The XMEN Clan Forums

I dunno how many of you have been following the markets lately. Maybe you have, or maybe the talking heads are just babbling as far as you're concerned. In either case, I ran across an article that may or may not be accurate but is sure written in some interesting prose.

it's not a piece of cake for anyone over 40 these days to understand the maze of financial structures that now appears to be unwinding. They were created by youthful financial engineers trained to exploit cheap money and leverage, who showed no fear and who have, until the past few weeks, never known the sting of the market's lash.

Here's the Article on Fortune

Professor of simplicity my foot. That was a string of jargon. (Personal pet peeve: authors who say they're gonna simplify things without actually doing so)

Still, from what I've read and seen, this is not a failure of the system itself, but rather the people within it. Namely, a bunch of investors made a bunch of bets that a lot of loans would be paid back. They lost.

*grump*

This reminds me of when Mrs. Bug and I bought the house. The lending folks looked at our credit and offered us $370K in loans... and the house was only going for $140K! We boggled at them for a few moments, and then took out the loan for the price of the house. This was greeted by puzzled stares from the lenders.

They wondered why we weren't jumping at the chance to have XBOX HUEG amounts of cash on hand. We were wondering why we'd want to pay interest on extra money we had no use for. Mind that we both had some experience with loans and the power of compound interest in the past.

As I pointed out to the readers on another forum, the problem with all these bad loans is that they will expect Uncle Sam (aka John Q. Taxpayer) to bail them out of these bad decisions. Whether "them" is a bank, a homeowner, or a real estate speculator. I've thought for years that credit was too lax, as I do remember (faintly) the 70s, when single-digit interest on a loan was a homebuyer's dream.

The problem with that line of thought are the people like my parents that would say, "Well... how come they get bailed out on their loan, and I'm still stuck with mine?"

And those people would be right for thinking that. People can't learn their lesson if there is no pain.

I wonder if the federal reserve bank was lax in oversight of some of this stuff. There is a lot of blame to go around and the responsibility is spread around enough that it's a mess to try and figure the whole thing out.


My wife and I have come to realize that we won't likely get into a house for a while. They're too expensive, and we will likely have to wait for foreclosures... AND for us to move back to the northwest.

The wife and I are keeping a very close look on the housing market and hope to get one in the next year or two. We havnt applied for a loan but weve gone to the bank to at least see If we could get one and they did the same thing to us by offering twice the loan we would want. Its almost like they want people to default on loans too big for them to pay for.
At the same time as the lenders giving credit away like water, there are people who are, instead of buying a starter house for 5-10 years and moving on to another house when theyve built some equity, jumping into Dream Homes. Ive got a friend who bought his house for until he retires (some 30 years away) and he is hurting bad, barely making bills, food and gas. Good thing he knows cars because if his went belly up and he couldnt fix it hed be out a house. People just dont realize they need to wait for some things until later in life.

It's not entirely the fault of the borrowers. The easy access to credit that was provided to the Lenders and the speed at which investors snatched up the MBS (mortgage backed securities) contributed greatly to the problem. Unfortunately, the easy money overrode common sense in a lot of cases.

The mortgage industry is going to be very tight with loans for the foreseeable future. Your going to need a pretty substantial down payment and pretty good credit going forward, and forget about getting a loan for an investment property without near perfect credit.

As full disclosure, I work for a mortgage lender. Thus far we are still in business, but we just did layoffs on Weds. All of us that survived that are just keeping our heads down for now, but many of us saw this problem coming months ago.

Dont get me wrong I'm not saying that the borrowers at fault. It is a bunch of issues adding up to the situation.