* This is a question that we all have in the back of our heads..is it not??? Don't you wonder the same thing? Don't you ask yourself: "What is going on here?"....I have; I have asked as homeowners here in the Hamptons are being affected as never before by this massive failure of the housing market. I watch as solid citizens are threatened by foreclosure. This only reinforces the feeling I have that the banks have no intention to help homeowners keep their homes. 11 MILLION AMERICANS ARE IN FORECLOSURE!!!How Many Homeowners Losing Their Homes Will It Take??? Why does the Federal Government Not See What the Banks Are Doing?...Or Is It That They Just Don't Care Either?
IT'S A LITTLE LIKE BOWLING FOR DOLLARS: KNOCKING THEM DOWN ONE BY ONE FOR THE MONEY!!
It has been recognized in this market that the banks, who got money from the Feds to help out with the underwater mortgages have no desire to help out the troubled homeowners with modifications--too bad since the properties here have a better chance to regain their former value and since houses are starting to sell at a good clip again.
However, the banks do not see the benefit to their bottom line and are, as a result, forcing the homeowners to short sell sooner rather than later and it is counter productive to the banks to act quickly to modify; instead they sell short, collect the subsidies from the government and then go after the homeowner for what they were behind in missed payments --- they can see a greater return on their efforts from that than from a good solid re-working of the original loans in order to keep the person in their home!!! The old "boot" of the property owner is the goal here and it is clear there is no genuine intention to really help anyone but themselves---it is shameful to watch retired people, elderly and young families all, to be so impacted by what the banks did in the first place.
Let's take a look at what happened: (please keep in mind that I am not a banker so this may seem naive; it is basically what happened as I watched it unfold)
- In their efforts to make the idea that home ownership was a possibility for all Americans the government made it a requirement through the Community Re-investment Act of 1992 that all banks were required to give loans out to any and all who had an income and in some cases, some who did not.
- The banks provided these loans as required but then had to create a way of selling these "questionable loans". So they packaged them with good loans into blocks of investment paper known as Mortgage Backed Securities. In other words, they literally "hid" the bad with the good and then sold them, in pieces called derivatives to investors from accross the globe. Fortunes were made on these investments.
- Then Hedge Fund's started betting on these derivates, betting that they would fail; buying them short--betting that they would lose value--just as the whole idea was beginning to unravel; this pushed the MBS to the bottom of the list of desirable investments at a very critical time....and just as the whole financial world started to recognize the fragility of the entire derivative concept...the bottom dropped out from under all the funds that were made up of this investment paper...WHY? This is why:
- Most of these loans were sold as Adjustable Rate Mortgages in order for the buyer to be able to afford the payments--the adjustment periods being 1 to 5 years on most of these loans. As these loans began adjusting, we saw the first layer of loan failures happen. More and more began to adjust as time went on and it snowballed into what we now see as a total collapse of the entire housing market at ALL price levels; that in combination with the money market fund "breaking" the dollar for the first time in history, then the Lehman Bros. failure and the stock market crashing...
And there you have it!!! That is a shortened version of just how it unfolded; so, who is to blame you ask??? I think it is clear that the Government and the banks share the blame on this one. There is no question that if the banks were not told to give loans to a lower income population, this never could have happened---but it did and therefore it is my opinion that this is the reason that we are all affected now; We all must be concerned about property values, even if we are not in a postion to lose our own homes! This chaos will affect ALL of us soon!!
* This is a post I wrote last night and in that one I asked the question--How many homesowners will it take losing their Homes--now I see this is a major story today so I wanted to run it again.
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