U.s. Banking Crisis: Capitalism "gone Wild"?

[OriginalPoster]

where's the proof? the japanese got burned already in the 1980s, potential foreign buyers were and still p*ssed off by IRS and immigration officials after tightening the rules because of sept 11. i sold my home and the home i built for a german friend because my wife was told in 2003 when arriving from Europe "owning a house is no valid reason to enter the United States!"

*****

1. That's odd, was it easier to move to another country than to straighten out the situation, or did you move as a matter of principle?

2. Was your wife actually denied entry even though she was in compliance with all immigration rules or was some rule changed after 911 that had the effect of denying her entry? There must be more to that story.

1. OP, there was a way to "straighten out the situation", namely by investing 2 million U.S. dollars in a newly formed company to be run by the investor (in that case my[not so] humble self) and provide x number of employment for U.S. citizens. now, i admit that i am mad. my close friends call me "mad dog Wally" and in a way they are right. but i am not mad/crazy enough to invest 2mm in a country who's politics i abhor, pay a multiple of taxes and that all for some shÍtty VISA which might or not might have led to a green card after a certain number of years. both, my wife and me, liked living in America and there was a short period during which my wife tried to convince me it is worth to invest that kind of dough. however, she agreed that it's not worth it when i pointed out the shortcomings and risk we would take.

both of us are german citizens. we held for a second time a 10-year visa which enabled us to stay for 6 months at a stretch in the U.S. this limitation was no problem for us as we own residential property in two other countries and used that property.

2. my wife was not denied entry. but the procedure "stand here, wait, do not make any calls on your mobile phone, so what if you miss your connecting flight to Orlando? put these papers away! we are the INS not the IRS and not interested in your tax returns" was enough for us to say "enough is enough".

any other questions?

So what was it that changed in regard to visa rules post-911? What I mean to ask is why was it previously adequate to have a 10 year / 6 month visa to retire to Florida but afterwards it was required to additionally invest $2M in a business? Were 10 year validity, 6 month visas repealed and the $2M rule intoduced in its place? I presume that the law must have changed, otherwise your attorney would have advised you of that you'd potentially need to invest $2M in a business before you moved to the US in the first place.

[maxman71]

Unfortunately the whole world got involved with this sketchy financial transactions - look for quite a few foreign banks to deep six in the near future. Bottom line - greed is the root cause of this.

Not exactly, the problem was not greed per se. The problem was that a situation evolved where risk was shifted away from people who originally assumed the risk and onto third parties and short-term financial gain was experience by all involved. It was a cascading series of events passing the risk off to the next guy -- first a clown decides to try to borrow 100% or more of the value of a house in order to buy it, then a bank official approves it knowing that the debt is goign to get wrapped into devivatives and sold off, then investment banks buy up the debt, then housing prices decline and an unmanagebale number of those original slobs default on their mortages. The dumbest ones might have been the final ones in the chain (the investment bankers who are supposed to be financially saavy), but the problem traces back to the orignal clown who bought the house he couldn't afford. Remarkably, the media has painted those slobs as being the victims in this story, rather than as dregs of society who think nothing of not repaying money loaned to them.

Allow me to add some history to this mess, and hence, its origins:

Back in the early to mid 1990's the Clinton Administration embarked on a huge Social Engineering Experiment. And that was to enable low/no income minorities to be able to buy homes. This was justified under US Affirmative Action laws which were interpreted by Clinton as meaning about 50% of the mortgages underwritten by Fanny and Freddie (US gov't sponsored mortgage corporations) had to go to minorities and low income folks. Often times, low income and minorities in the US are one in the same; translation: African-Americans, Hispanics, single parent females, etc. The underlying "logic" was that by allowing these folks to own a home at initially sweetheart mortgage rates, it would magically make them better citizens and make them behave better. Never mind most of them had no jobs, no income, no assets and no credit. Clinton allowed them to use their welfare payment "income" to qualify for the mortgages. That's right; they were ALLOWED to include their welfare payments on the loan docs as income to qualify for mortgages. This is no joke. So, Wall Street was given a "wink and a nod" to play along. Our patriots on the Street saw huge $ signs in all the huge fees they could collect from the initial mortgages themselves, as well as in all the derivative products spawned from them. Then Fed Chairman Alan "The Shyster" Greenspan was all to happy to play along by ratcheting down interest rates to ensure the funds flowed freely to finance this grand endeavor. Now, these folks obviously did not possess the personal habits that historically are found to be essential to being able to consistently meet various financial obligation, like making regular mortgage payments in full and on time. Normally, the ability to buy a home and pay a mortgage is the result of displaying behaviors such as having a good job, saving, managing your finances and life prudently and responsibly. Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going. Most Americans are livid over this Mother of All Bailouts and do not support it. (about 55-60% are against it) The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

[Naam]

So what was it that changed in regard to visa rules post-911? What I mean to ask is why was it previously adequate to have a 10 year / 6 month visa to retire to Florida but afterwards it was required to additionally invest $2M in a business? Were 10 year validity, 6 month visas repealed and the $2M rule intoduced in its place? I presume that the law must have changed, otherwise your attorney would have advised you of that you'd potentially need to invest $2M in a business before you moved to the US in the first place.

officially nothing did change as far as our status was concerned. we knew from the beginning that we could not overstay the 6 months and we never planned to stay longer. but you might be surprised to know that a visa to the U.S. does not automatically mean you are admitted. it is up to the discretion of the individual immigration officer (and his next superior) to grant or refuse admittance. no appeal possible!

there was a case in Miami (2002) when an old polish lady was sent back to Poland with the next flight although she had a valid visa to visit her daughter. reason: calloused hands, enough for the immigration officer to conclude she came to do menial work in the U.S. of A.

in my view nobody should complain about thai immigration rules. i don't fly out too often but Mrs Naam leaves and enters Thailand at least every two months, sometimes once a month. no questions asked, no eyebrows raised, gimme the paper, look into the camera... stamp... stamp... here you go.

we moved to Florida end of 1989 but never had the intention to immigrate or retire in the U.S. indefinitely. at that time the investment necessary to get a provisional residence visa was peanuts, i.e. 60,000 dollars. the change (1 million in states were unemployment is above federal level and 2 million in states were unemployment is equal to or below federal level) came (i think) after 2001.

[Naam]

Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going.

The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

hats off to Maxman! my respect for hitting the nail on the head.

[LaoPo]

Allow me to add some history to this mess, and hence, its origins:

Back in the early to mid 1990's the Clinton Administration embarked on a huge Social Engineering Experiment. And that was to enable low/no income minorities to be able to buy homes. This was justified under US Affirmative Action laws which were interpreted by Clinton as meaning about 50% of the mortgages underwritten by Fanny and Freddie (US gov't sponsored mortgage corporations) had to go to minorities and low income folks. Often times, low income and minorities in the US are one in the same; translation: African-Americans, Hispanics, single parent females, etc. The underlying "logic" was that by allowing these folks to own a home at initially sweetheart mortgage rates, it would magically make them better citizens and make them behave better. Never mind most of them had no jobs, no income, no assets and no credit. Clinton allowed them to use their welfare payment "income" to qualify for the mortgages. That's right; they were ALLOWED to include their welfare payments on the loan docs as income to qualify for mortgages. This is no joke. So, Wall Street was given a "wink and a nod" to play along. Our patriots on the Street saw huge $ signs in all the huge fees they could collect from the initial mortgages themselves, as well as in all the derivative products spawned from them. Then Fed Chairman Alan "The Shyster" Greenspan was all to happy to play along by ratcheting down interest rates to ensure the funds flowed freely to finance this grand endeavor. Now, these folks obviously did not possess the personal habits that historically are found to be essential to being able to consistently meet various financial obligation, like making regular mortgage payments in full and on time. Normally, the ability to buy a home and pay a mortgage is the result of displaying behaviors such as having a good job, saving, managing your finances and life prudently and responsibly. Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going. Most Americans are livid over this Mother of All Bailouts and do not support it. (about 55-60% are against it) The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

I know of the G.W. Bush era, starting those projects (October 15, 2002 to be exact), allowing people with low incomes to have access to mortgages, but I didn't know that started already during the Clinton era.

Can you provide links or proof for that since you wrote early to mid '90's whilst Clinton started being a President, January 20, 1993 ?

LaoPo

[Naam]

but the procedure "stand here, wait, do not make any calls on your mobile phone, so what if you miss your connecting flight to Orlando? put these papers away! we are the INS not the IRS and not interested in your tax returns" was enough for us to say "enough is enough".

Same here. Now imagine how it feels when your paying that guys salary too.

I am an american citizen but over 25 years ago I decided there were better places to live for me and my wife. While I do visit there on rare occasions, I wouldn't want to live there again. I guess when you live in a place and it changes day by day you don't notice the change. Once you have been gone for a few years the change can be quite shocking when you go back.

I've been through a fair number of customs and immagrations but there is none I dislike going through as much as the US.

BT you sound like my Mrs. but she differs from you in "I wouldn't want to live there again". if i told her that there was a way to go back to the U.S. (not necessarily Florida) without investing a couple of millions she'd start packing on a sunday evening and even miss the Formula One night race in Singapore which starts in a few minutes

[meom]

Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going.

The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

hats off to Maxman! my respect for hitting the nail on the head.

This derivatives business is quite complicated and I don't really understand much of it.

Below analogy tries to explain it though which makes sense to me.

Joe goes to the track and bets $2 on a horse.

________________________________________

Two guys standing nearby get into a discussion and Fred says to Sam, "I'll bet you $5 that Joe wins his bet."

Next to them are Bill and Bob. Bill says: "I'll bet you $10 that Fred welshes on his bet if he loses."

Next to them is Sally. Sally says: "For $3 I'll guarantee to Bill that if Bob fails to pay off, I'll make good on the bet."

Sally then goes to Mary and borrows the $7 needed in case she has to ever pay off and promises to pay back $8. She doesn't expect to every have to pay since she believes Bob will always make good. So she expects to net $2 no matter what happens to Joe.

A quick calculation indicates that there is now 2+5+10+3+7 = $27 riding on the outcome of the horse race.

Question how much has been "invested" in the horse race?

Answer:

$50,000 by the owner of the horse who is expecting to recoup his investment from the winnings of the horse and other future deals. Everyone else is gambling, not investing.

The issue with the home market is that the only "investor" was the person who bought the home. All those engaged in the meaningless derivatives spun off from this are gambling. You can see how quickly the face value of all these side bets can exceed the underlying investment. Who is holding these side bets - not the homeowner? It is the people at the failing investment banks, hedge funds and similar enterprises. Notice that the bailout is being directed at them not the homeowners.

The real world is, of course, even more complicated. Over the last 30 years people have been allowed to place bets on everything starting with the value of stock averages. They might as well bet on the temperature in Newark at 8:00 AM.

So when you hear everybody saying this is a crisis caused by the housing collapse, be skeptical. We are in the midst of a classic pyramid or Ponzi scheme and there is no way out except for people to lose a lot of money. All that is different this time is that it is the taxpayers who are being asked for the cash.

[BEENTHEREDONETHAT]

but the procedure "stand here, wait, do not make any calls on your mobile phone, so what if you miss your connecting flight to Orlando? put these papers away! we are the INS not the IRS and not interested in your tax returns" was enough for us to say "enough is enough".

Same here. Now imagine how it feels when your paying that guys salary too.

I am an american citizen but over 25 years ago I decided there were better places to live for me and my wife. While I do visit there on rare occasions, I wouldn't want to live there again. I guess when you live in a place and it changes day by day you don't notice the change. Once you have been gone for a few years the change can be quite shocking when you go back.

I've been through a fair number of customs and immagrations but there is none I dislike going through as much as the US.

BT you sound like my Mrs. but she differs from you in "I wouldn't want to live there again". if i told her that there was a way to go back to the U.S. (not necessarily Florida) without investing a couple of millions she'd start packing on a sunday evening and even miss the Formula One night race in Singapore which starts in a few minutes

Thats interesting Naam as my wife would much rather live here or in Panama or most anywhere (warm) than the states. One thing that really bugs her in living in the states is all the paperwork and the constant stream of bills. Also she would not want to get along without a housekeeper, spoiled rotten.

Must admit that the taxes, medical and property tax would run more than everything cost me here for a similar lifestyle. In fact a 4Br condo on the beach like we have here would probably be out of my price range in the US. I don't share well with governments. I hope peaceblondie dosen't read this, being exIRS .

Edited September 28, 2008 by BEENTHEREDONETHAT

[LaoPo]

.......................... and even miss the Formula One night race in Singapore which starts in a few minutes

BLAST !!!!! I missed the start.....

Hmmmm Massa first, Hamilton second, 57 rounds to go.

LaoPo

Edited September 28, 2008 by LaoPo

[midas]

Allow me to add some history to this mess, and hence, its origins:

Back in the early to mid 1990's the Clinton Administration embarked on a huge Social Engineering Experiment. And that was to enable low/no income minorities to be able to buy homes. This was justified under US Affirmative Action laws which were interpreted by Clinton as meaning about 50% of the mortgages underwritten by Fanny and Freddie (US gov't sponsored mortgage corporations) had to go to minorities and low income folks. Often times, low income and minorities in the US are one in the same; translation: African-Americans, Hispanics, single parent females, etc. The underlying "logic" was that by allowing these folks to own a home at initially sweetheart mortgage rates, it would magically make them better citizens and make them behave better. Never mind most of them had no jobs, no income, no assets and no credit. Clinton allowed them to use their welfare payment "income" to qualify for the mortgages. That's right; they were ALLOWED to include their welfare payments on the loan docs as income to qualify for mortgages. This is no joke. So, Wall Street was given a "wink and a nod" to play along. Our patriots on the Street saw huge $ signs in all the huge fees they could collect from the initial mortgages themselves, as well as in all the derivative products spawned from them. Then Fed Chairman Alan "The Shyster" Greenspan was all to happy to play along by ratcheting down interest rates to ensure the funds flowed freely to finance this grand endeavor. Now, these folks obviously did not possess the personal habits that historically are found to be essential to being able to consistently meet various financial obligation, like making regular mortgage payments in full and on time. Normally, the ability to buy a home and pay a mortgage is the result of displaying behaviors such as having a good job, saving, managing your finances and life prudently and responsibly. Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going. Most Americans are livid over this Mother of All Bailouts and do not support it. (about 55-60% are against it) The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

How interestimg.........! So many people deserve the blame. Even though it is bizarre to rely on welfare payments to fund a mortgage,

all this after all was backed by what has always been regarded as a fairly safe asset -i.e. residential real estate.

Why couldn't the authorities have insisted on mortgage protection insurance for these low income purchasers? If the property was fairly

appraised at that time and mortgage insurance was based on realising a realistic price if the need subsequently arose, such a gamble

by Bill Clinton cannot be too harshly criticized. If people hadn't subsequently turned this into such a synthetic mess,

it could have been far less damaging for the USA than many of the gambles George W. Bush has taken during his term in office !

Is all these people on Wall Street who subsequently became involved that deserve the real blame surely?

[lannarebirth]

Allow me to add some history to this mess, and hence, its origins:

Back in the early to mid 1990's the Clinton Administration embarked on a huge Social Engineering Experiment. And that was to enable low/no income minorities to be able to buy homes. This was justified under US Affirmative Action laws which were interpreted by Clinton as meaning about 50% of the mortgages underwritten by Fanny and Freddie (US gov't sponsored mortgage corporations) had to go to minorities and low income folks. Often times, low income and minorities in the US are one in the same; translation: African-Americans, Hispanics, single parent females, etc. The underlying "logic" was that by allowing these folks to own a home at initially sweetheart mortgage rates, it would magically make them better citizens and make them behave better. Never mind most of them had no jobs, no income, no assets and no credit. Clinton allowed them to use their welfare payment "income" to qualify for the mortgages. That's right; they were ALLOWED to include their welfare payments on the loan docs as income to qualify for mortgages. This is no joke. So, Wall Street was given a "wink and a nod" to play along. Our patriots on the Street saw huge $ signs in all the huge fees they could collect from the initial mortgages themselves, as well as in all the derivative products spawned from them. Then Fed Chairman Alan "The Shyster" Greenspan was all to happy to play along by ratcheting down interest rates to ensure the funds flowed freely to finance this grand endeavor. Now, these folks obviously did not possess the personal habits that historically are found to be essential to being able to consistently meet various financial obligation, like making regular mortgage payments in full and on time. Normally, the ability to buy a home and pay a mortgage is the result of displaying behaviors such as having a good job, saving, managing your finances and life prudently and responsibly. Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going. Most Americans are livid over this Mother of All Bailouts and do not support it. (about 55-60% are against it) The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

How interestimg.........! So many people deserve the blame. Even though it is bizarre to rely on welfare payments to fund a mortgage,

all this after all was backed by what has always been regarded as a fairly safe asset -i.e. residential real estate.

Why couldn't the authorities have insisted on mortgage protection insurance for these low income purchasers? If the property was fairly

appraised at that time and mortgage insurance was based on realising a realistic price if the need subsequently arose, such a gamble

by Bill Clinton cannot be too harshly criticized. If people hadn't subsequently turned this into such a synthetic mess,

it could have been far less damaging for the USA than many of the gambles George W. Bush has taken during his term in office !

Is all these people on Wall Street who subsequently became involved that deserve the real blame surely?

The '87 crash in US markets was caused largely because of "portfolio insurance". same same with mortgage insurance. Might work once in a while, but if everyone needs it, no one gets it.

[BEENTHEREDONETHAT]

Allow me to add some history to this mess, and hence, its origins:

Back in the early to mid 1990's the Clinton Administration embarked on a huge Social Engineering Experiment. And that was to enable low/no income minorities to be able to buy homes. This was justified under US Affirmative Action laws which were interpreted by Clinton as meaning about 50% of the mortgages underwritten by Fanny and Freddie (US gov't sponsored mortgage corporations) had to go to minorities and low income folks. Often times, low income and minorities in the US are one in the same; translation: African-Americans, Hispanics, single parent females, etc. The underlying "logic" was that by allowing these folks to own a home at initially sweetheart mortgage rates, it would magically make them better citizens and make them behave better. Never mind most of them had no jobs, no income, no assets and no credit. Clinton allowed them to use their welfare payment "income" to qualify for the mortgages. That's right; they were ALLOWED to include their welfare payments on the loan docs as income to qualify for mortgages. This is no joke. So, Wall Street was given a "wink and a nod" to play along. Our patriots on the Street saw huge $ signs in all the huge fees they could collect from the initial mortgages themselves, as well as in all the derivative products spawned from them. Then Fed Chairman Alan "The Shyster" Greenspan was all to happy to play along by ratcheting down interest rates to ensure the funds flowed freely to finance this grand endeavor. Now, these folks obviously did not possess the personal habits that historically are found to be essential to being able to consistently meet various financial obligation, like making regular mortgage payments in full and on time. Normally, the ability to buy a home and pay a mortgage is the result of displaying behaviors such as having a good job, saving, managing your finances and life prudently and responsibly. Clinton and Shysterspan turned this concept on its head, and hence the mess we're in now. Bush kept the party going. Most Americans are livid over this Mother of All Bailouts and do not support it. (about 55-60% are against it) The real cost of a bailout is much higher than the USD 700 billion. When all the derivatives are thrown in, it's more like in the TRILLIONS. And the fact is, no one really knows how much in derivatives there really is, as these instruments are kept off-balance sheet and hidden not only from the US public, but from other banks as well. That's why no one wants to lend; they don't know just how bad it is in other banks. What we have is not a lack of credit, but a huge lack of confidence, and confidence is the foundation of the worlds' financial system.

How interestimg.........! So many people deserve the blame. Even though it is bizarre to rely on welfare payments to fund a mortgage,

all this after all was backed by what has always been regarded as a fairly safe asset -i.e. residential real estate.

Why couldn't the authorities have insisted on mortgage protection insurance for these low income purchasers? If the property was fairly

appraised at that time and mortgage insurance was based on realising a realistic price if the need subsequently arose, such a gamble

by Bill Clinton cannot be too harshly criticized. If people hadn't subsequently turned this into such a synthetic mess,

it could have been far less damaging for the USA than many of the gambles George W. Bush has taken during his term in office !

Is all these people on Wall Street who subsequently became involved that deserve the real blame surely?

When I bitched about something that Bush did one of the TV republicans jumped on me and said it wasn't Bush's fault as there was a democratic congress and they were responsible. So in turn I say, at the time Clinton did that there was a republican majority in congress so it wasn't Clinton fault.

In reality I think there is plenty of blame to go around.

[lannarebirth]

All of a sudden, Nixon doesn't look so bad anymore.

[OriginalPoster]

How interestimg.........! So many people deserve the blame. Even though it is bizarre to rely on welfare payments to fund a mortgage,

all this after all was backed by what has always been regarded as a fairly safe asset -i.e. residential real estate.

Why couldn't the authorities have insisted on mortgage protection insurance for these low income purchasers? If the property was fairly

appraised at that time and mortgage insurance was based on realising a realistic price if the need subsequently arose, such a gamble

by Bill Clinton cannot be too harshly criticized. If people hadn't subsequently turned this into such a synthetic mess,

it could have been far less damaging for the USA than many of the gambles George W. Bush has taken during his term in office !

Is all these people on Wall Street who subsequently became involved that deserve the real blame surely?

It's not allowed to assign blame to Bill Clinton.

Those low income borrowers wouldn't have been able to afford mortgage insurance anyway and requiring that would have defeated the whole purpose of Fannie and Freddie. Fannie used to brag that "Since 1968, Fannie Mae has helped more than 55 million families achieve the American Dream of homeownership". In a country that has a neglible savings rate, you're not going to acheive that by requiring mortagees to have solid finances -- if they had solid finances they wouldn't need Fannie nor Freddie in the first place.

That's not the all of it though, even in totally free market loans people started borrowing absurd amounts agaisnt their home purchases. For instance, I sold a house in Pennsylvania in May. It was on the market for about 6 weeks without an offer, then I dropped the price by $US10K and four offers came in during a 72 hour period. Three of those offers were from people who wanted to pay OVER my asking price and then for me to rebate them $X dollars. That way it would appear on paper that they were borrowing "only" about 90% of the purchase price instead of 100%. Fortunately, the fourth offer was from a real person whose family was helping him to come up with a downpayment of about 50%, but still I was rather shocked that so late in the game that so many deadbeats would come along who would assume that such shenanigans would fly. I can only assume that during the boom that this type of thing must have reached outrageous proportions.

Edited September 28, 2008 by OriginalPoster

[midas]

That's not the all of it though, even in totally free market loans people started borrowing absurd amounts agaisnt their home purchases. For instance, I sold a house in Pennsylvania in May. It was on the market for about 6 weeks without an offer, then I dropped the price by $US10K and four offers came in during a 72 hour period. Three of those offers were from people who wanted to pay OVER my asking price and then for me to rebate them $X dollars. That way it would appear on paper that they were borrowing "only" about 90% of the purchase price instead of $100%. Fortunately, the fourth offer was from a real person whose family was helping him to come up with a downpayment of about 50%, but still I was rather shocked that so late in the game that so many deadbeats would come along who would assume that such shenanigans would fly. I can only assume that during the boom that this type of thing must have reached outrageous proportions.

But I thought almost every lending institution would either have in-house real estate appraisers

or would employ independent consultants every time a loan application was submitted?

And wasn't it the appraisers responsibility to ensure that his/her client ( i.e. lending institution )

was left with an adequate " cushion " between fair market value and the loan amount?

If this was not happening correctly, will there be any repercussions for the appraisal profession in the USA?

[cloudhopper]

All things being normal , as long as unemployment doesn't skyrocket from here there will be no further apprecieable ammount of foreclosures in the U.S.,

But all things are not normal, and unemployment only has to go up enough to nail one job of the double-income family maxed out on every form of credit to result in an appreciable number of foreclosures of even "good" mortgages where the loan/value isn't upside down (not to mention the amount of credit card debt walked away from and the resulting effect on those derivatives), and continuing the downward pressure on home (and stock) prices. IMO this is a likely scenario and unemployment could even "skyrocket".

No matter how much the Fed tries to inflate the money supply the banks will hoard it because the Fed will be unable to affect the demand side of the equation because purchases of all types will be deferred where possible in the expectation of future lower prices.

[OriginalPoster]

That's not the all of it though, even in totally free market loans people started borrowing absurd amounts agaisnt their home purchases. For instance, I sold a house in Pennsylvania in May. It was on the market for about 6 weeks without an offer, then I dropped the price by $US10K and four offers came in during a 72 hour period. Three of those offers were from people who wanted to pay OVER my asking price and then for me to rebate them $X dollars. That way it would appear on paper that they were borrowing "only" about 90% of the purchase price instead of $100%. Fortunately, the fourth offer was from a real person whose family was helping him to come up with a downpayment of about 50%, but still I was rather shocked that so late in the game that so many deadbeats would come along who would assume that such shenanigans would fly. I can only assume that during the boom that this type of thing must have reached outrageous proportions.

But I thought almost every lending institution would either have in-house real estate appraisers

or would employ independent consultants every time a loan application was submitted?

And wasn't it the appraisers responsibility to ensure that his/her client ( i.e. lending institution )

was left with an adequate " cushion " between fair market value and the loan amount?

If this was not happening correctly, will there be any repercussions for the appraisal profession in the USA?

The appraisal business is a farce and almost anyone can become an appraiser. All they do is look at a list of "comparable" houses that sold in your area and extrapolate from that what the house under apprasial is worth. An honest 5 to 10% error can easily happen with that process, and a good number of appraisers either don't give a dam_n or intentionally jockey the numbers such that come they way that they think that they clients want.

I'll give you an example of that too. After I got the money from my house in Pennsylvania I used it to buy my parents' house in Connecticut (from my parents with the intention that they would remain living in it). We wanted to transfer the property at a fair market value, not a penny more or a penny less, so my Dad had a lawyer fix him up with a "good" appraiser. The appraiser appraently thought that his client (my Dad) would benefit with a high appraisal so he came up with a number a full 20% higher than what any other house in the neighbor hood sold for at the peak of the bubble. The appraiser cloaked his numbers by providing a 20 page report along with the estimated value, including photos of houses in other neigborhood sand a whole bunch of prose about the state of the overall housing marker including such gems as "sales have srted to stabilize after a long steady period". For this report the appraiser reveived $400 and explicity assumed no responsibility for it's accuracy.

Edited September 28, 2008 by OriginalPoster

[midas]

That's not the all of it though, even in totally free market loans people started borrowing absurd amounts agaisnt their home purchases. For instance, I sold a house in Pennsylvania in May. It was on the market for about 6 weeks without an offer, then I dropped the price by $US10K and four offers came in during a 72 hour period. Three of those offers were from people who wanted to pay OVER my asking price and then for me to rebate them $X dollars. That way it would appear on paper that they were borrowing "only" about 90% of the purchase price instead of $100%. Fortunately, the fourth offer was from a real person whose family was helping him to come up with a downpayment of about 50%, but still I was rather shocked that so late in the game that so many deadbeats would come along who would assume that such shenanigans would fly. I can only assume that during the boom that this type of thing must have reached outrageous proportions.

But I thought almost every lending institution would either have in-house real estate appraisers

or would employ independent consultants every time a loan application was submitted?

And wasn't it the appraisers responsibility to ensure that his/her client ( i.e. lending institution )

was left with an adequate " cushion " between fair market value and the loan amount?

If this was not happening correctly, will there be any repercussions for the appraisal profession in the USA?

The appraisal business is a farce and almost anyone can become an appraiser. All they do is look at a list of "comparable" houses that sold in your area and extrapolate from that what the house under apprasial is worth. An honest 5 to 10% error can easily happen with that process, and a good number of appraisers either don't give a dam_n or intentionally jockey the numbers such that come they way that they think that they clients want.

I'll give you an example of that too. After I got the money from my house in Pennsylvania I used it to buy my parents' house in Connecticut (from my parents with the intention that they would remain living in it). We wanted to transfer the property at a fair market value, not a penny more or a penny less, so my Dad had a lawyer fix him up with a "good" appraiser. The appraiser appraently thought that his client (my Dad) would benefit with a high appraisal so he came up with a number a full 20% higher than what any other house in the neighbor hood sold for at the peak of the bubble. The appraiser cloaked his numbers by providing a 20 page report along with the estimated value, including photos of houses in other neigborhood sand a whole bunch of prose about the state of the overall housing marker including such gems as "sales have srted to stabilize after a long steady period". For this report the appraiser reveived $400 and explicity assumed no responsibility for it's accuracy.

Standards seem very different in the USA compared to Australia where I come from. Appraisers

( or valuers as we call them ) would very rarely " intentionally jockey the numbers " because

no one knows if one day they may be required to appear in Court to justify their valuation

methodology and result.

In Australia appraisers must be licensed by the government . I thought that was the case

in every state throughout the USA now? And yes the courts will allow them a 10 percent margin of error plus or minus

in the valuation amount-beyond that Australian Judges consider the valuer to be " professionally negligent "

and there have been the number of cases -some involving very big amounts in shopping centre valuations.

And its useless for them to put a provision to try to " explicity assume no responsibility for it's accuracy "

because a court in Australia will always say - you purported to be " an expert " when you signed this

document and people relied on your advice - therefore YOU ARE CERTAINLY RESPONSIBLE FOR ITS ACCURACY !!

Maybe this is where things started to " off the rails" in the USA mortgage market ???

Edited September 28, 2008 by midas

[ray23]

Sorry to hear about all the problems with American Immgrations. But, your living in Thaialnd now so in the end probably worked out much better for you.

Never forget took me 55 years, to git out of the darn place.

[OriginalPoster]

That's not the all of it though, even in totally free market loans people started borrowing absurd amounts agaisnt their home purchases. For instance, I sold a house in Pennsylvania in May. It was on the market for about 6 weeks without an offer, then I dropped the price by $US10K and four offers came in during a 72 hour period. Three of those offers were from people who wanted to pay OVER my asking price and then for me to rebate them $X dollars. That way it would appear on paper that they were borrowing "only" about 90% of the purchase price instead of $100%. Fortunately, the fourth offer was from a real person whose family was helping him to come up with a downpayment of about 50%, but still I was rather shocked that so late in the game that so many deadbeats would come along who would assume that such shenanigans would fly. I can only assume that during the boom that this type of thing must have reached outrageous proportions.

But I thought almost every lending institution would either have in-house real estate appraisers

or would employ independent consultants every time a loan application was submitted?

And wasn't it the appraisers responsibility to ensure that his/her client ( i.e. lending institution )

was left with an adequate " cushion " between fair market value and the loan amount?

If this was not happening correctly, will there be any repercussions for the appraisal profession in the USA?

The appraisal business is a farce and almost anyone can become an appraiser. All they do is look at a list of "comparable" houses that sold in your area and extrapolate from that what the house under apprasial is worth. An honest 5 to 10% error can easily happen with that process, and a good number of appraisers either don't give a dam_n or intentionally jockey the numbers such that come they way that they think that they clients want.

I'll give you an example of that too. After I got the money from my house in Pennsylvania I used it to buy my parents' house in Connecticut (from my parents with the intention that they would remain living in it). We wanted to transfer the property at a fair market value, not a penny more or a penny less, so my Dad had a lawyer fix him up with a "good" appraiser. The appraiser appraently thought that his client (my Dad) would benefit with a high appraisal so he came up with a number a full 20% higher than what any other house in the neighbor hood sold for at the peak of the bubble. The appraiser cloaked his numbers by providing a 20 page report along with the estimated value, including photos of houses in other neigborhood sand a whole bunch of prose about the state of the overall housing marker including such gems as "sales have srted to stabilize after a long steady period". For this report the appraiser reveived $400 and explicity assumed no responsibility for it's accuracy.

Standards seem very different in the USA compared to Australia where I come from. Appraisers

( or valuers as we call them ) would very rarely " intentionally jockey the numbers " because

no one knows if one day they may be required to appear in Court to justify their valuation

methodology and result summation Marc

In Australia appraisers must be licensed by the government . I thought that was the case

in every state throughout the USA now? And yes the courts will allow them a 10 percent margin of error plus or minus

in the valuation amount-beyond that Australian Judges consider the valuer to be " professionally negligent "

and there have been the number of cases -some involving very big amounts in shopping centre valuations.

I don't know if appraisers are required to be licenced or not, I only know that they are at best worthless. Zillow.com does better than most of them. Every state in the US requires a person to be licensed in order to drive a car too and yet there is no shortage of dangerous drivers on the road, licensing scarcely ensures competence.

[Naam]

The appraisal business is a farce and almost anyone can become an appraiser. All they do is look at a list of "comparable" houses that sold in your area and extrapolate from that what the house under apprasial is worth. An honest 5 to 10% error can easily happen with that process, and a good number of appraisers either don't give a dam_n or intentionally jockey the numbers such that come they way that they think that they clients want.

and that applies to real estate agents to. i had several agents coming to my home who's most important questions and notes were (that was my impression) how many ceiling fans and how many recessed lights do exist and whether washer and dryer are included in the price when i told them my price they mentioned "no way! look what homes have been sold at what price in your vicinity". when i argued "there are homes and there are homes" i got blank stares and a repetition of what is selling at what average price near by. so i led them politely to the door, put an ad with two dozen pictures and a proper description in the web (for sale by owner or something similar) and less than six weeks later we went to close the deal (not a single penny below my asking price which was fair).

[lannarebirth]

In America, an MAI appraisal is about the only decent appraisal one can get. Usually it's limited to the commercial property sector and will provide an appraisal on any number of metrics. They will do residential appraisal, but it's not cheap.

[Jingthing]

Americans, we may still be on the verge of a worldwide depression. There is absolutely no guarantee the emergency bailout will prevent it. Now ask yourselves, what party would you like to be in power during such a painful time, that could last a decade? The party of Franklin Delano Roosevelt who did respond to a crisis by creating great social programs that saved millions of lives or the party of George W Bush, who never met a welfare for the rich program he didn't like? I contend there is blame to go all around, both parties and also most of the American people who played along. The blame is only valuable to help us figure out how we got here, how we can start to fix it, and how we can prevent it from happening again. Now we must deal with the bad reality as it is now. And there is a big election coming up which offers a clear choice. Your move.

Edited September 28, 2008 by Jingthing

[skipvice]

Americans, we may still be on the verge of a worldwide depression. There is absolutely no guarantee the emergency bailout will prevent it. Now ask yourselves, what party would you like to be in power during such a painful time, that could last a decade? The party of Franklin Delano Roosevelt who did respond to a crisis by creating great social programs that saved millions of lives or the party of George W Bush, who never met a welfare for the rich program he didn't like? I contend there is blame to go all around, both parties and also most of the American people who played along. The blame is only valuable to help us figure out how we got here, how we can start to fix it, and how we can prevent it from happening again. Now we must deal with the bad reality as it is now. And there is a big election coming up which offers a clear choice. Your move.

NOT YOUR PARTY, Sorry

[OriginalPoster]

The appraisal business is a farce and almost anyone can become an appraiser. All they do is look at a list of "comparable" houses that sold in your area and extrapolate from that what the house under apprasial is worth. An honest 5 to 10% error can easily happen with that process, and a good number of appraisers either don't give a dam_n or intentionally jockey the numbers such that come they way that they think that they clients want.

and that applies to real estate agents to. i had several agents coming to my home who's most important questions and notes were (that was my impression) how many ceiling fans and how many recessed lights do exist and whether washer and dryer are included in the price when i told them my price they mentioned "no way! look what homes have been sold at what price in your vicinity". when i argued "there are homes and there are homes" i got blank stares and a repetition of what is selling at what average price near by. so i led them politely to the door, put an ad with two dozen pictures and a proper description in the web (for sale by owner or something similar) and less than six weeks later we went to close the deal (not a single penny below my asking price which was fair).

In Pennsylvania at least the real estate agents seemed to fall into two groups. The first group was ones who would tell you how great your house is and estimate its value high so that you'll get excited and feel flattered. The reason that they do that is because agents get a modest fee if you list the house with them, it's sort of a kickback from the multiple listings sevice. List your property with them and and it will sit on the market unsold and the agent will put in little, if any, work in trying to get it sold, they'll be spending most their time trying to flatter other homeowners into listing with them too. The other group of realtors does the opposite, they tell you all the flaws about your property and about how nice some of the recently sold comparable houses are, and try to get you to list the house at a really low price. Their incentive is that if they can get you to underprice the market the house might sell in 24 hours and they'll walk away with a 6% commision without doing anything except for convincing you to underpice the house.

Edited September 28, 2008 by OriginalPoster

[cclub75]

And there is a big election coming up which offers a clear choice. Your move.

Clear choice ! ?

Look at Pelosi smiling at Paulson ! I mean she's a shame. The Democrats are corrupted like the Republicans.

All eating at the same table.

This is why from a politician point of view, the situation became difficult to read. The Democrats support Paulson Plan. And some members of the good old party are the only ones to reject the plan !

So, total mess, yes. "Clear choice" I'm not sure...

Edited September 28, 2008 by cclub75

[Jingthing]

NOT YOUR PARTY, Sorry

Up to you, so you think your party would deal with people going hungry, 50 percent unemployment, massive homelessness, and even more people without access to health care better than my party. That is what a depression is. I am sure we both agree we don't want that, but what if we get that, who is better for the most people? The track record of the republican party (Katrina) doesn't support it. The last depression the democratic party did bring us through and we emerged a greater country, with social programs like social security and increased worker's rights born from the depression, still intact.

Edited September 28, 2008 by Jingthing

[midas]

In Pennsylvania at least the real estate agents seemed to fall into two groups. The first group was ones who would tell you how great your house is and estimate its value high so that you'll get excited and feel flattered. The reason that they do that is because agents get a modest fee if you list the house with them, it's sort of a kickback from the multiple listings sevice. List your property with them and and it will sit on the market unsold and the agent will put in little, if any, work in trying to get it sold, they'll be spending most their time trying to flatter other homeowners into listing with them too. The other group of realtors does the opposite, they tell you all the flaws about your property and about how nice some of the recently sold comparable houses are, and try to get you to list the house at a really low price. Their incentive is that if they can get you to underprice the market the house might sell in 24 hours and they'll walk away with a 6% commision without doing anything except for convincing you to underpice the house.

Yes I can understand your criticism real estate agents because they are often like used car salesmen !

Because their only real interest is to earn commission. But in theory if system works properly, the appraiser

should have no reason or any vested interests to apply anything other than high standards to interpret the market and apply that

interpretation in a single amount being the opinion of the properties value. If the result was a conservative estimate and following that

loan institution then only advanced a percentage of the valuation amount - there should have been no reason for things to get out of hand

the way they have.

[OriginalPoster]

In Pennsylvania at least the real estate agents seemed to fall into two groups. The first group was ones who would tell you how great your house is and estimate its value high so that you'll get excited and feel flattered. The reason that they do that is because agents get a modest fee if you list the house with them, it's sort of a kickback from the multiple listings sevice. List your property with them and and it will sit on the market unsold and the agent will put in little, if any, work in trying to get it sold, they'll be spending most their time trying to flatter other homeowners into listing with them too. The other group of realtors does the opposite, they tell you all the flaws about your property and about how nice some of the recently sold comparable houses are, and try to get you to list the house at a really low price. Their incentive is that if they can get you to underprice the market the house might sell in 24 hours and they'll walk away with a 6% commision without doing anything except for convincing you to underpice the house.

Yes I can understand your criticism real estate agents because they are often like used car salesmen !

Because their only real interest is to earn commission. But in theory if system works properly, the appraiser

should have no reason or any vested interests to apply anything other than high standards to interpret the market and apply that

interpretation in a single amount being the opinion of the properties value. If the result was a conservative estimate and following that

loan institution then only advanced a percentage of the valuation amount - there should have been no reason for things to get out of hand

the way they have.

I'm not claiming that the appraisers were the primary reason that things got out of hand, there are lots of reasons for that. But to think that appraisers would have no vested interest and would not apply anything other than high standards is simply naiive.

Edited September 28, 2008 by OriginalPoster

[midas]

I'm not claiming that the appraisers were the primary reason that things got out of hand, there are lots of reasons for that. But to think that appraisers would have no vested interest and would not apply anything other than high standards is simply naiive.

no of course there are many people than were involved in this whole debacle.

But in the case some of these so-called professionals, they must surely be potentially liable for

for fraud and or professional negligence ? The USA is known as being a litigious society

so surely the process can start by suing the insurance companies where some of these appraisers

had their professional indemnity insurance policies ( and please dont tell me

they practice in the USA without this )

In fact I'm sure I heard that on the list that the FBI is currently investigating is a

number of real estate appraisers.