Capitol Hill Blue Forums Political Issues Finance, the economy & Economics Banks in trouble?

Afrianc-Americans and Latinos Hardest Hit

Perhaps you should not put too much stock in what race hustling, Maoist-oriented Black supremist fringe groups peddle, California Rick. After all, they can only grow by fomenting hate.
Yours,
Issodhos

is it not a form of silent hate to deny the truth of a condition? It is easier to dismiss the cries of pain if you close your ears.

Transparency is absolutely required to have a true free market, and invariably absent whenever there is one. Increasing profit margins require that information be kept from prospective vendees so that they cannot ascertain the true "value" they are receiving. The problem in virtually any market is that it is manipulated by the purveyors to the detriment of the buyers, most commonly, but not always, through monopolistic practices and without exception through deception. This habit of deception then pervades the whole market sphere, and the invariable result is corruption and collapse, which is exactly how this crisis came about. The purpose of the government should be ensuring transparency… [/QUOTE]

This sounds like the Perfect Market Theory, NWP. Necessary to this theory is that eventually, in a ‘perfect’ market, there would be no profit – exchange would be made at cost – because everyone would ‘know’ the ‘value’ of everything, everyone would have total information, and because of this, everything would have a “true” (objective) value known to everyone.

Unfortunately for this theory, there are, in my opinion, two fatal flaws that reduce it to piffle. First, the theory fails to take into consideration that the world is not made up of automatons, but rather individuals who have differing thoughts, believes, desires, and needs. This means that any given product or service is valued differently by different buyers. Value is subjective (there is no one “true” value for a product or service). This is so, regardless of perfect transparency and knowledge.

Secondly, markets are made up of people, and people are imperfect, sloppy, and fuzzy. This means that markets are also imperfect and will ever be so. The dehumanized automaton that you require for your peculiar (and false) definition of a free market is, I think, a straw man intended to falsely suggest that a free market is not possible. The implied 'remedy' is, of course, centralized control by government employees and politicians -- whom I suppose we are to view as perfect, tidy, and sharp. Not buying it, NWP.;-)
Yours,
Issodhos

No. Sometimes it is just being honest enough to call BS for what it is. My bad?;-)
Yours,
Issodhos

Excellent, excellent find Phil. Thank you.

"Acorn" may not be a term familiar to some you Ranters. Acorn is a housing funding program that allows borrowers to borrow up to 100% of the home. Meaning, that the borrower didn't have to put down, a down payment to purchase.

Normally, one has to pay "PMI" when less than 20% is put down. A PMI is Property Mortgage Insurance. It must be purchased and it goes away once the property increases in value to 20% in equity. If a borrower then goes to get a home equity loan and uses the equity up to 100%, the PMI kicks in again, or only up to 80% of the equity can be borrowed against.

The Acorn program allows buyers to get a loan of 100% of the value of the property without having to purchase PMI, thus saving the borrower money each month as the PMI adds about $100.00 a month to the price of the mortgage.

The program is designed to help low-income borrowers get into a home.

It's interesting that the writer of this article suggests that the banking industry knew what was coming down the pike (over inflated home prices) and that is why they insisted that property mortgages not be excluded from bankruptcy reform in 2005 as they were prior.

Interesting.

I don't find anything sinister in helping minority and low-income groups get into a home so far...

...the fact that once they got into a home, and couldn't refinance and they couldn't continue to pay once the rate adjusted, the logical thing to do would be to sale. But, many, not being able to own homes previously, didn't want to "lose" the American dream and hung onto their home - which then ended up in foreclosure.

Lesson Learned: ARM's (Adjustable Rate Mortgages) are very bad - and don't do one.

Good point Phil.

However Iss has a good point too:


I really didn't want to bring up the point again because it's not germane to this thread, but it does have to do with the current banking situation and sub-prime loans:

What did the Acorn program have to do with slavery?

This is why I agree with Iss' reply as well.

In thinking about this, I have come to realize that, perhaps a "sinister" aspect of this program is that home owner gave up paying an affordable amount of rent in order to get into the American dream, thus stretching themselves into paying higher payments in the form of mortgage, only to lose their dream.

In doing so, the low-income person puts more money out only to be in the same place once again, renting, a short time later.

Perhaps the argument can be made that a lot of greedy people knew this would happen and took advantage of the unsuspecting low-income person.

However, the other side of the argument could be made that those who weathered the storm now own homes.

Do the negative and positives of these two scenarios cancel each other out? Probably not. Most likely, the negative scenario far outweighs the positive scenario.

I think you may be partly right. Not knowing much about the lending business I will continue and I could be totally wrong, wouldn't be the first time.

I think a lot of greedy people knew something would happen, not really caring what that something was, or who it was to, as long as they made their loan.

Once the loan was made, they felt there was no way they could loose. Either the borrower would pay the mortgage or they wouldn't. If the borrower paid, fine. If they didn't, either the government would bail them out, or the lender would bundle the loan and sell it to someone else, fine again. The lender couldn't loose. Seems low-risk for the lender to me.

I know a few months ago my wife and I were looking in to purchasing a home. We talked to a few lenders and was shocked at the amount they calculated what we could afford. No matter how I did the math, I could not see us paying the monthly amount they said we could afford. So, we still have not purchased a home and until we get more money saved for a down payment, we will not look further.

We would love to buy our own home, but I will not allow us to get in over our head. I will stay where I am before I do that. And now, the way the economy and inflation are heading, I am glad we didn't move forward at that time.

The lender led us to believe we could afford more than we really could. It always looks better on paper!

They like to do that. Luckily when I bought my house I went through the credit union I regularly bank with, they did not push the ARMS and highly suggested sticking to a fixed rate loan. When I got divorced I initially was going to buy my ex-wife out of her half of the house but by that point the house had increased in value by almost 150k, refinancing with anything other than "creative" loans, (and I mean creative, like so called 1% interest loans where you pay the principle + 1% of interest, what they gloss over is that there is still another 5% interest being charged, its just getting tacked onto the value of the loan!), was impossible so we ended up selling it and I'm happier for it. I ended up with a savings account and no debt.

I feel sorry for the folks that bought that house though, as I know they were just trying to scrape together the cash just to buy it, I know it was overvalued, we sold just before the market started heading south.

I think a good rule of thumb is, if you wouldn't pay it in rent, then don't get a mortgage with a payment that high! People seem to forget that with owning a house comes the additional responsibility of maintaining the house, there is no property management to come and pay for that clogged sink, broken heater, or fence thats falling down.

As a side-note, my credit union still doesn't push the ARMS but they do push a new loan, a 40yr fixed rate, 5 years ago the best you could find was a 30yr, it's getting almost impossible for a middle income family to buy here in San Diego and the banks had to get creative to help get people into homes, unfortunately for most lenders that meant getting people into loans they really couldn't afford.