Quote:
Originally Posted by pauldun170
Its a little more complex.
Years ago (1960's)...in order to make an extra buck so that they could raise capital to offer more loans Freddi Mac started selling mortgage backed securities.
Nothing wrong with it.
Year later some folks decide to maybe up their game a bit, make a lot more money with the risk that goes along with it by taking some products normally offered to low risk high wealth clients and offering them to lower income folks.
Nothing Wrong with it as long as you manage the risk.
Meanwhile some asshole decides "We're holding all these mortgages and thats a risk. Lets sell them off to those dudes putting together mortgage backed securities. We'll get some dough and we'll get this risk off our lap."
Nothing wrong with selling off some of your risk.
Soon...assholes didn't give a fuck about what kind of mortgage the put together and who they offer it too because "Hey...we're just gonna sell the fucker off anyway...no risk to us"
While this is happening jerk offs are buying and selling bundles of these off. Bundles of Mortgages packaged up as happy little money makers.
Ratings agency's having spent years dealing with all the freddy mac bundles figure...fuck it this shit is historically good so we just mark it as triple AAA funbagtastic.
Other assholes have the idea to insure these little bundles and sell insurance on em. Sell insurance on these bundles to anyone...even those with no stake in it.
I could go on for an hour and ten pages so I'll stop there. Lets just say its a complex issue.
|
I understand the complexity and that is why I put "Wall St." in quotes. There are so many different types of organizations involved it goes far beyond the location or traditional definition of Wall St. I don't consider the FHA or Fannie/Freddie a part of Wall St. but they are both involved in this problem up to, and beyond, their eyeballs.
I also bundled the transactions you describe because they are based off the same flawed evaluation of risk. The ratings agencies, AIG, and those who bought the mortgage backed securities were all making decisions based on the theory that, even if a borrower stopped paying, the property was held as security and was only increasing in value. They all believed that property couldn't be overvalued, based their decisions on that construct, and got bit in the ass big time because of it.
Quote:
Originally Posted by pauldun170
My original post that most people shouldn't be offered complex mortgages still stands in the way that teens shouldn't be given "big people" credit cards.
|
OK, but how do you determine who should have their options restricted? Is there a test they have to pass or do they have to prove they hired an attorney before they can view the full "menu"? If the same restriction on options is put in place for everyone then it is nothing more than I stated, catering to the lowest common denominator.
If I were a real estate investor an interest only adjustable rate mortgage would be a very attractive option. Should that option not be available to me simply because other people don't understand that the payment will change substantially in 5 or 10 years?