Forum Post: The bottom line is - people signed contracts & failed to honor them - period
Posted 13 years ago on Nov. 13, 2011, 7:12 p.m. EST by figero
(661)
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Remember - the banks only failed because people failed to make their payments. Case closed
Sorry. All a mortgage contract states is that if the borrower stops making payments--for WHATEVER reason--the bank gets the property. It's very simple. So if a homeowner decides that he can no longer afford his monthly mortgage payments, and he hands the keys back to the bank, he's not breaking the contract--he's FULFILLING it! That's the deal that both the bank and the borrower signed on for. What don't you get?
Very true.
Then why are you bitching?
I agree completely. Now the bank has a non performing asset on it's books, and until they sell it at a loss then they recover a portion of the borrowed money. Non of which would have occurred unless the borrower defaulted. look in the mirror.
LOL...the banks knew full well that certain borrowers would default--and they still signed the contract! Why is that? All the banks had to do was say no. All the banks had to do was to do what they had always done: require the borrower to put 10% or 20% down, which makes the borrower a lot less likely to walk. But they didn't. Instead they said, "Hey, here's a gigantic asset that we're going to give you for practically NOTHING. Enjoy! And when the housing market collapses, please don't walk away from your mortgage, even though that's exactly the deal that we're signing on to here, and even though we and other corporations walk away from our bad investments all the time..."
all the more reason the govt shouldn't be guaranteeing them. The govt gave the banks our tax money - remember that.
No, the banks don't lose. They write it off, works out ok for them actually. It is the tax payers who get stuck with the bill. If you don't like paying for it, you should advocate for some consumer protection. Nothing wrong with defaulting on a toxic mortgage. In my opinion, people should not continue to pay them.
Actually, the banks originating the mortgages sell off the mortgages, so you're right they don't lose money. The mortgages are no longer on their books. Oftentimes they make money from what are called mortgage servicing rights. Thus they no longer have an incentive to determine if the borrower will pay back the loan. This is known as a moral hazard.
The sold mortgages are bundled into mortgage back securities (MBS) which are made by MBAs and are sold to investors. Examples of investors are pension and retirement funds and insurance companies and other banks and hedge funds.
When those MBS dropped in value in 2007/8, the banks and investment funds lost money, and teetered on the verge of bankruptcy. You may recall Bear Stearns, Lehman and ML, not to mention the foreign firms such as RBS.
It was pretty much a bank run at that time, particularly if one of these firms had been your prime broker. So then tax payers had to come save these banks and AIG.
Thus the biggest risk takers were the investment houses and insurance agencies. Why did they take these risks? As always, greed: they wanted a higher return. MBS' have a higher coupon than Treasury bonds.
Should tax payers save them in such a situation? I think the public had no choice but to do so. In essence tax payers are offering insurance to the banks.
As anyone who has a car or home insurance knows, insurance is not free. The question then becomes: How much should the banks pay for this insurance?
Hmm.. Thank you, socrates. I continue learn new things here.. In addition to paying for insurance, it seems wrong that they should be allowed to sell these MBS. When a person signs a contract with a bank for a mortgage, can they specify that the lender will not be allowed to do this?
Since the credit crisis there has indeed been calls for originating banks to keep at least some portion of the mortgages on their books to minimize moral hazard. By analogy, this would be a copayment or deductible when ordinary (non-corporate) humans use healthcare insurance in the US.
From the perspectives of banks, this would be added regulation, and I believe this is part of the Frank-Dodd regulation that came after the crisis as you know. And we all know how much banks hate Frank-Dodd. Tea party supporters in the House as you know are defunding it.
(I don't have an opinion on it: my take on it is that we should work with European and Asian counterparts to come up with uniform banking regulations. With uniform regulations all businesses can compete on a level playing field.)
ah, so there is the global view. I am glad to hear there are some that can wrap their head around it.
You just showed how you don't know what you are talking about when you said......"They write it off, works out for them actually" I have been a banker, have you? What you just said is fucking stupid. Writing off, doesn't mean taking a loss, dim wit. Come on, try to duke it out with me. You can't
No thanks, I doubt you are Knowledgeable, fellow. I think you are just looking for a sparring partner and I am not interested.
That is because you will lose when you spar with anyone who knows what they are talking about. You already proved you don't.
You thought you could come on this board and just spew bull shit with other bull shitters, lol
Well, I caught you with your bull shit, lol. Most of what is on this board is bullshit. It's pretty funny,really.
Butt....................I caught you on your BULL SHIT. it was so easy.
hahahahahahahaha
then the govt should not be guaranteeing the mortgages. use common sense, if someone guarantees you protection, it only follows you will take excessive risk. Question: Why is the govt in the business of guaranteeing mortgages?
There are probably many reasons. One that comes to mind immediately is that when people own their own homes they take care of their neighborhoods since they have a stake in the community. This reduces crimes, and thus reduces policing costs, and to some extent improves educational prospects for children, teaching them responsibility.
I did not say the government was guaranteeing the mortgage. I just said the banks gets to write off their losses and it works out for them. It is not foreclosures that caused the financial crises.
but the govt is guaranteeing the mortgages via freddie & fannie lol! of course defaults are what caused the meltdown. what do you think is the underlying assets in those risky derivatives?
banks failed because bankers took poor risks knowing that they had an implied guarantee from the US taxpayer. they took these risks because they were compensated based upon their current performance rather than the risk they were assuming. when the risks go bad, the bankers are gone, but the bonuses paid to them remain in their wallet.
and why did banks take poor risks? because they want to lose money? Pleeaasse ! So government had no role in social engineering so everyone can own a home? Are you kidding? Banking industry is the most heavily regulated industry out there - maybe that's the problem. You cant repeal Glass Steagal & force banks to loosen lending standards at the same time. hello !!!
no bonehead. you don't understand the compensation scheme of Big Finance. They load up their books with risky trades and collect a bonus today while the trades appear good on the books. Years later, when the trades go bad, we clean up the mess. Meanwhile the bankers are long gone with their bonus. The compensation scheme of bankers is currently structured to assume risk without having them share in the downside. you clearly know nothing about banking, trading or risk. go watch fox
And why did the risky assets fail? People defaulted & did not repay. It's as simple as that. Had people continued to pay their mortgages - this would not be happening
you can't draw blood from a stone and every banker knows this. they don't, however, need to heed this warning because if they book the loan today and collect their bonus today it doesn't matter that the shit hits the fan years later. They are gone and we are left to draw blood from the stone (try to collect money from people that don't have it) they should've never lent to, but were encouraged to do so because of their compensation scheme. it's called moral hazard - look it up.
at the end of the day - if people didn't default there would be no problem.
And if the housing and job markets hadn't collapsed, they wouldn't have had to default. But people lost their jobs and couldn't pay their mortgages anymore. Or the value of their home collapsed, putting their investment underwater--a perfectly good reason to walk on a mortgage. Why didn't the banks plan for a collapsing housing market, hmm? They're supposed to be the experts. Why did they act as though housing prices would never go down?
and how is it I should pay for it? all calculations you need to make before committing to a mortgage.
at the end of the day - if bankers didn't make bad loans there would be less problems.
exactly. so why not look to the govt who made this "implied" guarantee? your aim is off
Within Merrill Lynch, some traders called it a "million for a billion" -- meaning a million dollars in bonus money for every billion taken on in Merrill mortgage securities. Others referred to it as "the subsidy." One former executive called it bribery. The group was being compensated for how much it took, not whether it made money.
The group, created in 2006, accepted tens of billions of dollars of Merrill's Triple A-rated mortgage-backed assets, with disastrous results. The value of the securities fell to pennies on the dollar and helped to sink the iconic firm. Merrill was sold to Bank of America, which was in turn bailed out by the taxpayers.
they're all to be looked at and exposed, simpleton.
yea but your not mentioning Washington. this movement is villianising Wall Street only. Why not occupy DC?
Why don't YOU?
I'm not complaining
you're wrong. they are. additionally, I don't subscribe to your premise that one can't address one social injustice (Finance) one way unless all other social injustices are addressed in other ways. it's an arbitrary premise derived from your bias for finance.
So where is Occupy Washington?
Wall Street is Washington and Washington is Wall Street.
I don't agree with your premise that OWS is invalid for some reason because they are not in Washington. one has nothing to do with the other.
really? I thought the whole movement is based on wall street lobby money in Washington no ?
you're missing the point. the fact that they are on Wall Street and not in Washington at the moment means something to you. It means nothing to me. It's an arbitray constraint you derived. it doesn't require an answer.
hahaha! ok ! It's a one sided equation - whatever.
the banks and mortgage companies set everyone up to fail and then bet against them.
sorry they set everyone up to lose, then in turn bet against them. evil.
Hahahahaha. You are right. People at AIG, Goldman Sacks, Merrill, Lehman, Etc...
Are you kidding. This is much bigger than the banks.This is about the future. this is about our survival as a people and a country. To be great, America has to do great things.
"WAKE UP PEOPLE!” We don't have time for this! Read “Common Sense 3.1” at ( www.revolution2.osixs.org )
First it will cheer you up, then it will make you angry.
FIGHT THE CAUSE - NOT THE SYMPTOM
Who has the power? That is my question. The mass of the few in this torn nation? The priest, the book, or the congregation? The politricks who rob and hold down your zone? Or those who give the thieves the key to their homes?
The bottom line is - bankers made bad loans & failed to give their bonuses back - period
If a distinct legal entity such as corporation has the right to declare bankruptcy, so should an individual borrower who is also a distinct legal entity.
The non performing bank created mortgage assets were fraudulently and surreptitiously bundled into worthless investment vehicles and resold to the public on various exchanges.
aaand.... the banks lent people money in amounts they never should have in the first place. oops forgot that part.
So why did they lend them the money if they had no job and no income? People failing en masse to make payments sounds like a systematic error at the banks.
omg - it's Herman Cain with that "period". Hi, Herman.
Figero you are so ignorant of how the mortgage business works its scary. Money is made by Wall Street on the origination. Wall Street could care less whether the borrower could pay it back because they took their money right after the closing. Thats why everyone was approved without standards. Now the banks are paying for their misdeeds because the investors who bought this crap are trying to "put back" the fraudulent loans to the banks. The chickens are coming home to roost.
the banks usually keep the riskiest tranche of any securitized loan, whether backed by consumer debt, commercial paper, or government bonds.
it's one way of the bankers telling the people they want to sell these loans to "i'm on your side".
so yes, they care, to some extent, whether the loan gets paid.
the investors can't "put back" the loans to the bank. that would mean that the banks have to agree to buy it back. they don't have to.
the investors, however, are other banks. that's why the banks are suffering.
Insurers such as Fannie, Freddie MBIC, etc can put back fraudulent loans they insured. So dont say there isnt any liabilty to the banks.
i never said banks have to liability, read again.
but no they can't "put back". the government had to rescind the contracts and revert the parties to their original state. that is dangerous ground. it means that nothing we do is actually implicitly allowed until the government say so.
why should i agree with anyone anymore? i'll just wait for the government to give me his nod of approval before i engage in any transaction, like working for wages, buying groceries, paying my utility bills, etc.
Why should I be able to buy my ratings and then foist boguly rated POS securities that I know will fail upon unsuspecting buyers? On another issue I am sure you were for the bailout bonuses based upon that BS "Sanctity of Contract" argument.
really - fraudulent loans? people borrowed money & didn't pay it back. Funny - all my 18 years in the banking industry and this is what it boils down to. But I am the ignorant one. Who encouraged the loosening of lending standard? Look up Barney Frank on You Tube & you will see plenty of footage of him saying he wants to roll the dice on this social engineering project of his.
Why don't you give back all your commissions on defaulted loans? After all you didnt really earn the money. If that was the law-- wanna bet there would be no negative amortization teaser rate balloon loans?
Yes, banks failed because lenders did not make their payments, but it's not as if the borrowers broke the rules. The rules state if you don't make the payments, the bank gets the house. So really the fact that the banks have all these assets on hand that they loaned more money for than they are currently worth is what is causing the banks so much pain.
banks with foreclosed houses costs the banks money. they are non performing assets worth a fraction of what the loan is.
That's what I said.
Why respond to such an obvious troll? Self-restraint people.
yea - kill the debate. clear indicator you are losing the argument
When you simply make a statement you are not seeking a debate, you are trolling.
Anything else you need to have explained or do you wish to debate something? BTW, the banks failing is not the reason I joined this effort so your debate will be one sided with one participant.
Now if you want to actually fix our country or even discuss if our country is brokent, that is an entirely different matter.
huh?
That's what I thought.
yea - can't respond to gibberish. Like I said - if people didn't default in the first place - we wouldn't have a crisis. Pay your damn loan back !
The problem with our country are dumb-asses that think they are always right or the idiot-shits that believe they can divert the attention of the real problem by contrivance of bullshit or perhaps the ass-hat that claims I am upset because I am behind on my mortgage or other bills.
Which are you?
The reason I work is to fix what is broken in my Country. Being smarter than you, I don't bother with the affects of the problems but seek to fix the problem itself. Take the problems in this country like high unemployment, declining wages, slumping housing prices, and much more.
Causal factors, interference with the electoral and legislative processes. Causal factors of this, undue influence of big money in the political processes.
Root cause is the influence of those that do not have the right to do so in politics so that is what I seek to fix through a Constitutional Amendment:
The FOUNDING FATHERS made their meaning clear when they drafted the CONSTITUTION of the UNITED STATES and the AMENDMENTS.
Thomas Jefferson - “I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”
Thomas Jefferson - “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
Thomas Jefferson - “I believe that banking institutions are more dangerous to our liberties than standing armies.”
John Adams - “Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or will ever do good.”
James Madison - “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.”
http://www.nycga.net/groups/political-and-electoral-reform/docs/amendment-28-to-the-constitution-of-the-united-states-of-america
Part of the amendment: Amendment 28 – Electoral and Legislative Process Contributions
BTW, all my bills are paid, up to date and have not been late in about 13 years and that is two mortgages and all my Insurance and car notes, everything. How about your bills?
Anything else
The banks should not have started making sub prime loans in the first place. That was a scam.
[Removed]
We have always been told that for the average American their house is their one investment that they can count on ...
Then there are people like us that purchased a house for $115k 10/12 years ago and are still making their payments and the house is only worth $78k now. I suppose you think that is fair too.
So you are saying people that have lived in their "homes" 20/30 years or whatever and may have ten or less years left to pay on their homes and suddenly lose their jobs that they have been working at the same amount of time due to the company screwing them out of their pensions, moving overseas etc. can't make their payments anymore and are now living in the streets is okay with you? You are heartless!
yes
Sad ... and all for the almighty dollar.
no - I just have a different idea of what is fair. forced to comply with what someone else's version is is not fair. The use of force is immoral
Peace ...
Good point
amen brother
figero = long-outed TROLL
Tiouaise =troll
You know what they say, "theman"... "It takes one to know one".
so pointing out trolling=trolling?