A truly artistic and tactful explanation for the Current Crisis.

[moriah]

Hah.

But it's very true.

http://www.suburbanhousehunters.com/about/mortgage-crisis/

I like it.

[kirby]

1. Great! n/t

[wryter2000]

2. K&R

I wish I could recommend this a few dozen times. Awesome.

[moriah]

3. Glad you like it.

A friend posted it, and I thought it was one of the best explanations for what happened...

And a VERY good primer for who needs to get their asses indicted over this mess.

[The Backlash Cometh]

4. Are you telling me that the independent mortgage offices are solely to

blame for this? Wasn't there anyone at the banks approving/underwriting these loans?

[moriah]

5. How can you "underwrite" a no-documentation loan?

Seriously...

Anyway, the point in this isn't as much the individual mortgage brokers who were doing it solely for a commission, but the "Really Smart Guys" who decided the best way to deal with bad mortgages was to sell them everywhere.

I think the banks had given the mortgage brokers too wide of leeway.

[The Backlash Cometh]

6. This is what I'm having trouble with.

I use to underwrite applications and I'm having trouble understanding what went wrong. Did the mortgage brokers lie? If they did, shouldn't they be prosecuted? What is a no-documentation loan?

[moriah]

7. Here's a page on a place that does a no-doc loan.

http://www.nva-mortgage.com/no_doc_loan.htm

Underwriting guidelines:

* Minimum middle credit score is 660 for the best rates but some lenders now will allow a 620 score with higher rates.
* 5 credit accounts are required. Housing history must have no late payments within 24 months
* Bankruptcy and foreclosures must be discharged for 3 years with reestablished credit. Judgments must be paid before closing.
* Two months PITI (Principal, Interest, Taxes, and Insurance) reserves are required with an LTV <=80%. 6 months reserves are required otherwise if we are verifying assets, otherwise, none are required.
* 5% minimum down payment is required from your own funds. 20% for investment properties
* 10 acres or less

My credit score right now is 640. I'm not late on anything and haven't been in awhile, but ... I'm struggling right now when my credit cards jacked me -- I had a false thing show up on my CR, I got it off of there within a month. But during that time, Amex pulled my report, cut my limits down to my balances, and rate-jacked me to 30%.

I appealed and lost.

In the meantime, that made my credit score drop -- I had 15k in available credit from Amex, and only $1500 on each of my two cards.

Other creditors, seeing my credit score drop, cut my limits and jacked my rates.

Even though I added no new debt, my debt servicing minimum payments went up 20%. That money now is paying interest, not principal. I always paid more than the minimum, but for example, on one card that I had a 2.9% rate on.... that rate went to 29%. Wow, that particular card DOUBLED on minimum payment.

If I lost my job, I would be so hosed.

But I could go out and buy a home without any documentation.

Edit: My score before all of this was 730.

[The Backlash Cometh]

8. Wow, moriah, thanks for the info.

This is downright fraud on the part of the mortgage companies, and then the double whammy from the credit card companies which seem to be underwriting aggressively.

[UpInArms]

9. loved the bottom line!

[moriah]

12. So you appreciate the artistry and tact too?

heheh.

Yeah, I cracked up when I saw that. It's hard to find something to laugh at in all of this mess.

[krispos42]

10. Best explaination I've heard all month

:rofl: :yourock: :rofl: :yourock: :rofl: :yourock: :rofl: :yourock: :rofl: :yourock: :rofl: :yourock: :rofl: :yourock: :rofl: :yourock:

Rec :thumbsup:

[Snarkoleptic]

11. If you're looking to blame someone for the current spike in foreclosures

and the present liquidity crisis, I suggest you look at-

The Federal Reserve...for lax monitary policy (in hopes of having the housing sector spur the economy)

Wall Street...for their greed in greenlighting a mindbending expansion of exotic products (esp. in subprime and Alt-A)

Bond Rating Firms...who were asleep at the switch and consistently mis-rated CDO's and MBS's as 'investment grade'

Lenders...for responding to Wall Streets open floodgate by reducing underwriting standards to a cursory overview

Investors...for using the lenders easy money to play a risky game of specualtion in real estate

Borrowers...many buyers lied about their income, job history, and intent to occupy the property (Lenders turned a blind eye to this as well)

It's certainly short sighted to dump the blame on small business when Wall Street was pulling all of the strings.
There were certainly issues with mortgage brokers, but these were the late-comers who have now gone back to selling used cars.

[moriah]

13. Don't forget appraisers.

An appraiser who consistently overvalues homes is much more likely to get repeat business.

[Redstone]

14. That's funny, but it's a "tranche," not a "traunche."

Sorry, couldn't help myself.

Redstone