Eric Cantor

[Michchamp]

What Fannie and Freddie did (owning more mortgage backed securities) wasn't a cause of the collapse. Saying it was doesn't explain away the rampant, pervasive and systemic ratings fraud conducted by the ratings agencies under pressure from the investment banks.

people had no idea this was going on prior to 2008, but the cat's been out of the bag for a while now. Entire books have been written about it. No comment from Wall Street other than to point at minorities and claim because they were forced to loan to them, things went bust. No surprise that theory played well with the Fox News demographic. It's entirely bogus though.

 

[Spartanmack]

Frank deserves his share of blame, no doubt. But it took complicit Rs for it to happen.

I don't disagree about R complicity but Rs like John Snow, Greenspan and McCain all tried to sound the alarm and were completely ignored. To my knowledge, not a single Dem was trying to reign in the GSEs - if anything, they were doing the opposite.

What is it w/ guys named John Snow? Nobody seems to heed their warnings...

 

[Michchamp]

I don't disagree about R complicity but Rs like John Snow, Greenspan and McCain all tried to sound the alarm and were completely ignored. ...

they were? that's news to me.

Blame the Bush appointees in the Fed, Treasury, and the SEC, I guess, who all had mandates to regulate aspects of the financial industry...

or Barney Frank and Chuck Schumer (which is odd because he has done nothing in the Senate except lobby for Wall Street, gut Dodd-Frank, and block every other attempt to regulate the banks). I guess they should've been more politically powerful, and rammed through legislation to create & fund their own agency to oversee the mortgage industry & mortgage backed securities, and had Bush sign it, or passed it over Bush's veto. That's realistic.

 

[Spartanmack]

What Fannie and Freddie did (owning more mortgage backed securities) wasn't a cause of the collapse. Saying it was doesn't explain away the rampant, pervasive and systemic ratings fraud conducted by the ratings agencies under pressure from the investment banks.

people had no idea this was going on prior to 2008, but the cat's been out of the bag for a while now. Entire books have been written about it. No comment from Wall Street other than to point at minorities and claim because they were forced to loan to them, things went bust. No surprise that theory played well with the Fox News demographic. It's entirely bogus though.

Well, if it's in a book, then it must be true. But I didn't say that was the cause, and that's not all they did. I also didn't blame Fannie and Freddie, I blamed Congress for forcing banks to come up w/ a way to offer loans at rates borrowers didn't qualify for. And Congress allowing Fannie and Freddie to own massive amounts of those MBS was a huge part of it. And by the way, it was common knowledge that the rubber stamp ratings were bogus - certainly Fannie and Freddie had been warned and even if they weren't they dealt with the ratings agencies and they had the personnel to do the analysis themselves. They heard the warnings from Treasury and the Fed, they knew hedge funds were shorting the bonds in size. They knew - they were just happy to play along. Blaming the ratings agencies is a cop out.

 

[Spartanmack]

they were? that's news to me.

Blame the Bush appointees in the Fed, Treasury, and the SEC, I guess, who all had mandates to regulate aspects of the financial industry...

I guess you missed that bit about Bush appointees at Treasury and the Fed warning about Fannie and Freddie as early as 2003. Try to keep up here kid.

 

[Michchamp]

Well, if it's in a book, then it must be true.

Books. it's been in several books. And the story is consistent in each one, among those I've read... here, here, here, and here. they also address all the excuses & spin from Conservatives you put forth here.

But I didn't say that was the cause, and that's not all they did. I also didn't blame Fannie and Freddie, I blamed Congress for forcing banks to come up w/ a way to offer loans at rates borrowers didn't qualify for.

but they didn't do that. the mortgage originators & banks acquiring the mortgage backed securities always had the burden of doing their due diligence on these things. Congress never changed that. it's completely absurd to claim that. These mortgage lending acts were passed in the 1970's... banks had been doing business as usual for decades, reviewing mortgages, weighing credit worthiness, etc. before things went through the roof and melted down in the mid 00's.

And Congress allowing Fannie and Freddie to own massive amounts of those MBS was a huge part of it. And by the way, it was common knowledge that the rubber stamp ratings were bogus - certainly Fannie and Freddie had been warned and even if they weren't they dealt with the ratings agencies and they had the personnel to do the analysis themselves. They heard the warnings from Treasury and the Fed, they knew hedge funds were shorting the bonds in size. They knew - they were just happy to play along. Blaming the ratings agencies is a cop out.

Fannie and Freddie weren't the only entity owning massive amounts of MBSs, and they certainly weren't the only entities that needed massive infusions of cash to stay afloat, as well as having taxpayers take those MBSs off their books for them.

the rating agencies aren't the only one with dirty hands... the investment banks bundling the securities getting rubber stamped certainly knew it. The rating agencies were merely complicit in the fraud. the entire system is dirty, and had enough clout to keep Congress from doing anything about it, except for the lame Dodd-Frank bill, and teh CFPB. No one in any of these banks was even charged with a crime... though there's more than ample evidence for that.

 

[Michchamp]

I guess you missed that bit about Bush appointees at Treasury and the Fed warning about Fannie and Freddie as early as 2003. Try to keep up here kid.

I didn't miss it. you claim they warned about it... but it was their job to DO SOMETHING about it.

 

[Spartanmack]

I didn't miss it. you claim they warned about it... but it was their job to DO SOMETHING about it.

No, that's completely wrong. It was not Treasury's or the Fed's responsibility to reign in Fannie and Freddie. That CLEARLY was Congress' job but when the Treasury and Fed warned Congress to do something about it, they ran into a brick wall.

 

[Spartanmack]

Books. it's been in several books. And the story is consistent in each one, among those I've read...

Oh, it was in books with an "s" - and a Michael Lewis one no less. Obviously, this proves all the incorrect things you said are actually correct.

but they didn't do that. the mortgage originators & banks acquiring the mortgage backed securities always had the burden of doing their due diligence on these things. Congress never changed that. it's completely absurd to claim that. These mortgage lending acts were passed in the 1970's... banks had been doing business as usual for decades, reviewing mortgages, weighing credit worthiness, etc. before things went through the roof and melted down in the mid 00's.

This is just dumb - if you really think these policies haven't changed dramatically or that Congress did nothing to promote home ownership in the 2000s then there's really no point in discussing this with you because you have no idea what you are talking about and are completely blind to reality - gets back to your outright refusal to blame the government (unless it's Bush or some other Republican) for anything.

Fannie and Freddie weren't the only entity owning massive amounts of MBSs, and they certainly weren't the only entities that needed massive infusions of cash to stay afloat, as well as having taxpayers take those MBSs off their books for them.

Who said Fannie and Freddie were the only holders? They were biggest and the only holder with an implicit gov't guarantee - turns out that didn't matter as the scumbags in the gov't used taxpayer money to bail all of them out.

the rating agencies aren't the only one with dirty hands... the investment banks bundling the securities getting rubber stamped certainly knew it. The rating agencies were merely complicit in the fraud. the entire system is dirty, and had enough clout to keep Congress from doing anything about it, except for the lame Dodd-Frank bill, and teh CFPB. No one in any of these banks was even charged with a crime... though there's more than ample evidence for that.

Nobody said the ratings agencies were the only ones with dirty hands - remember, I'm placing most of the blame on the gov't. This is turning into another stupid michturd argument where you keep putting words in my mouth to change the subject or move the goalpost so you can say stupid shit about things you know almost nothing about then think you proved me wrong when you've done nothing of the sort. Have fun.

Also, Dodd-Frank was after the crisis and it is completely worthless - it will do nothing to prevent any future crisis from happening. No small mortgage lenders or people who lied on their loan applications were ever charged with a crime either and scumbags like Frank and Schumer got re-elected.

 

[Sbee]

Kind of on topic, I just got a call from a bank to discuss my loan, I take the call. it turns out they are calling on one of my rental properties, they know that the current rates can't beat what I'm at so they start asking me about my primary residence which is held by another bank. I tell them I'm at 3.5 on a 20 year loan with 17 years left, of course they can't touch the rate so they try to sell me on stretching it out to 30 years and freeing up some cash. Of course this is a stupid idea and I'd maybe save a few hundred a month and pay over 100k more over the life of the loan. I say no and let them know they're wasting my time but imagine how many people fall for that stuff. You have 50 year olds who want to refinance to save a little money monthly but it keeps setting them back on their amoritzation schedule.

there are a ton of predatory practices still going on today, it's all in their playbook, if you can't beat the rate, get them to refi or switch to an ARM. Of course I understand this stuff but there are a lot of less savvy homeowners who get taken advantage of. Keep in mind that they call you, it's not you calling them.

lenders deserve a good amount of the blame

 

[Spartanmack]

Kind of on topic, I just got a call from a bank to discuss my loan, I take the call. it turns out they are calling on one of my rental properties, they know that the current rates can't beat what I'm at so they start asking me about my primary residence which is held by another bank. I tell them I'm at 3.5 on a 20 year loan with 17 years left, of course they can't touch the rate so they try to sell me on stretching it out to 30 years and freeing up some cash. Of course this is a stupid idea and I'd maybe save a few hundred a month and pay over 100k more over the life of the loan. I say no and let them know they're wasting my time but imagine how many people fall for that stuff. You have 50 year olds who want to refinance to save a little money monthly but it keeps setting them back on their amoritzation schedule.

there are a ton of predatory practices still going on today, it's all in their playbook, if you can't beat the rate, get them to refi or switch to an ARM. Of course I understand this stuff but there are a lot of less savvy homeowners who get taken advantage of. Keep in mind that they call you, it's not you calling them.

lenders deserve a good amount of the blame

You may not get this from a competing bank but when I refinanced, a lot of banks out here were offering refi without changing the term of your remaining loan (so in your case, they would offer you the lower rate fore the remaining 17 years) with no points but you have to pay fees like w/ any refi. You can use bankrate.com to get local rates w/o the hassle of giving up personal contact info.

 

[zyxt9]

Kind of on topic, I just got a call from a bank to discuss my loan, I take the call. it turns out they are calling on one of my rental properties, they know that the current rates can't beat what I'm at so they start asking me about my primary residence which is held by another bank. I tell them I'm at 3.5 on a 20 year loan with 17 years left, of course they can't touch the rate so they try to sell me on stretching it out to 30 years and freeing up some cash. Of course this is a stupid idea and I'd maybe save a few hundred a month and pay over 100k more over the life of the loan. I say no and let them know they're wasting my time but imagine how many people fall for that stuff. You have 50 year olds who want to refinance to save a little money monthly but it keeps setting them back on their amoritzation schedule.

there are a ton of predatory practices still going on today, it's all in their playbook, if you can't beat the rate, get them to refi or switch to an ARM. Of course I understand this stuff but there are a lot of less savvy homeowners who get taken advantage of. Keep in mind that they call you, it's not you calling them.

lenders deserve a good amount of the blame

my biggest issue is they should never be allowed to collect such high interest in the beginning. it starts out at what, 90% of the payment goes to pay off the interest? it is so ridiculous that there is not a cap so that the homeowner is actually acquiring value too. it takes too long to bring down the premium under the current setup, and most people will sell and move to their next home before the premium is down enough to make it reasonable, likely having to take out another 20-30 year loan instead of keeping more money in their pocket and potentially only having to take out a 10-20 year loan instead, depending on how long they lived in the first home (figuring they lived there 10-20 years).

cap the banks at collecting a max of even 75% (or lower if The People could make it happen) would be a huge benefit to homeowners. the banks will just need to collect their interest for longer at that rate, but damn, they are still collecting a fortune at the 75%, they wouldn't be going bankrupt and eventually it would all even out in the long run.

 

[Spartanmack]

my biggest issue is they should never be allowed to collect such high interest in the beginning. it starts out at what, 90% of the payment goes to pay off the interest? it is so ridiculous that there is not a cap so that the homeowner is actually acquiring value too. it takes too long to bring down the premium under the current setup, and most people will sell and move to their next home before the premium is down enough to make it reasonable, likely having to take out another 20-30 year loan instead of keeping more money in their pocket and potentially only having to take out a 10-20 year loan instead, depending on how long they lived in the first home (figuring they lived there 10-20 years).

cap the banks at collecting a max of even 75% (or lower if The People could make it happen) would be a huge benefit to homeowners. the banks will just need to collect their interest for longer at that rate, but damn, they are still collecting a fortune at the 75%, they wouldn't be going bankrupt and eventually it would all even out in the long run.

That's just the nature of interest - in the beginning, more of your payment goes to interest when your principle is highest and the ratio goes down as you payoff principle. And the ratio depends on the rate for a given length of a loan and it's really not THAT bad. For example, for a 30 year loan at 4% APR, 70% of your initial pmt goes to interest. If you double that rate, that ratio only goes up to 91% (obviously it can't double). And this is pre-tax, don't forget there is a substantial deduction for mortgage interest expense - at 4%, assuming your tax rate is 25%, the ratio drops from 70% to 59% on your initial payment.

By capping that ratio at .75 (or any level since .75 is actually above what you pay in today's rate environment), what you're really doing is capping interest rates which means banks can't properly price risk which will lead to adverse selection and bigger losses for banks when loans fail.

 

[Gulo Blue]

cap the banks at collecting a max of even 75% (or lower if The People could make it happen) would be a huge benefit to homeowners. the banks will just need to collect their interest for longer at that rate, but damn, they are still collecting a fortune at the 75%, they wouldn't be going bankrupt and eventually it would all even out in the long run.

By stating these terms, you've implicitly established an interest rate. Do you mean 75% of the year 1 payments cover the interest or do you mean lenders get 1.75 times the money they lended back over the course of 30 years?

The first scenario corresponds to an interest rate around 0.9% and the lender will be wait 30 years to get back 114% of his investment. The lender wouldn't even break even for 26 years. If that sounds good to you, I'd like to borrow money from you.

The 2nd scenario is actually where things have been. Like Spartanmack said, it's a rate a bit over 4%. Lender breaks even in year 17.

 

[tinselwolverine]

my biggest issue is they should never be allowed to collect such high interest in the beginning. it starts out at what, 90% of the payment goes to pay off the interest? it is so ridiculous that there is not a cap so that the homeowner is actually acquiring value too.

The homeowner gets a federal tax deduction on the interest payment. The more dollars of the payment that are interest, the higher the tax deduction.

In typical economic situations, a home buyer can expect an amount of an increase in equity in the normal appreciation in the value of property over and above with equity portion of the mortgage payment. Obviously, over the course of the last several years, the housing price roller coasters in some real estate markets haven't been all that normal.

 

[TheVictors]

You may not get this from a competing bank but when I refinanced, a lot of banks out here were offering refi without changing the term of your remaining loan (so in your case, they would offer you the lower rate fore the remaining 17 years) with no points but you have to pay fees like w/ any refi. You can use bankrate.com to get local rates w/o the hassle of giving up personal contact info.

If you financed prior to 2009 Wells Fargo will do it for free.


But LOL at the bullshit bragging about loan rates. We have "investment properties" too .... If it ain't Owner Occupied, the rate isn't going to be adjusted unless you put cash money down. And unless you are paying 4.5 or higher, refinancing now isn't going to make a material difference when all the fees and adjusted amortization table is considered.

But that's not the point of debt financing to begin with and there is a huge difference between evil "predatory lending" and the available options for a borrower. If you can borrow at 4% and invest at 6%, only a dumbass would forego the 2% spread.

You want predatory lending, talk about student loans. Those Federal loans are structured so you don't pay principle until the very, very end. But with my grad school loans locked in at a cool 1.875% ...why pay down the balance with the equivalent money put to work is far more than offsetting the $152/month payment?

 

[Sbee]

If you financed prior to 2009 Wells Fargo will do it for free.


But LOL at the bullshit bragging about loan rates. We have "investment properties" too .... If it ain't Owner Occupied, the rate isn't going to be adjusted unless you put cash money down. And unless you are paying 4.5 or higher, refinancing now isn't going to make a material difference when all the fees and adjusted amortization table is considered.

But that's not the point of debt financing to begin with and there is a huge difference between evil "predatory lending" and the available options for a borrower. If you can borrow at 4% and invest at 6%, only a dumbass would forego the 2% spread.

You want predatory lending, talk about student loans. Those Federal loans are structured so you don't pay principle until the very, very end. But with my grad school loans locked in at a cool 1.875% ...why pay down the balance with the equivalent money put to work is far more than offsetting the $152/month payment?

Bragging about rates? Sounds like some carryover butthurt. It's not like you have to be some go getter to have bought or refinanced in 2011 when rates were really low. Are you that desperate to find something to argue about?

 

[Spartanmack]

If you financed prior to 2009 Wells Fargo will do it for free.


But LOL at the bullshit bragging about loan rates. We have "investment properties" too .... If it ain't Owner Occupied, the rate isn't going to be adjusted unless you put cash money down. And unless you are paying 4.5 or higher, refinancing now isn't going to make a material difference when all the fees and adjusted amortization table is considered.

But that's not the point of debt financing to begin with and there is a huge difference between evil "predatory lending" and the available options for a borrower. If you can borrow at 4% and invest at 6%, only a dumbass would forego the 2% spread.

You want predatory lending, talk about student loans. Those Federal loans are structured so you don't pay principle until the very, very end. But with my grad school loans locked in at a cool 1.875% ...why pay down the balance with the equivalent money put to work is far more than offsetting the $152/month payment?

I used WFC when we bought in 2011 but they couldn't even come close to the rate we got when we refi'd a year ago.

If you have more than 40% equity in your rental property you can refi without plunking down cash. And generally speaking, unless you lived in the property before converting it to an income property, you should have 40% equity (unless the property has lost value) because you can't get a loan for income property without 40% equity.

If we're bragging about low rates, my grad school loans are locked in at 1.625%. I'll never understand why people pay those off early - or their low interest mortgages. Buy a 20 or 30 year bond.

 

[Spartanmack]

By stating these terms, you've implicitly established an interest rate. Do you mean 75% of the year 1 payments cover the interest or do you mean lenders get 1.75 times the money they lended back over the course of 30 years?

The first scenario corresponds to an interest rate around 0.9% and the lender will be wait 30 years to get back 114% of his investment. The lender wouldn't even break even for 26 years. If that sounds good to you, I'd like to borrow money from you.

The 2nd scenario is actually where things have been. Like Spartanmack said, it's a rate a bit over 4%. Lender breaks even in year 17.

I think he means the max % of initial payment that goes to interest is 75% and the loan would follow the amortization schedule from there then either the ratio wouldn't fall until the interest portion has caught up the actual amortization table or the payment schedule would be extended. Like you said this is basically capping interest rates but as I showed, current rates on 30yr loans have int ratios below 75% on initial pmts - much lower on an after tax basis.

The problem with this is in higher rate environments banks would get killed - the average life of a 30 year loan is just over 10 years so prepays and defaults would wipe them out and they could NEVER sell those loans and re-lend the money because the loss on sale of the loan would be huge.