Collapse in US lending standards has "central banks are scared out of their minds"

[Mr. Big Dog 10,747]

As far as I heard part of the problem is that people got adjustable rate mortgages, and the rates got... well, adjusted! Leading to higher payments thanpeople can afford. Add to that that many salaries got "frozen" i.e. no 3% increase a year for you. It is harder to find a job lately if you lost one... So... a downward spiral.

So you think house prices will not go down?

The real slammer are these option mortgages that people fell for all over the place. You know, the 500K mortgage for $1,200/month ads. Where the $1,200/month don't even pay for your interest but rather tag that unpaid interest onto your loan. After a period of time, that $1,200 monthly payment blows up to 4K or 5K or something insane like that. People thought they can just do a new option loan down the road since the now higher principal amount of the loan would be supported by the anticipated increased value of the home. When home prices became stagnant or even started falling, that calculation didn't work anymore and it came time to face the music.

[Heracles 417]

As far as I heard part of the problem is that people got adjustable rate mortgages, and the rates got... well, adjusted! Leading to higher payments thanpeople can afford. Add to that that many salaries got "frozen" i.e. no 3% increase a year for you. It is harder to find a job lately if you lost one... So... a downward spiral.

So you think house prices will not go down?

Salaries have probably stalled because of this constant flow of both legal and illegal workers. Employers have no reason to increase wages as they can hire someone cheaper or move jobs overseas. It says something when the rest of the world's economies are steaming ahead, while the US has stagnated. Fighting a war we cannot afford does not help either..

Edited August 20, 2007 by Boo-Yah!

[Dan J 277]

As far as I heard part of the problem is that people got adjustable rate mortgages, and the rates got... well, adjusted! Leading to higher payments thanpeople can afford. Add to that that many salaries got "frozen" i.e. no 3% increase a year for you. It is harder to find a job lately if you lost one... So... a downward spiral.

So you think house prices will not go down?

Salaries have probably stalled because of this constant flow of both legal and illegal workers. Employers have no reason to increase wages as they can hire someone cheaper or move jobs overseas. It says something when the rest of the world's economies are steaming ahead, while the US has stagnated. Fighting a war we cannot afford does not help either..

Wages have been going up for me and for most people at about the rate of inflation.

But house prices had been increasing at rates like 10% per year, and in some places much more. When that happens, houses are going to be un-affordable to many people pretty quickly.

But to keep shareholders happy, mortgage companies need to keep growing. When you have given mortgages to all the low credit risk people who want one, you have to go to more riskier loans to keep growing. Many investors saw this as a good investment and made a lot of money available to invest in these types of loans.

But if you base your growth on credit, your only borrowing growth from the future. And at some point that becomes unsustainable. The market will correct itself. Some people will be burned. Life goes on.

[w¡n9Nµ7 §£@¥€r 123]

With decreasing home prices leading to shrinking home equity, it makes more sense than ever to hire contractors who use the services of undocumented workers for home improvement projects. Every penny matters! Don't let the naysayers who claim it's "exploitation" get you down - it's not! The contractor wants the job and you need the job done! It's consensual.

[Mr. Big Dog 10,747]

It's consensual.

Tell that to the judge after getting laid by a 15 year old.

[w¡n9Nµ7 §£@¥€r 123]

But to keep shareholders happy, mortgage companies need to keep growing.

It wasn't the need to keep growing that got us here. It was the fact that there were (for whatever reason) buyers willing to buy securities that consisted of this toxic subprime debt. If financial institution A didn't offer a product to meet that demand, then financial institution B would.

[Caladan 19]

It's such a combination of things. Housing prices went up and up and up and up. Young people like me can't get into the market. This normally would cause prices to drop or stabilize, but between a combination of low interest rates and lenders offering subprime rates, requiring no down payment, basically doing whatever they can to keep it going up and up and up and up... and people buying into it figuring it doesn't matter if they can't afford the mortgage in five years because everything goes up and up and up and up so they'll just flip the house and move on. If all the mortgages in the country are sausages, securities buyers figured out a way to chop up the sausages in little pieces and then buy the bits of sausage they thought they could make a lot of money on, including the risky bits. (It reminds me a lot of the creative accounting done for Enron.) People's mortgage payments get too big, they lose a job, and you have a lot of foreclosures.

In Alberta, they're doing the same damn thing right now. The market is booming. The only thing that slows it down is that they can't get enough builders to make the homes -- 18 months waiting lists... and my brother-in-law is 25 with a forty-year mortgage. Which is nuts.

[mawilson 2,133]

But to keep shareholders happy, mortgage companies need to keep growing.

It wasn't the need to keep growing that got us here. It was the fact that there were (for whatever reason) buyers willing to buy securities that consisted of this toxic subprime debt. If financial institution A didn't offer a product to meet that demand, then financial institution B would.

Actually, that's not entirely true. The buyers were available because the ratings agencies -

Moody’s, Fitch and Standard & Poor’s – had given high ratings (AAA, in some cases) to bonds

backed by US subprime mortgages. AAA generally means "super-safe" so the buyers

didn't foresee any problems.

[mawilson 2,133]

Just wanted to add that debt, including risky subprime mortgages and junk-rated loans, is

often repackaged into new securities, some of which carry far higher ratings than the

underlying loans. Such mortgage-backed securities and collateralised debt obligations

can be mind-bogglingly complex. AAA is no longer as safe as it once was.

[w¡n9Nµ7 §£@¥€r 123]

The underlying mix of the assets was never a mystery, though. The hedgies were more than willing to purchase those securities regardless. As for the rating agencies inflating ratings, that's not exactly unprecedented during boom times.

[Heracles 417]

With decreasing home prices leading to shrinking home equity, it makes more sense than ever to hire contractors who use the services of undocumented workers for home improvement projects. Every penny matters! Don't let the naysayers who claim it's "exploitation" get you down - it's not! The contractor wants the job and you need the job done! It's consensual.

It does not matter whether it is consensual or not. You have hundreds of workers, both legal and illegal, coming here on an daily basis. Of course wages are going to be suppressed. Simple supply and Demand. Wages have stagnated. The economy has stagnated. I hear people talking about wage increases and so forth yet in reality the average wage is quite low. So immigration does have a lot to do with it. Especially in a situation where there is more supply than demand..

I know of truck drivers and brick layers in Aus who are earning more than most managers in America.. Why? because Australia has a carefully monitored and pro actively managed immigration policy.

[Trumplestiltskin 5,791]

Given that the vast majority of illegal workers (the ones from Mexico) occupy low-end, unskilled manual-type jobs - I think its a bit of a stretch to suggest that illegal immigration can be attributed to low-wages in skilled / professional careers. Doesn't seem like an obvious correlation.

[Caladan 19]

I know it's trendy to blame illegals for everything (or the Hispanic ones, at least), but this just doesn't add up.

Securities traders tend not to have immigrated from Mexico. In fact, they're usually all-American chets from the best American private schools. Investment banking firms? Not known for hiring illegals. Illegal workers? Not known for flipping real estate.

[Heracles 417]

Given that the vast majority of illegal workers (the ones from Mexico) occupy low-end, unskilled manual-type jobs - I think its a bit of a stretch to suggest that illegal immigration can be attributed to low-wages in skilled / professional careers. Doesn't seem like an obvious correlation.

I said both legal and illegal. The economy is doing poorly yet they are increasing the number of H1 visa..

PS What chance do poor black Americans have, for prosperity, if they are occupying all of the jobs. You cannot blame that ###### on oppression mate..

Edited August 21, 2007 by Boo-Yah!

[Heracles 417]

I know it's trendy to blame illegals for everything (or the Hispanic ones, at least), but this just doesn't add up.

Securities traders tend not to have immigrated from Mexico. In fact, they're usually all-American chets from the best American private schools. Investment banking firms? Not known for hiring illegals. Illegal workers? Not known for flipping real estate.

You should know how difficult it is to migrate to Canada, unless you satisfy the points system. Why would Canada have such a great system?? Common sense. You only allow in the workers you need..

Whereas in the US, for example, you still have thousands upon thousands of IT workers coming here daily. Well as long as there is room in the visa quota; then you are in. It like guys time to bring the American immigration system into the 21st century.. Lets not even count the illegal immigrants, low skilled workers, who come in as 'they' see fit..

Edited August 21, 2007 by Boo-Yah!