This is yet one more point of proof to me that George W. Bush is acting more like a Democrat than a Republican, but oh well.

Hopefully someone gets some benefit out of this though, and hopefully it isn't Fannie Mae and Freddie Mac and their stockholders.

Sodas
09-08-2008, 07:55 PM
Freddie Mac,

Didn't he have a show on TV?

Signed,

McCain-Mooseburger 08

Bryan Blaire
09-08-2008, 08:01 PM
Sodas, you completely got that wrong...

it's McCain-Mooseknuckle '08. Geez.

Sodas
09-08-2008, 08:09 PM
My apologies ;)

All ( insert plural of moose here ) look the same to me!

Yuri33
09-08-2008, 10:45 PM
We complain about the government over-regulating, and then we complain about the government bailing out institutions when those regulations are stripped away.

Maybe it's just easier to complain.

Frenzy
09-09-2008, 12:37 AM
uh oh, Yuri's making sense. :p

Zae, if you had said that rant in California, you'd've been called an elitist and/or racist for keeping poor, immigrant families from buying a home. The fact that the poor can't afford to buy a home is irrelevant. :rolleyes:

This is just Lincoln Savings & Loan all over again.

i read something interesting the other day. i'll go find the book so i can cite it. It's about unpopular presidential decisions, viewed through the long lens of history. Anyway, it said that FDR didn't want to run for a 3rd term. But the Republican who was running against him was a Nazi sympathizer and had craploads of money from the National Socialist Party. So FDR felt he HAD to run again, to keep THAT from getting into office. How come they don't teach cool stuff like that in History class?

GonzoTheGreat
09-09-2008, 03:35 AM
Well, everything would be fine if the housing market hadn't crashed. See, three years ago, it was looking like you could buy a house and watch it appreciate 10% or 20% every year. With that kind of market, ballooning ARMs or interest-only loans seemed like a good risk because you could always refinance with your (now much) higher equity.

That sounds amazingly like a Ponzi scheme.

But gosh, it didn't work out like that.

Fancy that. A not working Ponzi scheme. Who ever heard of that before?

I do wonder: why didn't the government put a stop to it long before? Usually they're a bit more alert when it comes to such swindles.

tanaww
09-09-2008, 08:30 AM
I believe that the fault of this lies in two places. First it is banks that set quotas on approved loans. However, loans are how banks make money so it's hard to blame them. It is good, theoretically, for banks to have rational credit standards and for programs to exist to help lower-income people buy homes. A home is an asset that should increase in value and FHA and VA programs help people get into homes that otherwise might not.

The primary fault lies squarely in the lap of Joe Consumer who's more focused on taking classes in history or literature than in basic personal finance. This person doesn't know an ARM from his ass (say nothing about the cyclical nature of interest rates) and got in over his/her head when interest rates started rising. The difference in payment between a 200K loan at 5% and a 180K loan at 7% is significant. Can you do the math? If you can't, you should learn. E-mail me or take a class. It's called the Time Value of Money and there are even tools on the internet to do this for you.

Banks, on the other hand, are aware of the cyclical nature of interest rates and that is why they pushed ARMs. They expected rates to rise and make the loans more profitable for them. Given that they're in business to make money this is a stunning development.

And, from what I have seen, it is not the poor people that are necessary at the heart of it. It is Joe Middle Class. The flippers, sure, and also those hit by economic downturns. West Michigan was decimated by job cuts at tier 1 and tier 2 auto suppliers for some examples. It's not the 100K houses sitting empty. It is the 200K houses. These houses are empty because you can buy a $350K house for about $160,000 at auction. Aren't snowballs lovely? There are people (in West Michigan) setting homes on fire to try and avoid foreclosure. Others simply send their keys to the bank. This is Michigan. I'm sure it's not an exception.

Gilshalos Sedai
09-09-2008, 08:52 AM
~very happy she's in the state the housing bubble missed~

Crispin's Crispian
09-09-2008, 10:41 AM
When we bought our first house, we got an ARM. This was in 2004, just before prices started skyrocketing in Portland. It was a 3/1 ARM through our credit union, and the only loan we could qualify for with no downpayment (we could afford the payments no problem). We knew the terms going into it--no ballooning payment, no huge jumps in interest (it was capped at 2% increase per year, and at 11% total), and just planned on refinancing or moving in three to four years.

It worked out for us, thankfully. Our CU even changed it over to a new 5/1 ARM after two years with lower interest.

Still, I'm glad we have a fixed loan now, as much hassle as it is to get it. To Tana's point above about understanding the finances, it's a very complicated business. I spent hours on the phone with our broker trying to understand all the terms and how things are calculated. I'm still not sure I do.

tanaww
09-09-2008, 10:52 AM
When we bought our first house, we got an ARM. This was in 2004, just before prices started skyrocketing in Portland. It was a 3/1 ARM through our credit union, and the only loan we could qualify for with no downpayment (we could afford the payments no problem). We knew the terms going into it--no ballooning payment, no huge jumps in interest (it was capped at 2% increase per year, and at 11% total), and just planned on refinancing or moving in three to four years.

It worked out for us, thankfully. Our CU even changed it over to a new 5/1 ARM after two years with lower interest.

Still, I'm glad we have a fixed loan now, as much hassle as it is to get it. To Tana's point above about understanding the finances, it's a very complicated business. I spent hours on the phone with our broker trying to understand all the terms and how things are calculated. I'm still not sure I do.

ARMs are only appropriate if you only plan on being in the house a short time. A very short time.

And, I'd like to add that asking your banker to explain your mortgage terms is like asking Willie Wonka to help you with your weight loss plan. I am a firm believer that a personal finance course should be a high school graduation requirement. At the very least, it should be a University General Education requirement. I think it's much more relevant than "Learning to Create Healthy Lives".

Crispin's Crispian
09-09-2008, 11:01 AM
ARMs are only appropriate if you only plan on being in the house a short time. A very short time.

And, I'd like to add that asking your banker to explain your mortgage terms is like asking Willie Wonka to help you with your weight loss plan. I am a firm believer that a personal finance course should be a high school graduation requirement. At the very least, it should be a University General Education requirement. I think it's much more relevant than "Learning to Create Healthy Lives".
It was a requirement at my high school, but I don't remember covering mortgages. Then again, this was 15 years ago. Plus when you're 16, figuring out closing costs on a 30-year fixed rate loan at 6.5% with a 6.895% APR isn't exactly...stimulating. ;)

Fortunately our mortgage broker could tell that I wouldn't be snowed by half-assed explanations of stuff. Plus I did research before calling her.

Birgitte
09-09-2008, 01:07 PM
I took personal finance in high school. In high school, it was pretty much a joke. Easy A, stuff like reading a paycheck, balancing a checkbook and creating a budget. The only thing we did with Time Value of Money was the rule of 72. Then I took it again in college. Much more difficult, but worth the effort, even if I still don't understand taxes. Honestly, all the stuff on Time Value of Money is easy. CNN has free basic online courses on their website that personally, I think they should advertise everytime they mention the mortgage crisis. People might still ignore it, but I'm betting most people don't even know they're there. There has to be some people smart enough to realize that without knowing what they're getting into, they're going to get screwed.

tanaww
09-09-2008, 01:46 PM
I took personal finance in high school. In high school, it was pretty much a joke. Easy A, stuff like reading a paycheck, balancing a checkbook and creating a budget. The only thing we did with Time Value of Money was the rule of 72. Then I took it again in college. Much more difficult, but worth the effort, even if I still don't understand taxes. Honestly, all the stuff on Time Value of Money is easy. CNN has free basic online courses on their website that personally, I think they should advertise everytime they mention the mortgage crisis. People might still ignore it, but I'm betting most people don't even know they're there.

See? I do have ONE that listens!

There has to be some people smart enough to realize that without knowing what they're getting into, they're going to get screwed.

And thanks to Personal Finance you're now one of them!

John Snow
09-09-2008, 01:57 PM
Plus when you're 16, figuring out closing costs on a 30-year fixed rate loan at 6.5% with a 6.895% APR isn't exactly...stimulating. ;)


Even at 16, the root of those calculations involves that amazing number, e! If that doesn't grab your interest, well, I just don't know what will....

Davian93
09-09-2008, 04:26 PM
No One Immune From Housing Crunch (http://sports.yahoo.com/nba/blog/ball_dont_lie/post/For-sale-Allen-Iverson-s-six-bedroom-home-in-Vi?urn=nba,106478)

I think we should all put a collection together to help this nice young man out.