It seems alot of you didnt buy a house between 2000-2005 which is were alot of the problems with subprime loans are having now. In that market people were competeing for houses to get something listed at $200,000 you needed to bid $205k and have an escalation clause to $ 215k it was crazy houses were on the market for 2 maybe 3 weeks max some sold the same day. The expectation was that housing prices were on the rise and people with bad credit could not buy a house without some of these more creative loan products. They didnt have the credit score. Buying a house is emotional for alot of people, they want the house. In alot of cases it was reccommended by mortage officers that they take the exspensive loan they quilified for and refinanced in a year or two once they had a higher score and get their 30yr fixed. My main point its that this is how buisness was done, across the board on all income levels, it got people into houses thay normally they couldnt afford and if they were smart then they would get a better loan later.

Now its nearly impossiable to get a 100% loan, you need 20% of your own money in a transaction. A starter house in the market i deal mainly in is 250,000, which means that you need $50,000 of your own money in the deal. I dont know anyone who has that kind of money to put into their starter house. If you cant sell the starter homes then the ones that own them cant buy the move up homes and the people that own those will have a hard time selling, its a dangerous cycle.

The Pulson plan is crap is not going to permenately fix the problem. Its like casting a tensdrils for 8 when your oppenet is at 20 and has a Darksteel Colllosus in play. Your delaying the inevitable and spending all your resourses to do it. What it wants to do is buy the bad paper from the banks so the banks can make loans again. Which sounds good in theory but whos going to stop them from doing the same thing? Not the government. I rather see these banks fail. They wont really all fail because the ones in strong position will buy up the ones in trouble. Some of the ones in trouble will renegotiate the loans they made so forclousres dont happen, and the market will take a hit. Thats all fine because everything will recover and it will be stronger then it was before.

If the governement really feels like it needs to do something than it should insure those 20% loans for any company willing to loan it at prime + a percent or 2. You make the loan company pay the government for this insurance and make it illegal to pass it on to the consumer. This way home buyers can afford to buy starter homes, and this limits the risk that the banks are making on the last 20%. Since in a forclosurethe bank holding the primary will get their money back from the sale of the home. This plan kick starts the housing sector while getting more people into homes, and cost the tax payer considerably less then 700 Billion dollars. There are other things that need to be done but this helps alot, and dont give any money to ACORN that organization is the biggest fruad in the industry.

I am a Real Estate Broker in Maryland I have a degree in Economics and Political Science from Loyola, and I also work for a company of home builders for the past four years.

I’ll put in my two cents in what I can remember of the past events that lead us to this in simple terms. If any of you are mortgage brokers maybe you can help me out with more specifics.

The roots of this ‘crisis’ can be traced back to the Clinton administration. As the economy turned and prospered during and after the tech boom, there was a conscious push to get more people into home ownership. Government entities like FHA and VA had strict rules on the income to debt ratio in which qualifies you for the maximum amount you can afford a loan at. Fannie Mae and Freddie Mac entities that buy loans from mortgage brokers also had strict guidelines in which loans had to conform to. The main idea was that in order to buy a house you had to have 20% of your own money in the transaction and could not spend more than 30% of your monthly income on your mortgage and could not be spending more than 60% of your monthly income on all debt. There was a big push from Democrats and the Clinton administration to increase homeownership for minorities and people that could not normally afford loans.  They directly asked Fannie Mae to change their guidelines for loans specifically the debt to income ratios, the mandate also told them to create new products to help low income people to buy houses.

When that institution changed the ratio it eventually changed the rules for everyone suddenly everyone could qualify for loans that were close to 60% then 80% of your monthly income on the mortgage. Since almost everyone needs a loan to buy a house this changed the demand for housing since there is far more money in the real estate market. In the 90’s your typical townhouse would cost around $90-100k in the Baltimore County market through 2000-2006 those prices jumped to close to $300-350k. As housing prices rose to this level most people could no longer afford to put 20% of the total value of your home of their own money into the transaction. So another innovation in mortages came along and allowed investors to cover the other 20% of your houses value on a second mortgage typically at a higher rate. So now people could buy a house with little of their own money. New products came out to attract different type of buyers but the rules were not strictly enforced so poor people ended up getting loan products made for businesses, you could kind of call this predatory lending but it isn’t really. In order to get some people qualified for a loan some brokers would use these fancy products like tease rates, arms, and balloon payments to get people into the house. If they made their payments they could build their credit and refinance in a year or two for a 30 year fixed at lower rates because well rates were falling, and house values were raising at amazing rates. Well people got into their houses and if they had problems they never refinanced or got credit cards and got deeper and deeper into debt. Remember some people are paying upwards of 80% of their income on their mortgage payments. Who can really live on only 20% of their monthly income I will never know. As teaser and arms expired and balloons rose people started to get into trouble and foreclosure started to be a real possibility.

Congress then created what is called mortgage backed securities. You can think of these as similar to stocks and bonds. They are packages of different loans that were purchased on the secondary market and bundled together based on many different kinds of risk and marked for their return on investment. The “bad paper” that you hear about are typically bundles of these second mortgages.  If someone defaults on their loan and goes to foreclosure the bank has to sell the house taxes get paid then the primary loan holder gets paid followed by the secondary loan holder. If on average a bank has to sell the house they foreclose on for 80% of its market value after costs then the secondary loan holder gets nothing. Investors and investment banks own all this paper that could be worthless if people stopped payment on their loans.

Thanks for remembering me I am coming out of retirement to sling some spells and claim some moxen.

I'll be at all of these Baltimore ones and planning on going to the Philly ones as well.

This was a great tourment. Oath is really good but I think TPS is really better. Oath lacks that ability to just go for the win when it needs too, and thats what happened in the top 8. I would have 1st or 2nd turn oath but lose to the tendrils. Anyways thanks for the great turn out I appeciate all the people that traveled far to come to this.