America’s housing system still has not been properly reformed

To sum it up, despite there being regulations on CDOs the real problem still exists. That problem is that loans are easy to get the gov stamp. Thos makes it easy for new home owners to get loans. And this makes it easy for sales people to sell the loans.

Much of this opinion article is based on an other article [0] which seems less doom and gloom and more about the shift to a majority of state sponsored loans. This in itself its own issue in that capitalism isnt doing what it should be when everything is subsidized by the gov.

Ultimately these two articles seem to be about responsibility. Banks are not responsible for homeowners making poor decisions. Banks are not responsible for investors trusting a market that is not self sufficient. And Banks are not responsible for the government to enable them with tax payer money. Meanwhile everyone can point the finger back to the banks and the bank depends on the fact that too many economies rely on them to fall

[0] http://www.economist.com/news/briefing/21705316-how-america-...

I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs.

The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount by which they are priced out in the big cities is only going to grow.

As an aside...

I'm not a lawyer but I've heard people say My cousin Vinny is the most accurate court room movie ever. In a similar vein, I'd nominate the Big Short as one of the more accurate wall street movies ever made.

It showed the lone wolf who not only saw the coming crash, this was far and away the easiest part, but figured out how to profit form it by getting the banks to write him a CDS.

The two smart kids working out of their garage that were smart enough to succeed despite all their mistakes.

The hedge fund who did an incredible amount of due diligence, going to properties, knocking on doors, talking to people inside the industry to put together the pieces that no one else could.

The wall street sales guy who sold the CDS knowing that it might bankrupt his company but figured he'd make a killing on his commissions long before that happened.

And the most accurate part of the movie was that it showed the anguish that each of these people went through. They'd seen something no one else had, been right about it, had the event happen and even then everyone else continued to plug their ears and pretend nothing was going on while they continued to bleed money each month. It really did a good job of showing that you can be right about everything and still not make money if the rest of the market continues to act insane.

In 2007 there really was a sense that people knew things were way out of hand but everyone was thinking, "If I can just get one or two more years on the bonus cycle, I'll be able to get out". To be fair, this type of thinking probably ins't going away anytime soon.

You should be more concerned about downpayment amounts (3% is acceptable, and some lenders will finance with 0%). This is what pushes home prices up artificially.

I had a foreclosure where I stopped making payments in 2011. My foreclosure finally completed in December of last year (4.5 years later). I already have lenders who will finance me on a new mortgage.

It's madness.

Yeah. Was speaking to a realtor yesterday actually about this (just an acquaintance) and homes in some areas in a particular midwest city have risen in value 23% in one year. As soon as a place goes on the market it has 10 offers over the asking price. This isn't good. But if you have a great job and good job security it is idiotic to not buy a house right now with the low interest rates assuming it's not way overpriced (and these can be found).

I purchased a home that costs about twice my annual salary. I think it's reasonable. I put 0 down and walked away with a check at closing after seller closing costs for some items I wanted repaired.

Anyway this is just my general commentary and my experience. I don't know enough about the market as a whole to make any real informed contribution, but just wanted to share anyway.

I'm still confused by the CDS bit. Is there a good eli5 article on it? I've already checked the eli5 subreddit and couldn't find anything specifically on the mechanism that allowed shorting.