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Goldman paying 3.15 BILLION to settle stinky mortgage claims

2&2 Slider To Leyritz said:
How did Group 1 get the shaft or take its medicine? For the most part, they got to live in a house that they otherwise never could have afforded for 2 or 3 years on an interest-only payment. Then they walked away and everyone else who made rational decisions picked up the tab. That isn't getting the shaft, that is gaming the system as much as the brokers.
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Everyone else got real estate. A staggering amount of wealth has moved from people in Group 1 to the banks over the last decade.

2&2, let me understand your perspective here.

Let's say I purchase some property and lend it to you. After 3 years of paying me money, I get the property back. Yet I made a rational choice to lend to someone who couldn't afford it and I got screwed even though I didn't lose anything except potential money.

Is that right?
 
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2&2 Slider To Leyritz said:
How did Group 1 get the shaft or take its medicine? For the most part, they got to live in a house that they otherwise never could have afforded for 2 or 3 years on an interest-only payment. Then they walked away and everyone else who made rational decisions picked up the tab. That isn't getting the shaft, that is gaming the system as much as the brokers.
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Sure, they walked away - with wrecked credit histories, thousands of dollars in payments down the tubes, nothing in their bank accounts, and a huge amount of stress and suffering. Perhaps you think they should also be thrown in a debtor's prison to make sure they learned their lesson?
 
PhDeac said:
Everyone else got real estate. A staggering amount of wealth has moved from people in Group 1 to the banks over the last decade.

2&2, let me understand your perspective here.

Let's say I purchase some property and lend it to you. After 3 years of paying me money, I get the property back. Yet I made a rational choice to lend to someone who couldn't afford it and I got screwed even though I didn't lose anything except potential money.

Is that right?
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That's not accurate.

Group 1 had no wealth to transfer to the bank. The reason they are walking away from their mortgage is because they were underwater. If they had wealth in the property, they would sell it, pay off the loan and pocket their equity.


Here is the timeline.

Lender loans Group 1 person $500K
Group 1 person buys house for $500K (They have no wealth right now. They own an asset worth 500K and have a liability worth $500K)
Group 1 person either makes interest only payments or mostly interest payments for a couple of years (basically renting money)
Market crashes and house value falls to $350K.
Group 1 person walks away and hands over keys to lender.

Lender takes $200K loss after selling costs. On a national scale this was the 100s of billions of dollars in mortgage write-offs that have been recorded.

Now the lender might have changed as the debt instrument was sold, but the person who owns the debt is the person who lost all of the wealth.
 
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Sounds to me like the lender made a terrible investment.
 
TownieDeac said:
Sounds to me like the lender made a terrible investment.
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They did. Alot of the rub are parties that bought these on the secondary market based on rating agencies that rated these mortgage packages as investment grade.
 
ChrisL68 said:
That's not accurate.

Group 1 had no wealth to transfer to the bank. The reason they are walking away from their mortgage is because they were underwater. If they had wealth in the property, they would sell it, pay off the loan and pocket their equity.


Here is the timeline.

Lender loans Group 1 person $500K
Group 1 person buys house for $500K (They have no wealth right now. They own an asset worth 500K and have a liability worth $500K)
Group 1 person either makes interest only payments or mostly interest payments for a couple of years (basically renting money)
Market crashes and house value falls to $350K.
Group 1 person walks away and hands over keys to lender.

Lender takes $200K loss after selling costs. On a national scale this was the 100s of billions of dollars in mortgage write-offs that have been recorded.

Now the lender might have changed as the debt instrument was sold, but the person who owns the debt is the person who lost all of the wealth.
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Group 1 person had something.

Now the lender has it.

Banks are sitting on property all over the country that they can sell when it is profitable to do so.

Also, you're missing a key factor here. That $500K went somewhere. It didn't disappear. Those lenders were getting part of that $500K from one source and taking losses elsewhere.
 
ChrisL68 said:
That's not accurate.

Group 1 had no wealth to transfer to the bank. The reason they are walking away from their mortgage is because they were underwater. If they had wealth in the property, they would sell it, pay off the loan and pocket their equity.
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Bingo.

A house without equity is just a rental with debt.
 
PhDeac said:
Group 1 person had something.

Now the lender has it.

Banks are sitting on property all over the country that they can sell when it is profitable to do so.

Also, you're missing a key factor here. That $500K went somewhere. It didn't disappear. Those lenders were getting part of that $500K from one source and taking losses elsewhere.
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LOL... Quit while you are behind
 
PhDeac said:
Group 1 person had something.

Now the lender has it.

Banks are sitting on property all over the country that they can sell when it is profitable to do so.

Also, you're missing a key factor here. That $500K went somewhere. It didn't disappear. Those lenders were getting part of that $500K from one source and taking losses elsewhere.
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You said that wealth transferred from group 1 to the bank. Wealth is a function of net worth which is assets minus liabilities. If they lost an asset that was fully leveraged (or worse, underwater), they didn't lose any wealth.

Banks aren't in the business of foreclosing and holding onto properties waiting on economic recovery. They are trying to get rid of shit as quickly as possible to free up capital that can be used in a productive manner.

I have read the last sentence three times and have no idea what the key factor is.
 
oh housing and life-decision geniuses from Wake Forest, what % should the family who brought home 5k a month used for housing/mortgage? 30% of gross, right? Then when the housing bubble burst and with it took millions of jobs, what the fuck were they supposed to do then, sages? start a business? become a lawyer or get a banking job?

for the majority affected, this was way out of their control and they were making the soundest economic decision for their family they could make at the time, were they not?
 
Long story short the banks made $Texas when the pipeline to third party investors was open. But the shit they got left holding the bag on is in no way good for their business.
 
bmoneydeac said:
Long story short the banks made $Texas when the pipeline to third party investors was open. But the shit they got left holding the bag on is in no way good for their business.
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definitely not good for their business or for consumers

at least they were too big to fail doe
 
bmoneydeac said:
You said that wealth transferred from group 1 to the bank. Wealth is a function of net worth which is assets minus liabilities. If they lost an asset that was fully leveraged (or worse, underwater), they didn't lose any wealth.

Banks aren't in the business of foreclosing and holding onto properties waiting on economic recovery. They are trying to get rid of shit as quickly as possible to free up capital that can be used in a productive manner.

I have read the last sentence three times and have no idea what the key factor is.
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Not sure why every discussion of the housing crisis includes the base assumption that everybody who was foreclosed on was underwater. Plenty of people just lost the ability to pay their mortgage and were foreclosed on as a result regardless of the value of their home.
 
WakeandBake said:
oh housing and life-decision geniuses from Wake Forest, what % should the family who brought home 5k a month used for housing/mortgage? 30% of gross, right? Then when the housing bubble burst and with it took millions of jobs, what the fuck were they supposed to do then, sages? start a business? become a lawyer or get a banking job?

for the majority affected, this was way out of their control and they were making the soundest economic decision for their family they could make at the time, were they not?
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The family that made 60/yr, had appropriate ratios, and didn't get into some punitive ARM because they'd save a couple of bucks for the first year probably did okay on average. The default rates on subprime ARMs are probably 2x subprime fixed. They likely selected the ARM because they were trying to have the lowest payment initially thinking they'd either outearn, sell, or refinance before the payment increased on them. Or they didn't understand the ARM feature or were misled by their broker. In nearly all cases going into one of those subprime ARMs was a bad idea.
 
When we look back 50 years from now I'm confident that not allowing those mega banks/funds to fail was the biggest mistake W will have made. We had a chance to correct the wrongs in our financial system and we were too scared to let the market correct itself. Whenever the next crash occurs, it will be far worse.
 
PhDeac said:
Not sure why every discussion of the housing crisis includes the base assumption that everybody who was foreclosed on was underwater. Plenty of people just lost the ability to pay their mortgage and were foreclosed on as a result regardless of the value of their home.
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Because if they weren't underwater they would likely sell the house before letting the bank foreclose on it? And if it went to foreclosure with any equity in it, the bank wasn't going to end up buying it back. Some investor would buy it at the foreclosure sale rather than the bank.
 
WakeandBake said:
oh housing and life-decision geniuses from Wake Forest, what % should the family who brought home 5k a month used for housing/mortgage? 30% of gross, right? Then when the housing bubble burst and with it took millions of jobs, what the fuck were they supposed to do then, sages? start a business? become a lawyer or get a banking job?

for the majority affected, this was way out of their control and they were making the soundest economic decision for their family they could make at the time, were they not?
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How do you know the example in your first paragraph applies to the "majority affected"? Please provide support to back this up.

And what was out of their control? Buying a house??? Did someone hold a gun to their head forcing them to take out a mortgage?
 
PhDeac said:
Not sure why every discussion of the housing crisis includes the base assumption that everybody who was foreclosed on was underwater. Plenty of people just lost the ability to pay their mortgage and were foreclosed on as a result regardless of the value of their home.
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Edit: bmoney beat me to it
 
BillBrasky said:
When we look back 50 years from now I'm confident that not allowing those mega banks/funds to fail was the biggest mistake W will have made. We had a chance to correct the wrongs in our financial system and we were too scared to let the market correct itself. Whenever the next crash occurs, it will be far worse.
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Yes... destroying the capital markets and taking down the entire economy would have been well worth teaching those greedy banks and hedge funds a lesson!!!!111
 
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