During the last few months, we’ve been treated to the laser like focusing of attention on the terrible situation unfolding on the Wall Street. So Here we are after nearly 25 years of equal opportunity lending funded by the acceptance as fact of bogus applications to secure loans for people attempting to live up to the implicit expectations of popular American culture. People who should be living in rental units bought condos, people who should be in condos bought houses and folks who can afford modest houses bought really expensive houses all on deferred interest.
Loan originators have been funding P&S Agreements that should have been rejected with a laugh for people who knew they were in too deep. They weren’t rejected because reality is years away and it might be rolled over to a new loan. The buyers all hoping the overpriced house they couldn’t afford and bought anyway will (hopefully) rise sufficiently in value to offset the accumulating debt. Instead in time, like all things, the bill came due the cheap interest loans came up to be converted per the contract. The result is, the borrower couldn’t afford the REAL cost of the house which in some cases jumped three fold. Disaster…the borrowers decide to walk away….”hey its not our fault, the realtor, the bank et al deceived us ALL!!… ” (Your parents raised an idiot, never seems to come up as the most accurate answer.)
Borrowers keep up the mantra claiming in Chorus “we didn’t know, its not out fault, we were tricked!”
This is of course PURE rubbish. Reality is, if you’re dumb enough to borrow the money, some equally dumb person will lend it to you, the problem here is of course the lender isn’t lending you his or her money.
Lenders are saying “we did nothing wrong, we met the guidelines, we did what we should have done, we created a boom real estate market, we created billions of dollars of equity and WE didn’t sign the loans, the borrowers made a contract, we didn’t”. This is also PURE rubbish as well. They could and should have said NO…for more reasons than need to be expressed and today are self evident.
So here we are, an election year, to prevent a run on the banks and wholesale panic, all of us will pony up nearly a trillion dollars while watching indictments (no doubt) of investment bankers, reports of huge bonus’s while filing chapter 11 at these banks and investment houses will abound. The Democrates will want something in the package to save the poor borrower who is a victim. {Victims do vote}
The Republicans will claim its just the market at work, until they start to lose money. Bush has become a Socialist..just like France ..isn’t life ironic.
The borrowers who walk away form their mortgages will get whacked for massive Income Tax bills if the Bank dumps the loan and lets them off the hook. Yes this is considered Income to the borrower for 100% of the amount forgiven. Now the borrowers will be paying Fed Income Taxes on money they NEVER actually got.
In time new laws will be written Governing lending, you will once again need 20% IN cash, real money to buy a house and a good credit rating to boot. The mortgage I suspect will not be allowed to exceed 35% of the monthly income and huge car loans will be a thing of the past. The price of some things will fall, due to lack of demand and/or people able to support the once inflated prices..
We will survive, so far its not as bad as the crash of the 1980’s (it may be in time). The stock market will likely fall more, it might hit 9500…we’ll survive.
