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Margin calls on mortgage lenders at unprecedented levels

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Re: Margin calls on mortgage lenders at unprecedented levels

#41

Post by kls »

DailyHN wrote: post #38

Is there a point at which the lender can screw up so much that the house becomes property of the borrower?

in the 08 crash there where some people that won their house in court, due to the industry using a practice called Robo-Signing. Some judges saw this as irreparably separating the mortgage from the deed. So while you technically still owed for the mortgage you signed, the asset could not be reclaimed due to the fracture of the mortgage from the deed due to robo-signing. The practice was used to move mortgages around while not having to pay filing taxes every time it changed hands. It robbed local municipalities of a lot of money in avoidance. So some judges frowned on the practice and basically awarded the house to the owner. Whether you would win your case or not was hit or miss though.

Re: Margin calls on mortgage lenders at unprecedented levels

#42

Post by imtringued »

pjc50 wrote: post #19
ddnb wrote: post #11

so can the Fed keep this up indefinately? What are the consequences of these actions? inflation? if so aren't we trading a crash for permanent(or at least long-scale) lower purchasing power for all consumers?

When talking of inflation we really do have to recognise that monetary expansion only causes wage/goods/services price inflation when there is too much money chasing too few things to buy. At the moment, the real markets are all over the place but it looks like there is huge physical production capacity which is idling. Inflation risk through demand is low. It is quite hard to have inflation without either near full…

It was too obvious to notice for but thanks for explicitly talking about it. I always wondered why the insane cash injections of the fed never reach the general public. Surely at some point some of that money is going to be used for payroll but that point of time never came because everyone is underemployed.

Re: Margin calls on mortgage lenders at unprecedented levels

#43

Post by bluntfang »

peterwoerner wrote: post #10

I mean people who can't work aren't going to be able to make rent. Landlords then cannot make mortgage payments so they default. Mortgage lenders are now up a creek without a paddle.

Shouldn't mortgage lenders have done their due diligence to ensure that the people they were lending to weren't reliant on rental income to make their mortgage payments?

This just sounds like people decided to take huge risks on rental properties and now that risk is catching up to them.

Re: Margin calls on mortgage lenders at unprecedented levels

#44

Post by nradov »

tareqak wrote: post #28

I have a question that is related to the article, but maybe goes a bit beyond it: why doesn’t the Federal Reserve buy the actual asset in question instead of the mortgage-backed securities question? I had the same question after I recently got a better understanding of the actions the Federal Reserve and the US government took in saving Wall Street in 2008 via the TARP (my understanding is still probably incomplete t…

The administration and logistics would be significantly more complex. In theory it's possible, but the Federal Reserve just doesn't have the manpower to buy up individual mortgages.

Re: Margin calls on mortgage lenders at unprecedented levels

#45

Post by nradov »

pjc50 wrote: post #19
ddnb wrote: post #11

so can the Fed keep this up indefinately? What are the consequences of these actions? inflation? if so aren't we trading a crash for permanent(or at least long-scale) lower purchasing power for all consumers?

When talking of inflation we really do have to recognise that monetary expansion only causes wage/goods/services price inflation when there is too much money chasing too few things to buy. At the moment, the real markets are all over the place but it looks like there is huge physical production capacity which is idling. Inflation risk through demand is low. It is quite hard to have inflation without either near full…

Inflation is also a matter of expectations. Everyone is expecting a huge wave of loan defaults in the next year, not just home mortgages but all types of loans. Due to the way that fractional reserve lending works, defaults reduce the money supply just as surely as shredding $100 bills.

Re: Margin calls on mortgage lenders at unprecedented levels

#46

Post by marcus_holmes »

hirako2000 wrote: post #24
andrepd wrote: post #15

Earlier quoted context omitted.

The only thing that would change the status quo would be personal responsibility to the criminals in charge, the actual persons, not a vague concept of "system". Those that rigged the game, that live luxurious lives beyond our dreams off bailouts that we paid in a crisis that caused suffering to billions of people. If those responsible got life sentences en masse for their crimes which probably killed far more people…

It's a tight community that instigate and tolerate financial practices that ultimately aren't benefiting of the average Joe, quite the contrary. It's there for a reason, the same reason it's not stopping. Unless there is a chance to beleive in representatives to truely represent the population, it's a dead game. We will slowly turn to cryptocurencies and detach ourself from this non sense system of taxation and fiat…

Cryptocurrencies so far seem to be a plaything of exactly the kind of people that are wrecking the financial markets. I don't see them as being the answer to anything.

Re: Margin calls on mortgage lenders at unprecedented levels

#47

Post by mikem170 »

pjc50 wrote: post #20
blackrock wrote: post #12

Is anyone of the impression that houses should NOT be purchased by companies like Zillow, Redfin, and Berkshire Hathaway? After 2008, if the government had allowed the housing market to actually be a market, then we wouldn’t have the housing crisis of today. Instead, corporations with access to cheap money, spent billions to buy distressed houses on the cheap, and held it for a few years, until it became extra profit…

That is a market. What might improve matters for actual humans is a non-market solution of some kind of rationing. Max 1 per customer, locals preferred.

> That is a market. What might improve matters for actual humans is a non-market solution of some kind of rationing. Max 1 per customer, locals preferred.

Would be a much better market if supply were not restricted by so many zoning laws. Something like Japan does would be much better. http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html

Re: Margin calls on mortgage lenders at unprecedented levels

#48

Post by leetcrew »

bluntfang wrote: post #43
peterwoerner wrote: post #10

I mean people who can't work aren't going to be able to make rent. Landlords then cannot make mortgage payments so they default. Mortgage lenders are now up a creek without a paddle.

Shouldn't mortgage lenders have done their due diligence to ensure that the people they were lending to weren't reliant on rental income to make their mortgage payments? This just sounds like people decided to take huge risks on rental properties and now that risk is catching up to them.

even in normal times, I don't think lenders are lining up around the block to give people with no income a mortgage for a house they intend to rent out. there are a lot of landlords with mortgages on several rental properties. if they have enough viable properties, it doesn't usually look super risky to give them another mortgage, since they can smooth the cashflow from the other properties in the case of a small number of vacancies / delinquent tenants. there are also landlords who have enough income from work to cover the mortgages if all the tenants stop paying at once. in a correlated event like this, even the "safest" borrowers might be unable to pay. it's hard for a lender to protect against the possibility of entire industries shutting down overnight.

Re: Margin calls on mortgage lenders at unprecedented levels

#49

Post by bluntfang »

leetcrew wrote: post #48
bluntfang wrote: post #43

Earlier quoted context omitted.

Shouldn't mortgage lenders have done their due diligence to ensure that the people they were lending to weren't reliant on rental income to make their mortgage payments? This just sounds like people decided to take huge risks on rental properties and now that risk is catching up to them.

even in normal times, I don't think lenders are lining up around the block to give people with no income a mortgage for a house they intend to rent out. there are a lot of landlords with mortgages on several rental properties. if they have enough viable properties, it doesn't usually look super risky to give them another mortgage, since they can smooth the cashflow from the other properties in the case of a small num…

sounds like they assessed the risk incorrectly or their risk tolerance didn't equal the actual risks they took. Isn't this normal? If I buy stock with all my money, and the stock dramatically lowers in price, I don't get to complain to the government and get free money, do I?
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