This topic contains 11 replies, has 12 voices, and was last updated by Anonymous 8 years, 2 months ago.
- May 5, 2011 at 6:20 pm #205832
…flippers? A co-worker thinks the crises was caused by investors buying second homes to flip. I think it has been caused by first-time homebuyers getting loans they can’t support. Who’s right?
- May 6, 2011 at 12:52 am #258940
The crisis started already end of 2004 with inventories going to unhealthy levels. The reason is people losing their jobs, not sub prime or flippers.
Since Bush came into power, the USA lost every single month 20,000 – 80,000 jobs more, then it gained. The government only reports unemployed for the first 6 month, the real unemployment rate is around 12%, not the official 5%.
This year, 12 Million more homes will go in foreclosure, curtesy of GWB and his money sucking wars.
- May 6, 2011 at 5:20 am #259763
It is all types of buyers. Some were long time owners who kept taking out larger and larger re-fi loans.
Or those who had previous houses, but kept buying up with variable rate loans.
- May 6, 2011 at 2:12 pm #261525
I think there are two parties at fault here — neither of which should be bailed out by the government. The folks stupid enough to take the ARMs that they can barely afford to pay at the lower rate, much less when it adjusts — and the banks/financial institutions who knowingly made these shoddy loans.
We have purchased several houses over the last 10 years and even though we could have taken an ARM — we were smart enough to get the best possible fixed rate available.
As for blaming the ‘investors buying second homes’ — I don’t think so. Those folks are usually wise investors who know what they are doing.
- May 6, 2011 at 3:41 pm #261959
i believe it is first time home buyers getting over qualified and not being educated on mortgages
- May 6, 2011 at 10:57 pm #262876
I think you’re both right. I also think there are people (other than first-time homeowners) who were given loans they shouldn’t have been given, but that’s my opinion.
- May 6, 2011 at 11:00 pm #262932
Its people who were able to get 80/20 loans with a 580 credit score as the only condition. They financed an 80 percent 1st and 20% second with no down payment, shoddy credit, did not have to prove income. The loans were fixed for the first 2 or 3 years but as soon as they adjusted up (usually 3% higher rate) they can’t afford the payments. During that 2 or 3 year time they should have been getting their credit cleaned up, and income to the point where they could refinance onto a fixed rate which alot of them didn’t do.
- May 6, 2011 at 11:35 pm #263721
Both, basically anyone who bit off more than they could chew and did not do their research, plus the flippers are making it worse, we have been trying to find a decent house for 6 months in our price range without foundation issues or termites and the flippers have their bid in within hours of it being listed. I give up, I am just staying where I am at.(fyi I was approved at 160k for dsm area iowa and I am smart enough not to spend more than I know I can currently afford which is 125k) I would not be able to make a payment on 160k along with my current house and yet… they still approved us.
- May 6, 2011 at 11:45 pm #264068
Both are a result of the same thing = GREED. And just as guilty as the lenders who were giving out money to people who were not good candidates….
Adjustable Rate Mortgages were an evil temptation, offering low monthly payments initially and then shocking the ill prepared who didn’t refinance quickly enough. Those low teaser monthly payments allowed people to buy more than they could legitimately “afford.”
- May 8, 2011 at 1:35 pm #267368
It was neither. It was typical Americans who think they can have the dream and not have to work for it… so they did “stated” income loans (aka liars loans), and got adjustable teaser rate mortgages so that working for $10 an hour they could buy that $425,000 house.
Their payment for the first two years was $600 but then jumped to $3,000 in the last year when the mortgage re-set at the higher rate.
It’s the fiscally irresponsible people who bit off more than they could chew who are responsible for the economic woes.
Flippers generally have extra capital and know that it’s possibl that they won’t sell immediately. Blaming first time homebuyers is unfair too because many of them did things right.
I blame the people who bought what they could afford… then heard they could get these amazing low rates to buy expensive houses they otherwise would never have been able to afford. They traded up and now all of them are foreclosed and living in boxes. Bummer.
- May 9, 2011 at 11:42 pm #269604
You’re more correct than your co-worker. Nobody can get a mortgage loan for an investment property without a substantial downpayment (probably greater than 30%). With that much equity, it is doubtful that an investor would default on his or her mortgage. (However, the investor could have lied and told the mortgage company that it was his primary residence which would have meant that the mortgage company would have employed looser underwriting guidelines.)
The only thing that I would correct about your position is that it was not necessarily first-time homebuyers who defaulted (although there are many). Rather, it was sub-prime borrowers (first-time buyers and otherwise) who defaulted at a much higher rate than prime borrowers.
Hope you win the bet!
- May 12, 2011 at 11:55 pm #274575
Neither! The crisis was caused by the lenders. It doesn’t matter who is getting the loan . . . the problem was created because of lenders doing bad loans and not educating their consumers.
A real professional would make sure their client or customer knows exactly what they’re getting into and what their options are. A lot of companies and individuals in the mortgage market were not doing that (BUT NOT ALL). The biggest reason; there are no checks and balances. If a bad mortgage broker did a bad loan there are no repercussions. There was no way of saying “well, Joe Blow put together 100 loans last year and 85 of them went to foreclosure . . . maybe we should check up on him” State and Federal agencies are working on that though.
A great example . . . Stated Income Loans. This was a popular program that many mortgage companies were offering and is now ILLEGAL in many states. Why? Because it’s a bad program that should never have been offered.
Right now there is national mortgage company with more than 17,000 real estate listings. Mortgage companies are not in the real estate business, yet this one company alone has 17,000 listings. What are the odds of 17,000 families committing loan fraud and getting loans they cannot afford? The problem is because the company approved them for a loan they cannot afford, and the average consumer doesn’t know any better. It’s not that their stupid, they simply believed the person whom they though was a professional.
I work in real estate and I use to hear it every day . . . “well my loan guy said I can qualify.” Trust me; these people don’t want to default on their loan. They don’t want to become homeless. I hear stories from a GOOD mortgage broker within my company telling how he’s now trying to save clients who left him before because some guy from the internet said he could get them a better deal. Well now their loans are adjusting and they can’t afford the doubled and tripled payments that they didn’t understand would come.
I hope that as a community, the mortgage industry can put guidelines in place so that this never happens again. In the meantime, please put the blame where it belongs . . . not on consumers, or realtors, or economists, but SOME bad mortgage companies and brokers.
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