Comments on: “If you were dead, they would still give you a loan” http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 15:19:29 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Disclosure of risk is NOT inherant to fraud | Let Them Fail http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-166231 Disclosure of risk is NOT inherant to fraud | Let Them Fail Wed, 29 Apr 2009 14:56:33 +0000 http://www.ritholtz.com/blog/?p=14110#comment-166231 [...] were following your orders to lend to any individual or institution that could fog and mirror (and even some that can’t), then you “collateralize” title to all these inflated streams of unrepayable debt [...] [...] were following your orders to lend to any individual or institution that could fog and mirror (and even some that can’t), then you “collateralize” title to all these inflated streams of unrepayable debt [...]

]]> By: Transor Z http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136198 Transor Z Mon, 29 Dec 2008 16:44:04 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136198 @CJ: Thanks! I should do a better job of searching the site. Based on those pieces, the answer to the question I asked looks like, "Kinda sorta, depending on the mortgage type." The information re: lender spread and other insidious aspects of Option ARMs is really good to know. A lot of people took out ARMs based on how long they planned (hoped?) to live in the home. So the mentality was like financing a car lease. Rising RE prices would cover any early payment penalties and/or even yield a nice profit on the back end. Much has been made of creating an "ownership society." I'd be curious to know, though, to what extent American's notions of "ownership" have changed from the goal of a traditional "permanent" family residence to a series of more temporary homes, like a car lease. If anyone has any good links that address this question, I'd appreciate it. @CJ: Thanks! I should do a better job of searching the site.

Based on those pieces, the answer to the question I asked looks like, “Kinda sorta, depending on the mortgage type.” The information re: lender spread and other insidious aspects of Option ARMs is really good to know.

A lot of people took out ARMs based on how long they planned (hoped?) to live in the home. So the mentality was like financing a car lease. Rising RE prices would cover any early payment penalties and/or even yield a nice profit on the back end.

Much has been made of creating an “ownership society.” I’d be curious to know, though, to what extent American’s notions of “ownership” have changed from the goal of a traditional “permanent” family residence to a series of more temporary homes, like a car lease. If anyone has any good links that address this question, I’d appreciate it.

]]> By: Dr. Kenneth Noisewater http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136189 Dr. Kenneth Noisewater Mon, 29 Dec 2008 16:04:47 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136189 <i>Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer. Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved. “I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs. <b>While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said. </b> “In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”</i> This has got to take the cake. Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.
Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.
“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.
While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.
“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”

This has got to take the cake.

]]> By: CJ http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136163 CJ Mon, 29 Dec 2008 12:11:21 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136163 @Tranzor Z said: <i>"Maybe a stupid question, but… ARMs that reset in 2009 pegged to current LIBOR/Fed rates won’t be a problem for borrowers, right?"</i> Very few pay option adjustable rate mortgages are set to LIBOR. According to Mr. Mortgage (making a <a href="http://www.ritholtz.com/blog/2008/12/pay-option-arms-the-implosion-is-still-coming-despite-low-rates/" rel="nofollow">special guest appearance in the BP Cafe</a>) more than 80% of them use a measure called the Monthly Treasury Average, with only small number using LIBOR. This is also explained in a good piece by Doctor Housing Bubble called <a href="http://www.doctorhousingbubble.com/option-arms-for-dummies-why-45-percent-mortgages-rates-will-do-absolutely-nothing-for-these-toxic-assets/" rel="nofollow">Option ARMs for Dummies: Why 4.5 Percent Mortgage Rates will do Absolutely Nothing for these Toxic Assets</a>. Yes I know that referring to authorities named Mr. Mortgage and Dr. Housing Bubble does look bizarre, but I've had more than enough experience with real estate and they're both excellent sources. @Tranzor Z said:

“Maybe a stupid question, but… ARMs that reset in 2009 pegged to current LIBOR/Fed rates won’t be a problem for borrowers, right?”

Very few pay option adjustable rate mortgages are set to LIBOR. According to Mr. Mortgage (making a special guest appearance in the BP Cafe) more than 80% of them use a measure called the Monthly Treasury Average, with only small number using LIBOR.

This is also explained in a good piece by Doctor Housing Bubble called Option ARMs for Dummies: Why 4.5 Percent Mortgage Rates will do Absolutely Nothing for these Toxic Assets.

Yes I know that referring to authorities named Mr. Mortgage and Dr. Housing Bubble does look bizarre, but I’ve had more than enough experience with real estate and they’re both excellent sources.

]]> By: Pat G. http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136133 Pat G. Mon, 29 Dec 2008 03:30:56 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136133 And now that the 3 month LIBOR rate has fallen 70% since 10-10 when it was at 4.82%, the financial institutions are reluctant to make ANY loans. From one extreme to the other. And now that the 3 month LIBOR rate has fallen 70% since 10-10 when it was at 4.82%, the financial institutions are reluctant to make ANY loans. From one extreme to the other.

]]> By: Dow http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136075 Dow Sun, 28 Dec 2008 22:29:11 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136075 mark, It's in the bankers' best interests to start dragging everyone into court before it's too late. Otherwise yes, Vinnie will take the law into his own hands at which point, the nation is lost. mark,
It’s in the bankers’ best interests to start dragging everyone into court before it’s too late. Otherwise yes, Vinnie will take the law into his own hands at which point, the nation is lost.

]]> By: mark mchugh http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136060 mark mchugh Sun, 28 Dec 2008 20:22:36 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136060 All things considered, I still like Vinnie's proposed solution the best. It's the only one that would make me feel better All things considered, I still like Vinnie’s proposed solution the best. It’s the only one that would make me feel better

]]> By: James http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136055 James Sun, 28 Dec 2008 19:07:20 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136055 And again, what some have termed “predatory borrowing” was in the real world, simply fraud perpetrated by bank employees and mortgage brokers: “[Managers] in the Irvine, Calif, office coached brokers to leave parts of applications blank to avoid prompting verification if the borrower’s job or income was sketchy.” ---------------------- And how is it that bank CEOs and other decision makers aren't facing charges for such fraud? Much like Ken Lay, they knew how their numbers were being generated. And again, what some have termed “predatory borrowing” was in the real world, simply fraud perpetrated by bank employees and mortgage brokers: “[Managers] in the Irvine, Calif, office coached brokers to leave parts of applications blank to avoid prompting verification if the borrower’s job or income was sketchy.”

———————-

And how is it that bank CEOs and other decision makers aren’t facing charges for such fraud? Much like Ken Lay, they knew how their numbers were being generated.

]]> By: Bob A http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136051 Bob A Sun, 28 Dec 2008 18:21:22 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136051 Nothing more or less than an organized crime operation undercover of a legitimate bank. And World Savings And ... ... ... ... ... ... ... ... Why not just say so? In CA you get life in prison for a third strike offense even if it's stealing a sixpack from 7-11. And Kerry Killinger is doing what this Christmas? Nothing more or less than an organized crime operation undercover of a legitimate bank.

And World Savings

And … … … … … … … …

Why not just say so?

In CA you get life in prison for a third strike offense even if it’s stealing a sixpack from 7-11.

And Kerry Killinger is doing what this Christmas?

]]> By: VoiceFromTheWilderness http://www.ritholtz.com/blog/2008/12/if-you-were-dead-they-would-still-give-you-a-loan/comment-page-1/#comment-136044 VoiceFromTheWilderness Sun, 28 Dec 2008 17:10:12 +0000 http://www.ritholtz.com/blog/?p=14110#comment-136044 Couldn't agree more, and glad someone somewhere is calling out the truth. Couldn’t agree more, and glad someone somewhere is calling out the truth.

]]>