Skip to comments.Iceland Forgives Mortgage Debt for the Population.
Posted on 04/14/2012 6:48:29 AM PDT by edcoil
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Not at all. One of the biggest contributors to the collapse of the U.S. real estate market in the last few years was the fact that the people who lent the money weren't lending in good faith. It's not so much that these banks were out to screw the borrowers, but that they lent the money while knowing full well that they had no intention of keeping the loan on their books. The real estate collapse was not a real estate crisis ... it was a banking crisis. Banks extended loans under very easy terms because they knew they had no long-term exposure ... since they intended all along to package the loans into mortgage bonds and sell them to investors.
It sucks if you were one of the ones without a house or a mortgage. Just imagine if you were saving to buy one. Socialism at its best. Many non-deserving people are going to be rewarded for this.
Just think if you knew ahead of time then you could go out and buy a house that is 10 times what you could afford, and it would just be handed over to you debt free. How many people in America have done that. They would like to do this here too. The responsible and the prudent are punished to the max.
So if you defaulted on a debt in year 1 you had 49 years of servitude for you and your family. In year 2 you had 48 years and so on.
As the Jubilee got nearer the amount of the loan you could take out got smaller and smaller.
The Almighty never intended us to be thieves either.
>they lent the money while knowing full well that they had no intention of keeping the loan on their books. The real estate collapse was not a real estate crisis ... it was a banking crisis. Banks extended loans under very easy terms because they knew they had no long-term exposure ... since they intended all along to package the loans into mortgage bonds and sell them to investors.
What? Where did you find this? DU?
You need to go farther back to get to what actually happened. There’s a lot more to it, and much of it involves the government forcing banks to make loans to people who were awful credit risks. This lead to the invention of MBS as a way to compensate for that mandatory exposure.
However the nonsense about banks being wrong for making loans which were not on their books is bunk. A person who signs the mortgage contract is being lent the money with the expectation that they repay the loan. It doesn’t matter who owns the loan in the end, that’s pure rationalization.
Now were there some shifty lenders who lent the money because they didn’t have exposure? Probably, but the biggest one of the (Countrywide) ate it in the process of the bubble bursting, so it’s not like they didn’t end up with exposure.
Let me break a piece of reality to you, banks always have and always will act as a conduit of money from investors to borrowers. The mechanism in question may vary, but that is a constant. The ‘investor’ can be via a savings account, a money market fund, or a MBS. That doesn’t make a heck of a lot of difference. The real problem in this particular case was the egregious quantity of government intervention in this market via regulators mandating bad loans to ‘underprivileged’ groups and the dynamic duo of Freddie and Fannie.
Blaming bankers for a situation they didn’t set up is bunk, and rationalizing theft is even worse.
Ha! They're not the only ones, y'know. What do you think protecting student loans and credit card debt and tax debt and anything at all from bankruptcy discharge is all about?
If we succeed in bringing back debt slavery then every creditor will be happy to loan you money, secure in the knowledge they can enslave you if you can't pay...and we already know how that turns out...
Securitization insulated mortgage originators from the consequences of underwriting a bad loan.
It took two to tango. The financial industry is just as culpable as governmental regulatory agencies.
It's absolutely true.
You need to go farther back to get to what actually happened. Theres a lot more to it, and much of it involves the government forcing banks to make loans to people who were awful credit risks. This lead to the invention of MBS as a way to compensate for that mandatory exposure.
Much of this is either exaggerated or downright false. If the real estate collapse had been confined only to those high-risk mortgages that were extended under some kind of idiotic Federal mandate, then we'd be in far better shape right now than we are. The reality is that the biggest contributor to the mortgage problem is the underwater mortgage that was originally extended to someone who was perfectly capable of paying the loan at the time, but ended up in arrears as the economy collapsed and the value of the home plummeted.
Mortgage-backed securities were not originally invented to compensate for the higher risks of loan exposure. At the time the first large-scale mortgage securities were created in the 1970s, the market was limited to government-backed securities like GNMAs because these were the only mortgages that were capable of being securitized in a way that provided investors with the protection they needed against the borrower's default.
The MBS market exploded in the 1980s largely as a result of shifting demographics and a weakness in traditional banking practices tied to growth patterns in the U.S. A simplistic (but accurate) summary of the U.S. banking industry in the early 1980s would be this: (1) it was dominated by small regional banks and savings & loan (S&L) institutions; (2) a typical bank or S&L in older regions like the Northeast or Rust Belt had an imbalance of depositors vs. borrowers (i.e., they had far more deposits on their books than demand for new mortgages); and (3) a typical bank or S&L in fast-growing regions like the Southwest had an imbalance of borrowers vs. depositors (i.e., the demand for new mortgages outstripped the cash deposits on their balance sheets).
The MBS market in the 1980s was created to address the imbalance I described in Items (2) and (3) ... by allowing banks in Region (2) to effectively lend money to the customers in Region (3) by purchasing securitized mortgages from banks in Region (3).
However the nonsense about banks being wrong for making loans which were not on their books is bunk. A person who signs the mortgage contract is being lent the money with the expectation that they repay the loan. It doesnt matter who owns the loan in the end, thats pure rationalization.
It's not rationalization at all. A mortgage contract is predicated on the assumption that the borrower will pay back the loan, but also on the assumption that the lender is going to engage in sound lending practices when they review a loan application. Anyone who lends money at a 100% (or more!) loan-to-value ratio, or lends money to illegal aliens who don't even have a legal right to be in this country (neither of which was all that uncommon by the mid-2000s), is out of his/her mind. My own bank had almost no fallout from the real estate collapse because: (1) they rarely (if ever) package and sell their loands, and (2) related to (1), they have very rigorous lending practices and make borrowers jump through hoops before getting a mortgage approved.
I agree with the other posted above who pointed out that "low-risk" investing still involves risk, and if you're not willing to deal with the consequences of that risk then you should probably stuff your money in a mattress.
Bingo. This is the quote of the thread right here.
Ironically, securitization also made it increasingly difficult for the investors who were left holding the bad loans from exercising their rights to take possession of the asset in the event of a foreclosure.
There was a fascinating case working its way through the Utah court system last year, in which the borrower in default had been able to successfully fight a foreclosure action because the loan originator (his local bank) had securitized his mortgage and sold it off to an institutional investor who had no legal standing to initiate a foreclosure proceeding under Utah banking law.
I don’t blame Iceland, but welching won’t work here. In Iceland’s case you’re looking at money borrowed from other Europeans that were STUPID ENOUGH to use their banks. In this country it’s savings accounts and pension funds that go broke.
If you owe a bill you owe a bill.
Did that government just award homes to people who took loans for free and then not give all non home owners any home?
If so, this is very a very biased way to do things.
Also who the hell is paying there for that, taxpayers?
I’ve been saying since high school that no American truly owns his home or land;the government only allows you to live there as long as the yearly taxes are paid.Actually no different from the ancient English landholders who paid annual taxes to the king.
And much of those taxes are for services you don’t want but which you are forced to buy/So obamacare isn’t really that radical an idea.
Iceland population: 313,183
“If you owe a bill you owe a bill.”
Number one rule of any agreement or contract is it has to be singed and agreed to by both parties. Was it?
Also, what if you agree with your neighbor to have him loan you $100.00 - then he goes to all of his friend with your note and gets 100.00 from all 10 of them not telling you or the other 9 and that you would pay you them 100.00 he got from you that you did not know about - do you now owe all 10 the original $100.00.
“You need to go farther back to get to what actually happened. Theres a lot more to it, and much of it involves the government forcing banks to make loans to people who were awful credit risks.”
One stop shopping:
Dear Judge.... could be a good thing if folks work on the pay-go system. We could drift away from being a “consumer” economy and go back to making real hard goods.
Besides the joy of seeing unemployed bankers would be refreshing.
How wonderfully compassionate of them!
Excellent! The first round of forgiveness will be taken out of your 401K and IRAs.
>> “The Almighty never intended us to be thieves either.”
That’s flat out criminal!!!!
Put all those lawmakers in prison!
Why can’t I borrow money directly from the Fed at say 0.5% for 30 years and cut out the middlemen, who add very little value.
“Good luck buying furniture, cars or electronics without credit.”
If you haven’t got the cash you don’t need it!!!!
I was raised that way and have lived by that rule all my 75 years!!!
“The Almighty never intended for the profligate and lazy to borrow money they cant or wont repay, either.”
Here’s one of the aspects of this parallel that fascinates me: In ancient Israel, there was a year of Jubilee every 50 years in which all debts were forgive, all indentured servants were emancipated, and land sold to satisfy a debt was returned to the owner. It was a once-in-a-lifetime event, not a regular things.
Our fiat-money system insures that everyone will eventually work for a bank or the government, which controls the money. You can go agree with God’s arrangement or not, but if you don’t agree, the end result is going to be an economic collapse. According to what I’ve been reading, all fiat-money systems eventually self-destruct after 50-yars or so, with terrible calamity and widespread suffering. The closest and most stark example we have is what happened in Germany between ww1 & ww2 with the collapse of the Weimar Republic. The Germans hyperinflated their currency in order to pay war debts and provide pensions for widows & orphans from those who served in ww1. No one wanted to be taxed to pay war reparations, so they just printed the money. Right now, we are going down the same path to pay people that can’t or won’t work, with Government Employee Unions conspiring with Government to help themselves to pay & benefits the rest of us can only dream of. A day of reckoning is fast approaching, unless we head it off with some honest and sensible solutions.
You’re exactly right. Ever see if you can? I bet they have so many laws, rules and regulations paid for and passed by politicians you cannot.
...work till I drop
>>What people really want is to wipe out their own debts while maintaining their own assets which are someone elses debt.
Worth saying again. Only perhaps “leftist people” would make it more accurate.
The Fed doesn’t give 30 year loans. They also don’t loan at 0.5%.
Currently, the Fed is lending a whopping $10 million at the discount window.
Buy your politician.
“This story seems to be fake,”
Youtube of news report.