So I distinctly remember about 5-10 years ago there being multiple articles and uproars about how blacks and other minorities were denied home mortgage loans because of poor credit, and how this amounted to racism because it's harder for minorities to get and sustain good credit. I know that there are MULTIPLE other factors for our subprime loan crisis, but does anyone have any thoughts on how this percieved racism might correlate to what's happening right now?

11/24/2007 2:11:48 PM

Don't you know that, unfortunately, trying to correlate any action/trait with skin color or ethnicity is not tolerable in the US these days?

Korean-Americans are hardworking
OMFG THERE ARE HARDWORKERS OF ALL ETHNICITIES, DON'T BE RACIST.

Blacks commit more crimes per capita
OMFG HAVE YOU SEEN THE RACISM AGAINST THEM??? THEY ARE JUST FIGHTING BACK/COMING OUT OF THE SHACKLES OF SLAVERY.

Only women can give birth
OMFK SOON MEN WILL BE ABLE TO GIVE BIRTH AND THAT GENERALIZATION WILL BE BURIED!!!!

11/24/2007 3:04:15 PM

as much of an idiot you are

i like the third one

aha

11/24/2007 3:45:26 PM

i agree with trap

11/24/2007 7:20:56 PM

why do they give blacks the subprime loans, thats racist.

but looking back at it what the hell did they expect. can you strengthen the economy by giving away house loans? is this just a form of slavery, give away money then make em work for it?

11/24/2007 7:22:59 PM

Quote :

"OMFK SOON MEN WILL BE ABLE TO GIVE BIRTH AND THAT GENERALIZATION WILL BE BURIED!!!!"

Give it a few decades.

11/25/2007 2:38:56 AM

re: original post

not quite sure what you're asking

but i hope nobody is arguing that we should've issued more "creative" loans to black people or anyone else.

11/25/2007 5:38:47 AM

Quote :

" but does anyone have any thoughts on how this percieved racism might correlate to what's happening right now?"

My thoughts are that any perceived racism is a lot of made up bullshit.

It's pretty simple. You make X dollars per month. A mortgage for house A will cost Y dollars per month, If Y >1/3*X, then you can't afford the fucking house.

11/25/2007 8:25:37 AM

^no its not that simple

they gave them loans with a variable interest rates and told them it will not go up for many years
of course no one but the fed knew what would happen
and the rates skyrocketed due to many factors
and all of a sudden people couldnt even pay the interest on their loans
so to me it sound like a big huge gaff by the fed and congress to encourage the loaning of money at artificially low interest rates when they couldnt keep the rates down

i would not even blame the people for one second

if you were poor and were offered a home loan at 1% interest you would take it too



[Edited on November 25, 2007 at 11:30 AM. Reason : .]

11/25/2007 11:28:39 AM

^that's retarded. The people getting the loan are still responsible for reading their own fucking contract and understanding the terms.

They deserve to lose their houses and go into bankruptcy if they can't at least read. Maybe they should make people take a reading comprehension test before they sign a contract to see if they are smart enough.

11/25/2007 12:53:54 PM

Quote :

"they gave them loans with a variable interest rates and told them it will not go up for many years"

People need to read what they sign. There's a federal truth in lending disclosure statement that buyers must sign to acknowledge that they read and understood the contract that they are entering into. Ignorance is no excuse.

Quote :

"of course no one but the fed knew what would happen"

It's not like the information was hidden. It's all there in the mortgage paperwork.

Quote :

"and the rates skyrocketed due to many factors and all of a sudden people couldnt even pay the interest on their loans "

The factor that caused the rates to increase is the fact that it's a VARIABLE mortgage.

Quote :

"i would not even blame the people for one second if you were poor and were offered a home loan at 1% interest you would take it too"

poor does not equal stupid. People that signed mortgages that they ultimately could not afford were nothing short of greedy. People are not entitled to home ownership, unless I missed that portion of the Bill of Rights.

If they get foreclosed on, they will have to rent. Losing your home does not mean losing your job, unless the inability to pay stems from job loss, but that has nothing to do with the subprime issue.

11/25/2007 12:56:27 PM

Quote :

"if you were poor and were offered a home loan at 1% interest you would take it too"

No, I wouldn't because I took the time to learn about the lending process and understood just how dangerous an ARM or "Balloon" loans are. Going with the fixed rate increased my rate and therefore brought down the price limit I could afford when looking for a house but I've been unaffected by the market the last couple years and still have my 6% rate and steady payment that I can afford (of course my property tax going up more than $1,000 is going to sting but nothing compared to a rate increase).

For my second mortgage I had no choice but to go with an interest-only loan (it was the only reasonable package available at the time). However, all I had to do was figure out the amortization table and make the additional payment on the principal and I'm covered.

Honestly, the biggest problem is that finances are not to nearly enough in high school. I remember having to balance a checkbook in ELP (like 9th grade) but they only dealt with it for a couple days and we moved on. Everyone needs a better understanding of investing, balancing a budget, credit and loans, etc. They never really explain just how screwing up your credit early is going to affect the rest of your life and how much money you can waste for simply being a bit lazy/sloppy early on with your money. Personal Finance should be at least a full year course in high school and required for graduation. It is the one thing that everyone will have to deal with and probably affect them the most (more so than chemistry or 2 years of French). A bunch of us at work were talking about how we were all college educated but we initially felt lost when it came to mortgages and investing... could only be more overwhelming for someone "less educated"

11/25/2007 12:56:30 PM

^i agree, they should teach that in high school, it should be a required course

Quote :

"They deserve to lose their houses and go into bankruptcy if they can't at least read."

do you think the lenders know how to read? yes they can but they chose to lend to people with bad credit. Why? because they were speculating on interest rates.
as long as the rates were low this would work.

and if you are poor and you only make enough to pay rent and dont have any left for savings and you get this once in a lifetime chance it looks good, especially when the lender tells you everything would be fine.

hey stupid people and smart people got in this boat together and now its sinking.
you gotta wonder how this could have happened. it starts with the fed and the people behind the scenes who encouraged congress to back subprime lending.

if they had held up their end of the bargain and done their research they could have kept rates low but they didn't and couldn't, and unfortunately alot of people bought into this false hope.

11/25/2007 1:39:26 PM

It's both the lenders' and borrowers' faults. The lenders were predatory and the borrowers weren't too smart on their end. To blame one group is to be ignorant of what really happened.

[Edited on November 25, 2007 at 3:50 PM. Reason : ]

11/25/2007 3:50:04 PM

i agree to a slight extent

but I put 80%+ of the blame on the borrowers.

11/25/2007 4:38:14 PM

So how does race play into this? Did they only offer these variable interest rate mortgages to blacks?

I guess from my point of view it's pretty dumb to enter into a variable interest rate mortgage when the rates are the lowest they have been in a long time. There's nowhere for a variable rate to go except up. The only circumstance would be if you were absolutely planning on moving within a few years.

11/25/2007 8:42:15 PM

Eh I blame the Lenders more.

I expect the borrowers to be stupid.

I expect the lenders to watch out for their own best interests.

[Edited on November 25, 2007 at 9:01 PM. Reason : BUT THE BLAME CLEARLY FALLS ON THE BLACKS]

11/25/2007 9:00:45 PM

Quote :

"So how does race play into this?"

I think the OP was basically asking "Did lenders lower their standards to avoid charges of racism?"

[Edited on November 25, 2007 at 9:33 PM. Reason : ]

11/25/2007 9:30:55 PM

Quote :

"stupid people and smart people got in this boat together and now its sinking."

the difference is that the smart people (lenders) didn't actually get in the same boat as the stupid people. They were only out for the commission anyway - they don't give a fuck that the stupid people are defaulting now. they made their money and socked it away for tough times, like a smart person does.

the poor people should've known not to play in a rich person's territory. rich people don't go to trailer parks and pick fights or drinking contests. poor people should likewise think twice about steppin into a rich person's world

[Edited on November 25, 2007 at 10:38 PM. Reason : s]

11/25/2007 10:37:33 PM

^ that has to be the dumbest post i've ever read

11/25/2007 10:41:57 PM

its not dumb, its insightful

11/25/2007 10:42:38 PM

so by your logic a poor person should never try to better themselves, because success belongs only to the rich

11/25/2007 10:44:22 PM

you missed my point entirely

[Edited on November 25, 2007 at 10:46 PM. Reason : s]

11/25/2007 10:45:29 PM

STAN: I want to be a woman. From now on, I want you all to call me 'Loretta'.
REG: What?!
LORETTA: It's my right as a man.
JUDITH: Well, why do you want to be Loretta, Stan?



LORETTA: I want to have babies.
REG: But... you can't have babies.
LORETTA: Don't you oppress me.
REG: I'm not oppressing you, Stan. You haven't got a womb! Where's the foetus going to gestate?! You going to keep it in a box?!
LORETTA: [crying]

11/25/2007 10:47:02 PM

loaning money to black persons under any circumstance is certainly less than optimal.

11/25/2007 11:36:39 PM

Quote :

"I expect the lenders to watch out for their own best interests."

And they did exactly that. The packaged up and sold as many loans as possible, and the government-supported companies like fannie mae, freddie mac, etc. bought as much as possible.

They made fat profits, shareholders saw their stocks go up, employees made a killing, and the government bought up a bunch of loans that would become non-performing.

The lenders behaved rationally and sought the most profit.

11/26/2007 12:41:27 AM

well there are still alot of lenders that we're completely bankrupt
alot of financial institutions lost millions or billions
so obviously alot of smart people bought into the false hope as well

11/26/2007 12:48:50 AM

Quote :

"so by your logic a poor person should never try to better themselves, because success belongs only to the rich "

I think he wasn't insinuating that so much as he was saying that they shoulda known better than to try to play a playa.

11/26/2007 12:54:23 AM

Quote :

"The lenders behaved rationally and sought the most profit."

They did, but the profits were lost. To make money lending money the people need to pay it back. If they do not then you do not get your profit, all of it went towards reselling the darn house at a loss.

That said, the current problems in the banking sector are still nothing compared to the S&L disaster of the late 80s:


[Edited on November 26, 2007 at 1:29 AM. Reason : .,.]

11/26/2007 1:28:36 AM

^What's the charge off rate for loans held by fannie mae/freddie mac/etc.?

11/26/2007 1:54:45 AM

Quote :

"LoneSnark: They did, but the profits were lost. To make money lending money the people need to pay it back. If they do not then you do not get your profit, all of it went towards reselling the darn house at a loss."

I thought the middle men made out though. Like, the people who intially gave the loans, collected on them a bit, and then sold them to legitimate banks turned a quick profit and left everybody else holding the bag.

11/27/2007 4:05:48 AM

Well, it's not quite that black and white. A lot of loans were packaged up into CDOs and sold on the bond market to investment banks, retirement funds, and a shit-ton of them ended up in China.

A lot of lenders also serviced the loans themselves. Basically whoever got left holding the bag got fucked.

In reality, other than those who managed to profit off of re-selling sub-prime loans, the people who were foreclosed on lost the least. They can simply walk away and be not much worse off than when they started. They never came close to owning their homes, much less building equity, and were really just glorified renters. They'll move on and rent someplace else.

11/27/2007 9:21:53 AM

Quote :

"and a shit-ton of them ended up in China. A lot of lenders also serviced the loans themselves. Basically whoever got left holding the bag got fucked. "

so you're saying black people don't care about chinamen?

[Edited on November 27, 2007 at 1:38 PM. Reason : national economic warfare at its finest]

11/27/2007 1:37:56 PM

Let me clarify my original post. About 5-10 years back I read countless articles on how the housing industry was racist because they never gave blacks the chance to own their own home. That blacks with "decent" credit got denied solely because they were black. I truly believe that that is what spurred this whole epidemic. Banks and the housing industry started loaning in droves to avoid more negative publicity, and they realized that they could make a pretty penny off this practice in theory. A few years later...and look what's happening. Do any of you guys agree that perhaps "racism" played a giant part in this situation we've dug ourselves into?

11/30/2007 9:06:25 AM

Your whole understanding of the subprime meltdown is wrong

"Banks and the housing industry started loaning in droves to avoid more negative publicity when they discovered how to make profits off of high-risk borrowers by packaging up the loans and selling them to investment banks and other groups investing in fixed-income instruments.

read this for a better understanding of how this works and how it came to be in simple layman's terms:
http://voiceofsandiego.org/articles/2007/06/27/opinion/01toscano062707.txt

11/30/2007 9:30:19 AM

Quote :

"they gave them loans with a variable interest rates and told them it will not go up for many years of course no one but the fed knew what would happen and the rates skyrocketed due to many factors"

The rates haven't increased merely because of the rate hikes. The rates have increased because the ARMs these people have come with a teaser-rate for about 2 years. After that, the rates go up, regardless of what interest rates have done in the economy.

Also, there is no such thing as a subprime loan. It is a subprime borrower.

11/30/2007 10:52:40 AM

White House and Fed announce a temporary bailout. A financial miracle or just delaying pain and making it worse down the road? You decide.

It appears this will go til next November, the next election. It could be Bush just saying "I don't care the long-term consequences, postpone a recession til after the election at all costs."

Quote :

"WASHINGTON (Reuters) - The Treasury Department is finalizing a plan with mortgage industry leaders that will hold interest payments steady for many subprime borrowers facing higher rates and possible foreclosure. Treasury Secretary Henry Paulson discussed the plan at a meeting with top banking regulators and industry representatives on Thursday and is expected to announce details of the proposal as early as Wednesday, sources familiar with the meeting told Reuters. The mortgage representatives and regulators are focusing in on restructuring "2-28" and "3-27" subprime loans, which start with a fixed mortgage rate of up to three years but then reset to a much higher rate. During the five-year U.S. housing boom that ended in 2005, such adjustable-rate loans were widely available to subprime borrowers with damaged credit. Many of these loans are entering default after they reset to higher rates. As envisioned, the plan would effectively extend the fixed-rate period for stressed borrowers and so shield them from a payment spike that could push them into foreclosure. Industry representatives and regulators are still thrashing out details of who would qualify for the interest rate amnesty and how long to extend the fixed-rate period of the loans. Mortgage industry representatives want to limit mortgage relief to borrowers who have a proven record of making payments under the initial rates. The plan will likely be discussed Monday at a housing conference to be held in Washington and organized by the Office of Thrift Supervision. OTS Director John Reich was one of the regulators to attend the Thursday meeting and "he was encouraged with the progress made toward a balanced approach that will help people stay in their homes without negatively affecting the markets," said OTS spokesman William Ruberry. Treasury spokeswoman Jennifer Zuccarelli would give no details about Thursday's meeting except to say it was a chance for regulators to learn more about the mortgage industry's outreach efforts. "They wanted to hear an industry update on ways to help more struggling homeowners as quickly as possible. We are encouraged by the process," she said. For some time Sheila Bair, chairman of the Federal Deposit Insurance Corp, has been pushing servicers and lenders to change the terms of the loans to minimize losses for both the homeowner and investors. She took part in Thursday's meeting along with Federal Reserve Board Governor Randall Kroszner. The White House on Friday said it was "premature" to discuss possible new steps to address the mortgage crisis and declined to comment on reports that officials are working on a deal with lenders to freeze interest rates on some loans. "It's premature to talk about those discussions at this point," White House spokesman Scott Stanzel told reporters. Financial markets have been spooked in recent months as defaults have risen and many investors are struggling to get a handle on the value of these sinking loans. In an interview with BusinessWeek magazine, Paulson said he hoped to have a final industry consensus on a loan modification plan before the end of the year. "We'll have broad agreement on criteria that will make it easier to modify mortgages in the volumes we need," Paulson was quoted as saying in the magazine's December 10 issue. T.J. Marta, a fixed income strategist at RBC Capital Markets in New York, said freezing adjustable mortgage rates would anger some investors who bought mortgage backed securities, but it could help forestall a massive domino effect that could drag down a wide swath of financial assets. "Your purists are going to scream to high heaven that their contract is being altered, but your pragmatists are going to say, 'Do I want to reduce cash flow or see my Triple A-rated bond go south?' Pragmatists are going to do the deal," Marta said. He said it was "hard to overstate the severity" of the effect of massive mortgage foreclosures on Wall Street, where exposure to subprime mortgages has been "spread like pixie dust." (Additional reporting by David Lawder, editing by Neil Stempleman) Copyright 2007 Reuters "

Quote :

" "If they can freeze rates for 7 years then in 7 years those “home owners” will be able to sell their houses for about what they bought them for due to the inflation right now Bernanke and Paulson are spreading through the system." Response: But that’s only freezing interest rates. What about the I/O’s and neg-ams who have to start paying principal? Or the balloons? They’ll still have higher payments. And even if payments were frozen, the cost of health care, gas, food etc will be so inflated too and take a bigger chunk out of wages — without the attendent wage inflation — that in a few years, income still won’t cover the frozen payment. And freezing rates might bring them from underwater to the surface, but won’t bring back the appreciation that so many FB’s were depending on to refinance. They might forclose anyway. And there’s another problem — at least five years worth of demand is already sucked up. Say the houses do break even. FB’s will still have to sell — to whom? All those nonexistant buyers on the sidelines? AND, I suspect any rate freeze of any stripe would apply only to primary residence homes. No legislature would pass a law bailing out investment property or HELOCs. So those FB’s are toast anyway — which sets comps for everybody else. How are you going to get this easy money in the hands of the people with a lack of toxic financing? Heck, not even a lack of toxic financing, todays lending standards are pure puckerbutt. Sorry, folks in general won’t have access to this money. Second, when you have a pyramid/Ponzi scheme, which is what this is/was, you need a constant infusion of new capitol. So tell me, what good will freezing anything do? "

Quote :

"The WSJ announced the “mother of all cramdowns” today, with the Bush Administration agreeing with mortgage services that low introductory rates should be kept until Bush is out of office. Investors and services evidently agree that individual workouts will overwhelm the system, naking the eventual losses greater. Instead, some kind of rule will be used to divide people into those who can pay the higher rate, those who can’t even pay the introductory rate, and those who can pay the lower rate but not the higher rate. The latter group would get a reprieve. The length of time has not been set. And the article said “subprime.” Not sure about Alt-A, etc. The thing is, under the new bankruptcy law those with lower incomes can just walk away, whereas those with higher incomes can have part of their future earnings seized for years. "

[Edited on November 30, 2007 at 12:08 PM. Reason : /]

11/30/2007 11:49:21 AM

What a fitting name. From the WSJ:

Quote :

" The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition, which is called the Hope Now Alliance."

11/30/2007 12:27:58 PM