Nemo, they are not restricting the products, just making sure one of the choices is a "plain vanilla" product. I don't think they are controlling anyone's life.
Lucifer, I disagree. Just look at how many people don't pay off their credit card balances each month. A few may have Spock like reasons, but most are Homer Economicus.
Why should the government give people a choice at all? Why not just have all mortgage loans be originated by the federal government through Treasury borrowings, and people can just be happy with what they get?
Just back from a patriotic visit to one of our National Parks, where I played frontcountry tourist for the day, and if wasn't for foreign visitors, Americans would be few and far between...
Video games are still winning the battle for hearts and minds, over mater.
Think it's a fine idea. Have one choice labeled, "This is the one that isn't specifically designed to screw you in some way."
There are a lot of truly valuable people in the world who aren't good with money. Personally, I hope the need to be good with money is one of those things that eventually becomes irrelevant in most situations -- like chipping arrowheads out of obsidian,
That is manifestly the case in America today. Under the stewardship of neoclassical economics in the personas of Alan Greenspan and Ben Bernanke, the growth in private debt has not merely been ignored but has actively been encouraged, in the dangerously naive belief that the private sector is being “rational” when it borrows.
This apparent indictment of the private sector as therefore “irrational” is in fact really an indictment of neoclassical economics for abuse of language. What neoclassical theory means by the word “rational” is “able to correctly anticipate the future”–which is the definition, not of rationality, but of prophecy. Steve Keen's Debtwatch
If people would voluntarily choose these over Option ARMs etc., then they would already be offered...
Either you have to regulate the rates offered for these "vanilla" mortgages, or you have to ban the alternatives. Otherwise, what's the point? Everyone will just pick the lowest monthly payment like they do now.
Phaedrus, yes. But mortgage brokers were incentivized to steer borrowers into non-traditional products (those wonderful YSPs). This proposal requires the "plain vanilla" be offered first - and the borrowers can opt out - and also bans YSPs. I believe Tanta would approve!
nades, I doubt we will see 20% down as common ... although 30% to 50% is common in China. BTW, I spoke with someone from China yesterday - and even though there is some residential speculation in China right now, it is mostly being done with all cash ... and that might lead to a price bubble, but not a residential mortgage credit crisis. My sister-in-laws brother is a developer in China and he still requires 50% down (cash) before he breaks gone.
"...in the dangerously naive belief that the private sector is being “rational” when it borrows."
There is a terrible confusion between the exercise of reason and the ability to rationalize. When people rationalize they become ingenious at finding reasons for getting what they want.
and it is possible that for very exotic mortgages, borrowers might have to demonstrate that they understand the risks or have been aided by a certified mortgage planner
Yes, you're right that mortgage brokers (I are one) could make more money with, for example, Option Arms, IF they misled their clients. I never did and this is 30-Year Fixed Rate country (Seattle). I never deceived anyone but people deceive themselves. So we think "plain vanilla" is gonna fix things? Not gonna happen. You can't fix stupid (thank you, Tater Salad) and people will never stop deceiveing themselves. This idea is a non-starter, a waste of everyone's time.
Everyone seems to be focusing on Homer. What was going on with the lenders who were making loans that had risks that the lenders apparently didn’t understand?
Like all kids, I got half my genes from my dad, Homo economicus, and half from mom, quite human, and therefore inconsistent.. But there were no wingnuts or wall street greeders in the family tree, so I guess things are for the best.
Did I mention that my dad hated FDR, and that I escaped that legacy and thought Reaganomics was just as silly as Larry Kudlow?
And, for the record, HVCC is a freaking disaster. Ken Harney gets it. The rest of the real estate world will too, and soon, because the market is being hammered by it.
Phaedrus, please explain why you think HVCC is a disaster.
I don't see why offering a plain vanilla loan beside one that enables people to be irresponsible will work. People will choose whichever option allows them to pay the least for the longest, and moves as much downside risk to other people as the govt-distorted market will permit.
Jim in Portland, growning up I can remember my parents concern over a house being built in the community that cost 10K...They felt like the people were reckless with their money and would not be able to pay for it in their lifetime. Kinda dates me, but I'm a boomer that never drank a Coke I thought I could afford, genes probably.
All this legislation tries to make it seem as if no-one knew what was going on and no-one could have seen this coming. They did it on purpose, now comes the inevitable collapse. It's what "they" wanted, it's what "they" still want, and now we're going to have it.
FDR was a very clever, complex man, with some good and some not so good, like most of us. As a politician he was about as good as we're likely to get. We all have our limitations, because that's our nature.
I don't recall that 'vanilla' was ever off the menu. It was just that tutti fruiti became the favor of the decade and lead to a rash of stomach problems.
Chasing the latest fashion often results in later remorse.
In the past year, we have learned the hard way that when people take out mortgages they cannot repay, the entire economy can be disrupted. Fixing the problem is complicated.
"Chasing the latest fashion often results in later remorse."
Tell me something I don't know. All I can wear is black. Everything else makes my butt look like somethiing you could see from the space shuttle without a telescope.
Banks (and realtors) don't want folks to understand, they just want a deal signed, and money borrowed on their terms.
Here's a Ken Lewis anecdote for the holiday: In yesterday's mail, a new VISA arrived from BOA with a new name (and dog knows what other changes). Previous card was BOA VISA Platinum, new one is VISA Signature.
At the end of the first page of come-on, is this Important Notice: This credit card has no preset spending limit. This does not mean that all transactions will be approved. We will consider transactions for approval on an individual basis, including transactions in excess of the Revolving Line (referred to above as your Credit Line)
So, I have a credit line, but they can disapprove an expenditure transaction, even if under the credit line. Got that? Big Daddy in Charlotte is looking out for someone's welfare we should assume, right?
On page 4, note this: FIA Card Services, N.A. is the exclusive issuer and administrator of this credit card program
Have I been sold into a contract with FIA, like a 18th century slave, by BOA? Who's my master? Is he kind? Will he beat me severely for infractions?
I think it is the elitism of this argument that gets me the most, that some people are just not ever going to be capable of handling "adult" things like a mortgage or balancing their check book. Maybe this is a little more palatable than saying they made a bad choice, but people making this argument should think about what they are saying.
Relax, lay off the ante bellum references. Remember Curt Flood broke the reserve clause. I'd hold out for more money if I were you. Hell, I did and got two first round draft picks, a date with a Laker Girl, and sky box seats at the next two Super Bowls.
What is the logic there? I guess they have a theoretical credit line but they are giving themselves an out based on the pace of your expenditures (something that might tip them off to a change in your creditworthiness)?
I am not an elitist. I think people are perfectly capable of understanding the implications of their investment decisions. I think they choose to do otherwise.
I am not an elitist. I think people are perfectly capable of understanding the implications of their investment decisions. I think they choose to do otherwise.
I don't. Seriously. If you ever watched any of the reality stuff: Jay Leno "Jaywalking"; Cops; Street Smarts(sp?); or even "Elimi-date" you'd see a whole lot of people who have problems following a chain of logic longer than two steps. Adults. Not that they're bad people, but they are really fundamentally challenged, and yet they can carry on a conversation normally. It makes me wonder exactly what is "average" or normal.
All this talk of reform is eyewash. Changing incentive plans for bankers, better disclosures for borrowers.... All of these measures sound hopeful at first, but become bogged down in implementation problems and the final results are ineffective. The folks at the Federal Reserve and in Congress know that. They also know their acting on these reform efforts will divert the voters from simpler, more effective measures.
That article in the WSJ that Basel II picked up on pointed out that allowing low downpayments was the single biggest cause of the mortgage mess. Simply requiring that any loan made with govt support of any kind, or by an institution that benefits from govt support of any kind, be at least 20-30% down, would effectively prevent a repeat of this latest financial mess. Why is there no appetite for this? Because it would lead to a large further drop in home prices. That is anathema to most voters and their leaders, even though accepting this now and getting on with a restructured economy built around the new price levels would benefit the economy most in the long run.
"I think it is the elitism of this argument that gets me the most, that some people are just not ever going to be capable of handling "adult" things like a mortgage or balancing their check book."
I am not an elitist. People are able to do all sorts of things. But do they want to? Is it important to them? Most people want simple in the things that are necessary but don't interest them, so that they don't get in the way of the things that do.
If you think the measure of a man (or woman) is simply how well and willingly he/she earns and handles money -- why, you're in tune with the dominant American culture, and you have the elites you deserve.
Thirty or forty years ago, many Americans of moderate means didn't have to manage their own retirement plans (defined benefit all the way), didn't have to determine which mortgage option was safest (the bank or mortgage company would usually do that for them, and refuse them if there was no good option), didn't have to decipher complex rule changes from the medical insurer, the credit card company, the telecom company that could conceivably cost them hundreds or thousands of dollars.
For the average citizen, the world is really a much worse place than it was 40 years ago. (For a very few, it's much, much nicer.) I think the answer is more to change the world that the citizen.
"That article in the WSJ that Basel II picked up on pointed out that allowing low downpayments was the single biggest cause of the mortgage mess. Simply requiring that any loan made with govt support of any kind, or by an institution that benefits from govt support of any kind, be at least 20-30% down, would effectively prevent a repeat of this latest financial mess."
That'd solve the problem better than education. It's just -- when we get there, I'll believe it.
I saw two buckets on the paddock rail
One was red
And one was blue
Both contained gray water
Floating straw wisps and the spittle of horses
How beautiful in summer sunlight
Were the forbs and the wild rye
Green as jade emerald filigreed -
Blue and red and green
Inside the gray unpainted fence
This is how it could have been
If we had not spoiled them
If no one were there
Neither man nor woman
Neither man nor his beasts
Only their accidents, luminous shining
The bread-like body
The wine-like blood
Silent and rich in the summer day
When everyone had gone away
I don't think the measure of a man or woman is how well he or she manages money. I think it is how he or she manages life. I'd say the same thing about being able to change a tire. At some point, you have to learn to take care of yourself.
I don't think, I know, that HVCC is and will be a disaster. And Bond Girl, yes, the Big Guys are getting bigger (Wells Fargo) and the mortgage brokers and going the way of the Dodo, but as much for business-model-related reasons as anything else.
Here's a true story. My client, a sophisticated, retired real estate investor is refinancing his condo. It's worth,realistically (that is, backed by real-world comps) at least $325K. The appraisal came in at $240K with 5 comps. HOWEVER, 2 of the comps were 2.5+ miles away and another 2 were listings, not sales. Result: 1 comp worth anything. The underwriter required 2 additonal comps and they also turned out to be junk. The appraisal was truly garbage and the appraiser IS INCOMPETENT. I've never seen one that bad. Why? I've heard that experienced appraisers won't work for half their regular fee, so the appraisers that are hired are new and/or not well-qualified. No, there's no doubt in my mind that HVCC is a disaster and it won't be very long before the rest of the real estate world figures this out. It is accelerating the declines in home values and driving prices lower. People, and likely Congress, are not gonna like that.
I agree with Niall Ferguson that Obama's economic forecasts are a joke because there's just not enough money in the world to finance all the borrowing the U.S. and other big countries will be doing over the next few years i.e. the US is planning to borrow at least $10 trillion over the next 10 years (which we can't afford to do).
Why don't you guys just round up all the "victims" here and keep them on a special farm somewhere like pets? Make sure all their basic needs are met, etc.
I offer the downpayment suggestion, Bob, because it is a practical way to prevent a recurrence of our current problems lies somewhere between true laissez faire (which we haven't had in the housing market since the 1930's), and Soviet-style limitation of choices through regulations.
Offering and disclosing simple loan designs is too weak to provide a solution, because there is too much money to be made by abusing the more exotic alternatives. Banning all exotic loan alternatives is unacceptable because we want the freedom to make our own choices. But there is no reason we taxpayers must subsidize, by even $1, directly or indirectly, any leveraged home purchase where the buyer is putting in less than 20-30% of the money out of their own pocket, or their relatives' pockets. Dowpayments less than that should be available, but their availability and cost should be entirely determined by the private market without any govt support.
km4 - hehe, hardly. Turns out that what I'm smoking, fully legal kreteks, are about to be made less so. Some ridiculous nannying of adults on the grounds that flavored tobacco is a gateway for kids smoking cigarettes.
To get back on topic... the reason vanilla disappeared in a lot of places is because it was too expensive - vanilla didn't qualify Homer for a house - any house, in bubble land, at least on the front end of the schedule [down payment & full amortization]... so screw vanilla, we need more flavors!
Now after the fact those non-vanilla flavors turned out way costly BUT on the back end... the profits, spiffs & YSPs have already been paid out & spent... now all that is left are the losses. And those assuming the losses aren't the same pool [or not 100%] as those who made the dough. Classic case of profit capture, cost avoidance.
If the 'vanilla option' can't be made to work... look for all other options to become prohibited for everyone regardless of whether they understand them or can benefit.
"But there is no reason we taxpayers must subsidize, by even $1, directly or indirectly, any leveraged home purchase where the buyer is putting in less than 20-30% of the money out of their own pocket, or their relatives' pockets. Dowpayments less than that should be available, but their availability and cost should be entirely determined by the private market without any govt support."
We're more in agreement than not. Though personally, I'd also be for a bit of "truth in securitization" action on the other end. How about a rating system for opacity?
The appraisal management companies (AMC) are national and they're the ones who hire the appraiser. We mortgage brokers are no longer allowed to even talk to the appraiser. There is a dearth of appraisers who want to work for substantially less money, no surprise, so they, the AMC's, are challenged in finding someone who is local, competent and will work for less. One AMC with which I am familier does generate good appraisals, but at a cost to my client of $675, versus the $350 I/we used to be routinely charged.
It should be noted in all this that the AMC does NOTHING for their money, i.e. they have no special qualifications of any sort and add nothing to the process. They just put the appraisal out to bid and collect their money. A costly "middle man" has been added to the process but that middle man adds no value.
Appraisal fraud has ALWAYS been fraudulent and prosecutable. So why do we need an appraisal management company? Well, we don't, and once people see the effects, I suspect they will be done away with.
I hope everyone is enjoying the 4th! It is a really nice day here.
I hope you are enjoying the 4th, CR. God bless you and yours.
I have seen and heard something this 4th, amid all the standard patriotic hokem, something I have not seen or heard before.
It is that America is fallible. Our model is not always, or inevitably, the envy of the rest of the world. We have deep problems to roll up sleeves and solve. We have screwed up.
It's a refreshing change from the last few years, when it was pretty obvious that we had screwed up, but most of the proletariat refused to accept or admit it.
Obama may become a kind of turning point, a template of a new American patriot who is fallible.
Bob, I am fine with better disclosures for investors and borrowers. I just think that those measures alone will be ineffective without focusing on, and being ruthless about, the main driver - loans that allow too little borrower skin in the game.
Oh, bondgirl, you haven't closed the number of mtges I have.
I try to explain, you guys read what I write, you know I'm not
terrible at explaining, and I know that 90% of what I'm saying
is blah blah blah to my hearers.
You have no idea how dumb and ignorant most people are.
Consolidation/Concentration is happening and in many ways is a good thing ... my take on the big subject. No, the effects I'm referring to are lower appraised values, that is, lower than true market, across the board. Why? Because, at least in part, lenders are OK with it and they're the only ones that count, now. (The client is required to give the AMC their credit card number, so the AMC is paid BEFORE the appraisal is performed.) Appraisals are slower to be done and less professionally done, but the big deal is that values are understated, i.e. below true market, sometimes substantially and THAT is a very big deal, for obvious reasons, and it affects everybody.
Phaedrus, I am sure there was some perfidy involved in the law requiring there to be a corporate barrier between mortgage brokers and appraisers. But mortgage brokers have only themselves to blame for this. When it was possible for mtg bkrs to exercise influence over individual appraisers, they did so to boost appraisal values. So now we have an insulating layer with its own problems. The cost is a minor issue. If spending a few hundred more bucks helps to set a better price for a transaction that averages a quarter of a million dollars, then it's a good idea.
It's commonly believed that mortgage brokers put pressure on appraisals to "make the number" and some of that did go on. What's forgotten is that appraisal MUST be justified by comps and lenders were not shy about challenging them. ALSO, appraisers are licensed and can lose their license for shennanigans. Again, fraud is fraud. ALSO, most mortgage brokers, and I most definitely include myself in this group WERE AND ARE HONEST. I told my appraiser, not once but again and again, to put the number "right on" and that I and my client would deal with whatever that number turned out to be. There is lots of negative fallout for bad/overstated appraisals and I, and most of the folks like me, didn't want any part of that. Moreover, I am sick to death of "the world" blaming us for a huge debacle that was clearly Wall Street driven. The math and the ratings were bad, very bad, and I could go on and on, but I won't.
The cost issue is in my mind a major one. They've gone up substantially and, I think, unreasonably, and that has made us mortgage brokers less competitive, to the point that major lenders are taking back turf (we used to do 60% of all mortgages). That was my earlier reference to trouble with the business model.
Sorry, all, for dominating the thread, not my intent ... but ... Bond Girl, I was personally horrified when zero down became all the rage, and Interest Only, and Neg Am Option Arms, and I knew then it could not end well, I, personally, don't like debt and have no mortgage (but I paid $132K for my house in 1997). I have told a number of young people in the last several years NOT to buy, but to wait. Housing prices have NOT bottomed IMO. OK, end of rant(s). Sorry again, lotta my hot buttons being hit ...
This is a condescending article which states the mortgage borrowers is mentally challenged.
The truth no matter what the mortgage paper states, the bank will either interpret those words to suit their needs or their creative attorney gives those words double meanings.
The Bank is the like a scam artist, only this scam artiist has the backing of the federal government.
The problem is homo economicus did not pick the poorest products. The people opting out would not be the ones with the most sense, but the ones with the least.
Yes, we need the government to control every aspect of people's lives to make sure nobody hurts themselves.
Homer Economicus = Not Fiction.. Corrected
"Day of the Locust" Homer Simpson, or the other one?
I always opt out.
My preference.
But then I fully understand options and futures.
Someday this war's gonna end...
Nemo, they are not restricting the products, just making sure one of the choices is a "plain vanilla" product. I don't think they are controlling anyone's life.
Lucifer, I disagree. Just look at how many people don't pay off their credit card balances each month. A few may have Spock like reasons, but most are Homer Economicus.
best to all
Now if only people understood the plain vanilla mortgage.
I like to watch people behave bad financially, albeit from a distance.
Tanta vive
Why should the government give people a choice at all? Why not just have all mortgage loans be originated by the federal government through Treasury borrowings, and people can just be happy with what they get?
Hoocoodanode we were gonna need a Dumb and Dumber Czar.
Just back from a patriotic visit to one of our National Parks, where I played frontcountry tourist for the day, and if wasn't for foreign visitors, Americans would be few and far between...
Video games are still winning the battle for hearts and minds, over mater.
Why do people watch NASCAR or other car racing events?
They want to see a spectacular crash, although most wouldn't admit as much...
Economics isn't all that different from NASCAR in that regard, from my perspective.
Think it's a fine idea. Have one choice labeled, "This is the one that isn't specifically designed to screw you in some way."
There are a lot of truly valuable people in the world who aren't good with money. Personally, I hope the need to be good with money is one of those things that eventually becomes irrelevant in most situations -- like chipping arrowheads out of obsidian,
Plain vanilla mortgages have been available all along. They're called 30-Year Fixed.
Did JD write this article? The puns are funny.....
......................
Any chance we see the return of 20% down or am I just a dreamer.....
(I fear i know the answer....)
................................
That is manifestly the case in America today. Under the stewardship of neoclassical economics in the personas of Alan Greenspan and Ben Bernanke, the growth in private debt has not merely been ignored but has actively been encouraged, in the dangerously naive belief that the private sector is being “rational” when it borrows.
This apparent indictment of the private sector as therefore “irrational” is in fact really an indictment of neoclassical economics for abuse of language. What neoclassical theory means by the word “rational” is “able to correctly anticipate the future”–which is the definition, not of rationality, but of prophecy.
Steve Keen's Debtwatch
I agree with CR... There seem to be more Homers than Spocks in the US now....
For those of you scoring @ home, Thaler is the root word for Dollar.
If people would voluntarily choose these over Option ARMs etc., then they would already be offered...
Either you have to regulate the rates offered for these "vanilla" mortgages, or you have to ban the alternatives. Otherwise, what's the point? Everyone will just pick the lowest monthly payment like they do now.
Phaedrus, yes. But mortgage brokers were incentivized to steer borrowers into non-traditional products (those wonderful YSPs). This proposal requires the "plain vanilla" be offered first - and the borrowers can opt out - and also bans YSPs. I believe Tanta would approve!
nades, I doubt we will see 20% down as common ... although 30% to 50% is common in China. BTW, I spoke with someone from China yesterday - and even though there is some residential speculation in China right now, it is mostly being done with all cash ... and that might lead to a price bubble, but not a residential mortgage credit crisis. My sister-in-laws brother is a developer in China and he still requires 50% down (cash) before he breaks gone.
best to all.
Bob Dobbs,
That would save us money on public education, at least.
I hope everyone is enjoying the 4th! It is a really nice day here.
best to all
Bravo CR.
Fancy graphs using doctored numbers only get you so far, as one has to get into J6P and Jane Chardonnay's mindest to really see what makes em' tick...
"...in the dangerously naive belief that the private sector is being “rational” when it borrows."
There is a terrible confusion between the exercise of reason and the ability to rationalize. When people rationalize they become ingenious at finding reasons for getting what they want.
TARP = Trouble Indemnity
and it is possible that for very exotic mortgages, borrowers might have to demonstrate that they understand the risks or have been aided by a certified mortgage planner
Does that mean they have to take a test?
Yes, you're right that mortgage brokers (I are one) could make more money with, for example, Option Arms, IF they misled their clients. I never did and this is 30-Year Fixed Rate country (Seattle). I never deceived anyone but people deceive themselves. So we think "plain vanilla" is gonna fix things? Not gonna happen. You can't fix stupid (thank you, Tater Salad) and people will never stop deceiveing themselves. This idea is a non-starter, a waste of everyone's time.
Everyone seems to be focusing on Homer. What was going on with the lenders who were making loans that had risks that the lenders apparently didn’t understand?
Like all kids, I got half my genes from my dad, Homo economicus, and half from mom, quite human, and therefore inconsistent.. But there were no wingnuts or wall street greeders in the family tree, so I guess things are for the best.
Did I mention that my dad hated FDR, and that I escaped that legacy and thought Reaganomics was just as silly as Larry Kudlow?
And, for the record, HVCC is a freaking disaster. Ken Harney gets it. The rest of the real estate world will too, and soon, because the market is being hammered by it.
Most fall under
"Homo Panicus"
JimPortland
Escaped by the skin of your teeth.
Phaedrus, please explain why you think HVCC is a disaster.
I don't see why offering a plain vanilla loan beside one that enables people to be irresponsible will work. People will choose whichever option allows them to pay the least for the longest, and moves as much downside risk to other people as the govt-distorted market will permit.
Phaedrus,
Is business going to just a few players now? Isn't that what people expected?
Jim in Portland, growning up I can remember my parents concern over a house being built in the community that cost 10K...They felt like the people were reckless with their money and would not be able to pay for it in their lifetime. Kinda dates me, but I'm a boomer that never drank a Coke I thought I could afford, genes probably.
"Humans, however, can use a bit more help, especially when the options are hard to understand."
volker get this, volker dumb ass enough to know when need help, some people should shut up and admit they dumb ass too
volker glad government know we all dumb ass, volker gonna swill some more beer, gorge some more salted snack foods and red meat now
all this talk about genes
volker have half his genes tied behind his back
Bandaid on a bullet wound.
Lipstick on a pig.
Closing the barn door after the horse runs away.
Too damn little, too damn late.
All this legislation tries to make it seem as if no-one knew what was going on and no-one could have seen this coming. They did it on purpose, now comes the inevitable collapse. It's what "they" wanted, it's what "they" still want, and now we're going to have it.
"Did I mention that my dad hated FDR..."
FDR was a very clever, complex man, with some good and some not so good, like most of us. As a politician he was about as good as we're likely to get. We all have our limitations, because that's our nature.
I don't recall that 'vanilla' was ever off the menu. It was just that tutti fruiti became the favor of the decade and lead to a rash of stomach problems.
Chasing the latest fashion often results in later remorse.
-- Hiding out
In the past year, we have learned the hard way that when people take out mortgages they cannot repay, the entire economy can be disrupted. Fixing the problem is complicated.
Was this written by a banker?
"Chasing the latest fashion often results in later remorse."
Tell me something I don't know. All I can wear is black. Everything else makes my butt look like somethiing you could see from the space shuttle without a telescope.
Banks (and realtors) don't want folks to understand, they just want a deal signed, and money borrowed on their terms.
Here's a Ken Lewis anecdote for the holiday: In yesterday's mail, a new VISA arrived from BOA with a new name (and dog knows what other changes). Previous card was BOA VISA Platinum, new one is VISA Signature.
At the end of the first page of come-on, is this Important Notice: This credit card has no preset spending limit. This does not mean that all transactions will be approved. We will consider transactions for approval on an individual basis, including transactions in excess of the Revolving Line (referred to above as your Credit Line)
So, I have a credit line, but they can disapprove an expenditure transaction, even if under the credit line. Got that? Big Daddy in Charlotte is looking out for someone's welfare we should assume, right?
On page 4, note this: FIA Card Services, N.A. is the exclusive issuer and administrator of this credit card program
Have I been sold into a contract with FIA, like a 18th century slave, by BOA? Who's my master? Is he kind? Will he beat me severely for infractions?
I opted out, in a manner of speaking, a long time ago and dared to confront reality head on.
Facing reality is far more soul destroying than most dare to imagine.
And more profitable.
It was never off the menu.
I think it is the elitism of this argument that gets me the most, that some people are just not ever going to be capable of handling "adult" things like a mortgage or balancing their check book. Maybe this is a little more palatable than saying they made a bad choice, but people making this argument should think about what they are saying.
1930's Untouchables: Gangsters
2000's Untouchables: Unabankers
mp - jeebus, the last time I heard someone say something like that it ended with "and I'm not proud of everything I've done"...
C
"Have I been sold into a contract with FIA..."
Relax, lay off the ante bellum references. Remember Curt Flood broke the reserve clause. I'd hold out for more money if I were you. Hell, I did and got two first round draft picks, a date with a Laker Girl, and sky box seats at the next two Super Bowls.
some people are just not ever going to be capable of handling "adult" things like a mortgage or balancing their check book.
Now whose being 'elitist'?
-- Hiding out
What is the logic there? I guess they have a theoretical credit line but they are giving themselves an out based on the pace of your expenditures (something that might tip them off to a change in your creditworthiness)?
"never drank a Coke I thought I could afford" +1
Jim like the way you think +1
Pride has nothing to do with it.
I am not an elitist. I think people are perfectly capable of understanding the implications of their investment decisions. I think they choose to do otherwise.
"I think people are perfectly capable of understanding the implications of their investment decisions."
That means you BELIEVE, and that's a dangerous notion.
I am not an elitist. I think people are perfectly capable of understanding the implications of their investment decisions. I think they choose to do otherwise.
I don't. Seriously. If you ever watched any of the reality stuff: Jay Leno "Jaywalking"; Cops; Street Smarts(sp?); or even "Elimi-date" you'd see a whole lot of people who have problems following a chain of logic longer than two steps. Adults. Not that they're bad people, but they are really fundamentally challenged, and yet they can carry on a conversation normally. It makes me wonder exactly what is "average" or normal.
mp, you asked about the china end game a few days ago. Did you get any insights?
There may be an 'average', but what they're finding about the brain suggests there is no normal.
CONJURE'S RECOMMENDED READING
"The Origin of Consciousness in the Breakdown of the Bicameral Mind"
All this talk of reform is eyewash. Changing incentive plans for bankers, better disclosures for borrowers.... All of these measures sound hopeful at first, but become bogged down in implementation problems and the final results are ineffective. The folks at the Federal Reserve and in Congress know that. They also know their acting on these reform efforts will divert the voters from simpler, more effective measures.
That article in the WSJ that Basel II picked up on pointed out that allowing low downpayments was the single biggest cause of the mortgage mess. Simply requiring that any loan made with govt support of any kind, or by an institution that benefits from govt support of any kind, be at least 20-30% down, would effectively prevent a repeat of this latest financial mess. Why is there no appetite for this? Because it would lead to a large further drop in home prices. That is anathema to most voters and their leaders, even though accepting this now and getting on with a restructured economy built around the new price levels would benefit the economy most in the long run.
"I think it is the elitism of this argument that gets me the most, that some people are just not ever going to be capable of handling "adult" things like a mortgage or balancing their check book."
I am not an elitist. People are able to do all sorts of things. But do they want to? Is it important to them? Most people want simple in the things that are necessary but don't interest them, so that they don't get in the way of the things that do.
If you think the measure of a man (or woman) is simply how well and willingly he/she earns and handles money -- why, you're in tune with the dominant American culture, and you have the elites you deserve.
Thirty or forty years ago, many Americans of moderate means didn't have to manage their own retirement plans (defined benefit all the way), didn't have to determine which mortgage option was safest (the bank or mortgage company would usually do that for them, and refuse them if there was no good option), didn't have to decipher complex rule changes from the medical insurer, the credit card company, the telecom company that could conceivably cost them hundreds or thousands of dollars.
For the average citizen, the world is really a much worse place than it was 40 years ago. (For a very few, it's much, much nicer.) I think the answer is more to change the world that the citizen.
"...you asked about the china end game a few days ago."
Yes. China will continue to pursue a policy of export-driven growth.
Not good.
Joe sixpack just cannot muster the courage to live by Ed Abbey's dictum.
Better a cruel truth than a comfortable delusion.
LIke selling ice to Eskimos.
"That article in the WSJ that Basel II picked up on pointed out that allowing low downpayments was the single biggest cause of the mortgage mess. Simply requiring that any loan made with govt support of any kind, or by an institution that benefits from govt support of any kind, be at least 20-30% down, would effectively prevent a repeat of this latest financial mess."
That'd solve the problem better than education. It's just -- when we get there, I'll believe it.
WHEN EVERYONE HAD GONE AWAY
I saw two buckets on the paddock rail
One was red
And one was blue
Both contained gray water
Floating straw wisps and the spittle of horses
How beautiful in summer sunlight
Were the forbs and the wild rye
Green as jade emerald filigreed -
Blue and red and green
Inside the gray unpainted fence
This is how it could have been
If we had not spoiled them
If no one were there
Neither man nor woman
Neither man nor his beasts
Only their accidents, luminous shining
The bread-like body
The wine-like blood
Silent and rich in the summer day
When everyone had gone away
Pavel
July 4, 2009
I don't think the measure of a man or woman is how well he or she manages money. I think it is how he or she manages life. I'd say the same thing about being able to change a tire. At some point, you have to learn to take care of yourself.
"Yes. China will continue to pursue a policy of export-driven growth."
I cannot see a single possible good outcome from that strategy, not in the end.
I don't think, I know, that HVCC is and will be a disaster. And Bond Girl, yes, the Big Guys are getting bigger (Wells Fargo) and the mortgage brokers and going the way of the Dodo, but as much for business-model-related reasons as anything else.
Here's a true story. My client, a sophisticated, retired real estate investor is refinancing his condo. It's worth,realistically (that is, backed by real-world comps) at least $325K. The appraisal came in at $240K with 5 comps. HOWEVER, 2 of the comps were 2.5+ miles away and another 2 were listings, not sales. Result: 1 comp worth anything. The underwriter required 2 additonal comps and they also turned out to be junk. The appraisal was truly garbage and the appraiser IS INCOMPETENT. I've never seen one that bad. Why? I've heard that experienced appraisers won't work for half their regular fee, so the appraisers that are hired are new and/or not well-qualified. No, there's no doubt in my mind that HVCC is a disaster and it won't be very long before the rest of the real estate world figures this out. It is accelerating the declines in home values and driving prices lower. People, and likely Congress, are not gonna like that.
"I'd say the same thing about being able to change a tire."
Not the same thing as managing life or money.
So money equals life? Can't manage money, can't manage life? Can't manage money, can't change a tire?
False equivalencies.
Is there a relationship between Homer Economicus, Homo erectus Homo erectus - Wikipedia, the free encyclopedia, and plain vanilla" mortgages?
by Obama Administration?
I agree with Niall Ferguson that Obama's economic forecasts are a joke because there's just not enough money in the world to finance all the borrowing the U.S. and other big countries will be doing over the next few years i.e. the US is planning to borrow at least $10 trillion over the next 10 years (which we can't afford to do).
Phaedrus,
Is that a national appraiser versus local thing?
km4 - try the hopium. You won't feel a thing...
C
Why don't you guys just round up all the "victims" here and keep them on a special farm somewhere like pets? Make sure all their basic needs are met, etc.
@ Counterpointer
Is that what Obama and you are smoking
I offer the downpayment suggestion, Bob, because it is a practical way to prevent a recurrence of our current problems lies somewhere between true laissez faire (which we haven't had in the housing market since the 1930's), and Soviet-style limitation of choices through regulations.
Offering and disclosing simple loan designs is too weak to provide a solution, because there is too much money to be made by abusing the more exotic alternatives. Banning all exotic loan alternatives is unacceptable because we want the freedom to make our own choices. But there is no reason we taxpayers must subsidize, by even $1, directly or indirectly, any leveraged home purchase where the buyer is putting in less than 20-30% of the money out of their own pocket, or their relatives' pockets. Dowpayments less than that should be available, but their availability and cost should be entirely determined by the private market without any govt support.
"...you asked about the china end game a few days ago."
Yes. China will continue to pursue a policy of export-driven growth.
Not good. - mp
Agree with both (1) continue to pursue [merchantilist] export driven growth and (2) not good for anyone - them, us, other innocent bystanders.
Bob Dobbs on Sat, 7/4/2009 - 7:22 pm (PDT)
WELL SAID!!!
km4 - hehe, hardly. Turns out that what I'm smoking, fully legal kreteks, are about to be made less so. Some ridiculous nannying of adults on the grounds that flavored tobacco is a gateway for kids smoking cigarettes.
C
To get back on topic... the reason vanilla disappeared in a lot of places is because it was too expensive - vanilla didn't qualify Homer for a house - any house, in bubble land, at least on the front end of the schedule [down payment & full amortization]... so screw vanilla, we need more flavors!
Now after the fact those non-vanilla flavors turned out way costly BUT on the back end... the profits, spiffs & YSPs have already been paid out & spent... now all that is left are the losses. And those assuming the losses aren't the same pool [or not 100%] as those who made the dough. Classic case of profit capture, cost avoidance.
If the 'vanilla option' can't be made to work... look for all other options to become prohibited for everyone regardless of whether they understand them or can benefit.
"But there is no reason we taxpayers must subsidize, by even $1, directly or indirectly, any leveraged home purchase where the buyer is putting in less than 20-30% of the money out of their own pocket, or their relatives' pockets. Dowpayments less than that should be available, but their availability and cost should be entirely determined by the private market without any govt support."
We're more in agreement than not. Though personally, I'd also be for a bit of "truth in securitization" action on the other end. How about a rating system for opacity?
Bond Girl,
The appraisal management companies (AMC) are national and they're the ones who hire the appraiser. We mortgage brokers are no longer allowed to even talk to the appraiser. There is a dearth of appraisers who want to work for substantially less money, no surprise, so they, the AMC's, are challenged in finding someone who is local, competent and will work for less. One AMC with which I am familier does generate good appraisals, but at a cost to my client of $675, versus the $350 I/we used to be routinely charged.
It should be noted in all this that the AMC does NOTHING for their money, i.e. they have no special qualifications of any sort and add nothing to the process. They just put the appraisal out to bid and collect their money. A costly "middle man" has been added to the process but that middle man adds no value.
Appraisal fraud has ALWAYS been fraudulent and prosecutable. So why do we need an appraisal management company? Well, we don't, and once people see the effects, I suspect they will be done away with.
As long as they see the effects before the market is completely concentrated?
A costly "middle man" has been added to the process but that middle man adds no value.
Same could be said of mortgage brokers - or real estate agents - or about ANY middleman. Define 'value'...
Facing reality is far more soul destroying than most dare to imagine.
yes
I hope you are enjoying the 4th, CR. God bless you and yours.
I have seen and heard something this 4th, amid all the standard patriotic hokem, something I have not seen or heard before.
It is that America is fallible. Our model is not always, or inevitably, the envy of the rest of the world. We have deep problems to roll up sleeves and solve. We have screwed up.
It's a refreshing change from the last few years, when it was pretty obvious that we had screwed up, but most of the proletariat refused to accept or admit it.
Obama may become a kind of turning point, a template of a new American patriot who is fallible.
Bernake...forget about it! He screwed up.
Bob, I am fine with better disclosures for investors and borrowers. I just think that those measures alone will be ineffective without focusing on, and being ruthless about, the main driver - loans that allow too little borrower skin in the game.
loans that allow too little borrower skin in the game
That is the component that has been missing from this discussion so far.
Sorry to put you in the hot seat, Phaedrus - I've been curious how that has turned out.
I have seen and heard something this 4th, amid all the standard patriotic hokem, something I have not seen or heard before.
Nothing new. Heard that in spades during the seventies... though went silent again after 'Morning In America'...
Stuff like this cycles...
Oh, bondgirl, you haven't closed the number of mtges I have.
I try to explain, you guys read what I write, you know I'm not
terrible at explaining, and I know that 90% of what I'm saying
is blah blah blah to my hearers.
You have no idea how dumb and ignorant most people are.
Consolidation/Concentration is happening and in many ways is a good thing ... my take on the big subject. No, the effects I'm referring to are lower appraised values, that is, lower than true market, across the board. Why? Because, at least in part, lenders are OK with it and they're the only ones that count, now. (The client is required to give the AMC their credit card number, so the AMC is paid BEFORE the appraisal is performed.) Appraisals are slower to be done and less professionally done, but the big deal is that values are understated, i.e. below true market, sometimes substantially and THAT is a very big deal, for obvious reasons, and it affects everybody.
rich - ripples or a new tide, it's strange days ahead.
Hmm, even doomers need lullabies... YouTube - Gorillaz-Sunshine In a Bag
nytol
C
Phaedrus, I am sure there was some perfidy involved in the law requiring there to be a corporate barrier between mortgage brokers and appraisers. But mortgage brokers have only themselves to blame for this. When it was possible for mtg bkrs to exercise influence over individual appraisers, they did so to boost appraisal values. So now we have an insulating layer with its own problems. The cost is a minor issue. If spending a few hundred more bucks helps to set a better price for a transaction that averages a quarter of a million dollars, then it's a good idea.
I believe they are called suburbs.
With 5/1 arms;-}
Someday this war's gonna end...
It's commonly believed that mortgage brokers put pressure on appraisals to "make the number" and some of that did go on. What's forgotten is that appraisal MUST be justified by comps and lenders were not shy about challenging them. ALSO, appraisers are licensed and can lose their license for shennanigans. Again, fraud is fraud. ALSO, most mortgage brokers, and I most definitely include myself in this group WERE AND ARE HONEST. I told my appraiser, not once but again and again, to put the number "right on" and that I and my client would deal with whatever that number turned out to be. There is lots of negative fallout for bad/overstated appraisals and I, and most of the folks like me, didn't want any part of that. Moreover, I am sick to death of "the world" blaming us for a huge debacle that was clearly Wall Street driven. The math and the ratings were bad, very bad, and I could go on and on, but I won't.
Oh, and a doubling of cost is NOT a minor issue to my clients.
The cost issue is in my mind a major one. They've gone up substantially and, I think, unreasonably, and that has made us mortgage brokers less competitive, to the point that major lenders are taking back turf (we used to do 60% of all mortgages). That was my earlier reference to trouble with the business model.
Sorry, all, for dominating the thread, not my intent ... but ... Bond Girl, I was personally horrified when zero down became all the rage, and Interest Only, and Neg Am Option Arms, and I knew then it could not end well, I, personally, don't like debt and have no mortgage (but I paid $132K for my house in 1997). I have told a number of young people in the last several years NOT to buy, but to wait. Housing prices have NOT bottomed IMO. OK, end of rant(s). Sorry again, lotta my hot buttons being hit ...
This is a condescending article which states the mortgage borrowers is mentally challenged.
The truth no matter what the mortgage paper states, the bank will either interpret those words to suit their needs or their creative attorney gives those words double meanings.
The Bank is the like a scam artist, only this scam artiist has the backing of the federal government.
I resent the insult of this author.
The problem is homo economicus did not pick the poorest products. The people opting out would not be the ones with the most sense, but the ones with the least.