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I'm pretty sure these subprime loans aren't Federally insured. They're not GNMAs. I don't know why Kev brought up the FDIC in this discussion.

mackerm wrote:

I'm pretty sure these subprime loans aren't Federally insured. They're not GNMAs. I don't know why Kev brought up the FDIC in this discussion.

Because the mainstream lenders are partnered with, sometimes own, the subprimes, even some mainstreams lend both. People often end up in the subprime market going through their local bank that resells the mortgage. It gets more complicated if you bring in the GSE's.

I'm not saying their shouldn't be stricter standards for Fed backing, quite the opposite. That's different than making risky practices illegal.

These investors get to go the Hard Rock Cafe, while the victims of their shady investing go to HardKnockHigh?

No.

Think different:
http://tpmcafe.com/blog/coffeehouse/200 … ubble_boys

One final point: the hedge fund crew may try to take the homeowners hostage, arguing that the only way to keep millions of low and moderate income homeowners from being thrown out on street is to bailout the hedge funds. This is not true. Congress can just pass legislation that allows homeowners who default to remain in their house as renters, as long as they pay the fair market rent (as determined by an independent appraisal) for their home.


We must be careful not to confuse the plight of distressed homeowners with the plight of the hedge fund crew. As we all know, you can never give in to hostage takers, especially if they run hedge funds.

Pariah wrote:

People do go to banks with a reasonable expectation that they are dealing with "experts", similar somewhat to the way people expect their Doctor or attorney to be expert in the field they operate in.

Not really. I mean, they're all out to make a buck by providing a service, so be on your toes. But with banks (well, in this case of a loan, anyway): they're out to make money by giving you money. How much more warning flags do you need? Do not trust someone who proposes such a deal blindly!

Jeez.

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JakeTheTall wrote:

Pariah wrote:

JakeTheTall wrote:

I'm still saying that's a big lesson from the school of hard knocks.

I do have a certain empathy for that position myself but there is another angle you can consider and I think it has some bearing.
People do go to banks with a reasonable expectation that they are dealing with "experts", similar somewhat to the way people expect their Doctor or attorney to be expert in the field they operate in.
I don't think it is unreasonable to hold lenders at least partially responsible if they recommended loans which they knew were very high risk without properly informing their clients.
And a paragraph of boilerplate legalese on page 3 of the loan form does not count.

Yeah, that's true.  And maybe the loan folks were pushy / good salespeople.

Hum.  I was going to say "But that doesn't change the fact that these people really should have known the couldn't afford to buy"...but, I guess when the banker-type says "yes you can"....I dunno.

Yep, pretty hard to resist the American dream of home ownership.  Now the folks who were buying investment property and thinking they'd be able to flip/off load the property on some other sucker, they made poor business decisions if they got into ARMs after 2005.