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Thread: $800bn and still the markets fail?

  1. #11
    Administrator keith's Avatar
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    Quote Originally Posted by britchick, post: 56713
    could banks call in their mortgages, loans etc and make people pay it all back?

    if the bank you have your mortgage with goes down but doesn't have a buyer then would you have to pay it back?
    I'm no financial expert but I would assume that the answer is somewhere along the lines of they COULD call in your loans but they'd be mad to do it.

    Say you take out a 100k mortgage with a bank. They've paid that 100k out to the sellers, and the profit is the interest you're going to pay over 25 years or whatever. Sure, there's also a house asset to consider as well but we all know that house prices are diving and people aren't buying them now.

    Soooo what do you do if the bank calls in your mortgage? try and sell the house quickly? may not be possible and for some people it may not cover the amount they owe anyway

    I mean there's no way you can meet their demand, so they're effectively deciding to lose the interest profit that they'd counted on in their books, AND immediately transfer your good loan to bad debt.

    A good mortgage or loan, even now, has to surely be an asset to a lender. Sure, it's different once people start defaulting but before that point, they'd be pretty mad IMHO to try and call in a good loan
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  2. #12
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    Quote Originally Posted by Keith, post: 56733
    A good mortgage or loan, even now, has to surely be an asset to a lender. Sure, it's different once people start defaulting but before that point, they'd be pretty mad IMHO to try and call in a good loan
    get you point but my and lots of other peoples once 'good mortgate debt' is rapidly shrinking, i looked at house prices yesterday and we have lost quite a significant amount of money baring in mind we bought just over 3 years ago. We ploughed all our savings into the house as this seemed to be the right thing to do. :rolleyes008: we have a cushion and both of our jobs are pretty secure i just fear for people that are up to their necks and then lose their jobs. I'm not talking people who raked up huge credit card debt (although i'm not judging) i'm talking people who wanted to buy their own home and paid through the nose for it. There is going to be a lot of heart ache:(














  3. #13
    Administrator keith's Avatar
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    Quote Originally Posted by britchick, post: 56736
    get you point but my and lots of other peoples once 'good mortgate debt' is rapidly shrinking
    I think we may be talking about different things here....

    The price of your house is irrelevent to the bank who lent you the money as long as it still covers the debt you have with them should you be unable to pay. If it doesnt, there's still not much they can do about it or would want to do about it whilst you're still paying your mortgage.

    So in terms of the question asked, would they ever say to someone who is successfully paying every month, "give me back the mortgage you owe" then I really doubt it

    For those who are unfortunate enough to start having problems, and it could be any of us sadly :(, then obviously it's a different matter
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  4. #14
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    oh ok, i was thinking negative equity made it a bad mortgage debt














  5. #15
    Administrator keith's Avatar
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    Quote Originally Posted by britchick, post: 56740
    oh ok, i was thinking negative equity made it a bad mortgage debt
    Only if you can't pay it any more... up until that time, they're presumably happy with the deal they made and keep getting paid interest.

    Of course if someone can't keep up the payments, then the value of the asset v the loan less the profit already made on the deal comes into play but that's a lose/lose for the bank and the home owner.
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  6. #16
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    another question, why don't the banks have enough money? who has it all then?














  7. #17
    Senior Member Watchinherskip's Avatar
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    Not sure how this fits into it, but more than likely, the bank or entity that you got your loan through RARELY is the institution that you will be making the payments to over the life of the loan. Recently they have been bundling hundreds or thousands of loans into packages and selling them off to other entities. Makes your head spin when writing out the checks and you get a new coupon book from a new place every couple of years. I think somehow it was the bundling that had some extra effect on the whole mess. It is above my pay grade to know that.










  8. #18
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    Quote Originally Posted by britchick, post: 56713
    could banks call in their mortgages, loans etc and make people pay it all back?

    if the bank you have your mortgage with goes down but doesn't have a buyer then would you have to pay it back?
    In the US, many homeowners already have defaulted on their mortgages and some have walked away from the homes. The bank now owns the homes. It has happened frequently enough during the past two years or so that the value of the homes has declined. Now the banks own the homes that the borrowers abandoned and can't sell them for anything near the amount borrowed. In addition to the ARMs and dubious qualifications of the borrowers, some financial institutions were lending 100% or more of the home's value, assuming it always would increase.

    Methinks these people have not been in the industry very long. :sigh;

    And, yes, you do have to continue making mortgage payments even if the lender goes under. Another financial institution probably already owns the paper.


    Quote Originally Posted by Watchinherskip, post: 56903
    Not sure how this fits into it, but more than likely, the bank or entity that you got your loan through RARELY is the institution that you will be making the payments to over the life of the loan. Recently they have been bundling hundreds or thousands of loans into packages and selling them off to other entities. Makes your head spin when writing out the checks and you get a new coupon book from a new place every couple of years. I think somehow it was the bundling that had some extra effect on the whole mess. It is above my pay grade to know that.
    Yep! That bundling and selling of these loans multiple times is part of the big problem in the US--and affecting other countries as well. Apart from the convoluted audit trail, few people/organizations actually understood what they were purchasing.

  9. #19
    Administrator keith's Avatar
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    Quote Originally Posted by Taja, post: 56966
    In addition to the ARMs and dubious qualifications of the borrowers, some financial institutions were lending 100% or more of the home's value, assuming it always would increase.

    Methinks these people have not been in the industry very long. :sigh;
    Well I was speaking a guy from the mortgage industry the other day in the UK, no idea if its the same in the states.

    He was saying that when he started out, you got promoted through the bank on the basis of making good solid loans to people. Your loan book was like a CV.

    The last so many years he said things changed and you were being commissioned to sell loans to everyone and anyone. A few bad ones were expected but if you typed in the name to the computer and you got a yes to a loan, you sold it. He said it was very obvious to him at least that some people werent going to be able to afford the mortgage even after a few years but what was he supposed to do? He was getting huge commissions, the bank was happy, the customer desperately wanted it.

    I guess although I dont necessarily agree, I think the weak part was the banks who set the criteria for that computer check to say yes to people.

    Did anyone see the questioning of the ex ceo of Lehmanns? 1/2 a billion earned in the last few years even as the bank was going down. You can bet that guy isn't in any financial difficulties
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  10. #20
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    That's exactly what has happened in the US as well, Keith. The change from commissions for quality loans to commissions for all business brought in the door, regardless of quality. Greed by all parties--people wanting a home or larger home they can't afford, sales people wanting higher commissions and bonuses and lenders who saw profits without considering the risk.

    I missed the interview with the former CEO of Lehmann's, but I've been hearing about it.

    Another good one is the new CEO of Wachovia. Technically, the bank is il-liquid (as opposed to insolvent) and will be purchased by either Citigroup or Wells Fargo. If it isn't part of the government's "rescue" program, the CEO will be paid about $19 million for less than a month's work--golden parachute for buyout.

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