here is a list of banking laws over the years

Yeap.

It was an attempt to keep alive the only sector which was really helping the economy at the time. Housing.
 
Desh said:
Or was it an attempt to keep the cash cow alive instead of doing what was good for the long term market.

Who originated the escalation of these types of loan? what was the catalyst?

Were there really never any protections and then someone just used the system or was there a protections in place which were changed?
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One more time. I pointed out the law that began it, it was passed in 1993, it was designed to make banks give loans to groups they didn't before to make it "equal" and "representative".

You are deliberately ignoring the beginning of the thread to post this crap?

It was continued later because it allowed the politicos to run around saying things like, "There are more <insert group here> owning homes than ever before!"

You will remember both Clinton and Bush making such claims during their tenures.
 
Damocles said:
Ah so you selected this one:



Rather than this:

I know it sounds so innocuous, but it directly effects the housing lending. They simplified it here, but this was the beginning of the mess we are in... The law specifically required and reset lending requirements so that people who could not previously get loans could get "imaginative" loans...

You know those great ones with teaser rates, etc...
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Did you leave out this bit, from the next paragraph, on purpose?

The RTC's sunset date is set at Dec. 31, 1995
 
Desh said:
Yeap.

It was an attempt to keep alive the only sector which was really helping the economy at the time. Housing.
Click to expand...

In part, I would agree with that. But on the other hand they were stuck between the proverbial rock and hard place (kind of like they are now). Mainly this was due to their stupidity in how they went about "helping to make things better/equal".

Had they refused to lower interest rates from 2000-2003, then the markets would have been crushed even further.... causing a more severe economic downturn than what we had. However, we wouldn't have seen the housing bubble form as large as it did either.

In hindsight, lowering the rates was the right thing to do. KEEPING them low was where they made the error. They should have begun raising rates at a faster clip in 2003 and 2004 rather than that annoying 25bp at a time crap that took 2 years to get rates back up. Now we see Bernanke lowering 25bps then another 25bps.... if he continues this trend then he is making the same mistake in reverse.

We still have an outside chance of avoiding a recession. But the longer the Fed screws around, the lower the odds of that happening.
 
But the situation did not seem to harm the market until there was an escalation in these types of loans. So I think it may have been more effected by some other legislation in combination with the 1993 law.
 
Desh said:
But the situation did not seem to harm the market until there was an escalation in these types of loans. So I think it may have been more effected by some other legislation in combination with the 1993 law.
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It didn't harm the market? It created the fricking bubble that caused the acceleration!

Have you been reading the thread at all?

You are desperate to attempt to blame those you want to rather than look at it realistically. The regulations were changed to force banks to give loans they otherwise wouldn't. This created the housing bubble that will cause a downturn in the real estate market. The rush at the end is because that is the peak. Just as maroons rushed in to buy stocks at the peak in the 90s.

We are now seeing the culmination of a bad policy set forth in the early 90s and continued by everybody since because of the whole "More <insert group here> are homeowners" points they were getting at election time.
 
Superfreak said:
It has nothing to do with raising all boats. Bottom line, not one consumer is FORCED to buy a house. Forced to sign a mortgage that they do not understand. Forced to take out equity loans on their home for new cars, flatscreens etc.... They are equally culpable with the lenders. You and I have a responsibility when we borrow money to understand the terms in which we have to pay that money back.

Again, this is not to suggest that there aren't any shady lenders. There are... and they should be prosecuted. But to act as though shady lending practices are the main reason so many people are in homes they can no longer afford is ridiculous.
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Edited ---
Economist Tyler Cowen points out the problem...“As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications,” according to... BasePoint Analytics. “Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents...
Click to expand...

This is a form of criminal fraud. I want to see indictments, convictions, jail time. Asking the taxpayer to foot the bill, screw you!
 
without question desh... there were certainly voices of reason over the past decade warning us that looser credit standards were a bad idea in the long term. Unfortunately, the country ignored them. Borrowers continued taking out loans they could not afford. Lenders kept letting them. All the while the idiots in DC championed greater home ownership numbers.
 
I just cant help but feel sonething could have been done when many of us on here were metioning the scary signs.
 
Desh said:
I just cant help but feel sonething could have been done when many of us on here were metioning the scary signs.
Click to expand...

Of course you cannot help it.... because something could easily have been done. It was common sense. But many, myself included, ignored the naysayers back in 2004/05. I honestly do not recall seeing articles like the one you just posted which stated that 19 percent would not have qualified for the 30 yr etc....

I have seen many housing bubbles form and burst over the years, but not one that was nationwide like the one we are seeing at this point. Up until June of last year I didn't see the extent of this mess. I thought it would be isolated to over-inflated areas like CA, Las Vegas, Florida etc... obviously I was wrong on that.

I don't think I fully understood just HOW loose the credit standards had become.
 
Kudo's to desh for this fine thread, but as long as you act like business is evil and borrowers have not duty to pay you'll never understand.
More liquidity is never a bad thing, we'll adjust. We went from having to sign in blood to having to just have a pulse.
Desh the lenders have paid for their sins by losing BILLIONS of shareholders dollars, I believe incapable borrowers must take their medicine of forclosure and ruined credit or the problem will be many times worse.
 
Foreclosure is not a death knell to your credit by any means. A smart person can correct the credit in 2 to 3 years after being foreclosed on.
 
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