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Posted by David Sherman on Tuesday, December 16, 2008 at 12:20:23 :
In Reply to: Re: ASK any banker posted by axelsteve on Tuesday, December 16, 2008 at 00:46:50 :
One banker here told me that in California, their bank was requiring mortgage applicants to "sign" their loan papers with their fingerprints. Whether because they were illiterate or undocumented, I don't know, but it tells you how easily they were giving out loans.
Another big chunk of foreclosures, however, is amongst speculators who bought all the new houses they could, via NINJA loans, liar loans (no income proof needed), and ARMs, intending to flip them before the rate adjusted up. A lot of people were making a lot of money doing this while the bubble was inflating, but they got caught with their pants down when it popped. To these guys, a house was no different from a speculative stock. They had no intention of living in them (other than maybe in one of them just long enough to escape the capital gains tax), and generally no intention of even renting them out. They wanted to flip them quickly for a quick profit. There's nothing wrong with that (other than it's a waste of trees and concrete to build actual houses), but it's something to keep in mind when the media put out all these scary numbers about the number of homes that are in foreclosure, and sob stories of poor people being forced out of their homes by heartless bankers. A very big chunk of those foreclosed houses were no more than stocks to the speculators who bought them, and as soon as they were upside down in the mortgages, they just let the banks take them back. Technically, yes they're being foreclosed upon, but nobody's being forced out of their home because of it. And yet these speculators would be right in the front of the line if congress enacted any sort of "homeowner bailout".