Posted on 06/30/2011 7:25:03 AM PDT by Notary Sojac
Banks Push Home Buyers to Put Down More Cash
"A 2009 Federal Reserve Bank of St. Louis study concluded buyers who made smaller down payments were more likely to default during “unfavorable economic circumstances, such as a housing market slowdown or job loss.”"
Yes, but a decent underwriter would be able to take that into consideration.
A 10% downpayment is more reasonable.
But “forcing” a 20% downpayment is just silly.
Again, the government has no business directing a private business on how they should conduct themselves. The mortgage business worked just fine for a couple of hundred years.
And you're right. Banks are in the business of making loans at an interest rate commensurate with the risk. The higher the risk of a loan to an individual, the higher the interest rate for that loan.
But to the swells in Washington, that's "racist."
Eric Holder's people have historically had a much higher default rate than any other group, which means they were being held to a lower standard.
And even that wasn't enough. Nothing will be enough except handing them free stuff forever and always Amen.
I’m saying there hasn’t been a natural price correction because the Government has stepped in to artificially prop up the lenders and many mortgage holders to reduce the effects of what should have naturally occurred. The 35-50% reduction you cite seems pretty accurate, but that only means that the real correction should have been greater, especially in the markets where the greatest inflation of home prices occurred. In my area, for example, I reckon the home prices are still at least 50% higher that the actual value of the homes.
The risk of default is inversely proportional to the size of the down payment.Period.
If you get something for nothing down, you lose nothing if you walk away.
So what did you find offensive or incorrect?
If you get something for nothing down, you lose nothing if you walk away.
If I don't put anything down for a house, I still make mortgage payments on it up until the time I walk away from it. But unless the mortgage company reimburses me for all those mortgage payments I made up until I walked away, I did, in fact, lose something: those mortgage payments, which include money towards the principal and the interest.
And, of course, my credit is destroyed.
So I don't think you lose nothing if you walk away . . .
So would you have been living somewhere else for free?
"Hubby and I are going to try to build our dream home and to finance as little as possible...
Those things you listed are identical to our plans (except the finance part for we have enough loot saved to buy outright) - the only key component we changed is that the "dream home" won't be built in the former united States but in a friendlier country.
This one is likely to be on fire in the next few years.
Only if I were lucky or very wealthy.
So we agree: unless you were reimbursed the mortgage payments you made up until you walked away from your mortgage, you don't "lose nothing" when you walk away from your mortgage. You lose something.
If you could live somewhere for free, why would you buy a house in the first place?
If it would have cost you more to rent than you were making in house payments, you came out ahead.
I have always put down 20% or more, and my payments were always less than rent would have been.
Get gov’t out of the mortgage business, and let mortgagors decide what the multi-tiered system looks like.
Where are you going?
That horse has already gotten out of the barn.
The way to get government out would have been for GWB back in the fall of '08 to say, "Forget it, Henry. Your buds are just going to have to suck it up and take their losses like every other mismanaged business does."
True enough. It isn’t too late to dismantle the gov’t mortgage structures now, though.
“The industry should regulate itself and 20% down should be about the minimum.”
“Then young lawyers, fresh out of college, like Barry Obama, took the banks to court on the basis that 20% down was racist.”
That is part of it. The rest is the banks then sold those “less qualified” loans and made MBS’s out of them, Mortgage Backed Securities. These were then off loaded onto Fannie and Freddie, and now, the taxpayers. The banks no longer had to have these bad loans on their books, made gobs of money doing it, and want to go back to doing more of the same.
This is why the banks no longer care about the credit worthiness of who they lend to. In fact, they did structure these MBS’s to make MORE money when the loans failed, by making bets with Credit Derivative Swaps, CDS.
Win win for the banks, lose lose for the middle class savers.
“If you get something for nothing down, you lose nothing if you walk away.”
From the banks perspective, this is no longer true.
They make money when these loans fail, in fact they make MORE money when these loans fail. They made fancy bets called CDS that they structured to make money when the loans fail. They have made more money doing this than in their lending.
They must want another round of fools to keep the credit bubble going and make more money on the taxpayer dime.
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