March 19, 2007

FLASH: Senate subprime fiasco hearing on Thursday (after Sen. Dodd is done blowdrying hair)

HP'ers know we've predicted Senate hearings for over a year now, but I thought they'd take off in 2008, as a way for incompetent and corrupt congressmen to show the voters that they're on top of things.

Which is humorous, as we know now that not only were they complacent as the out-of-control REIC gamed the system, not only were they bribed by the NAR and homebuilder lobbies, but that their incompetence was directly responsible for the housing bubble and now resulting crash.

Now "presidential hopeful Dodd" (say that a couple of times without laughing) is having hearings on Thursday to "investigate" the subprime bomb.

Oh, won't this be fun!

WASHINGTON, March 19 (Reuters) - U.S. Senate Banking Committee Chairman Chris Dodd said on Monday he asked executives at the top five subprime mortgage companies to testify at a Thursday hearing and explain their lending practices.

Dodd said he asked executives from HSBC Holdings Plc, New Century Mortgage Corporation, Countrywide Financial Corp., General Electric Co's WMC Mortgage unit and First Franklin Mortgage.

Federal and state banking regulators and consumer advocates have also been asked to testify at Thursday's hearing, Dodd said in a statement. Dodd, a Connecticut Democrat, is a U.S. presidential hopeful.


Anonymous said...

Why call in all the executives to explain their lending practices.

They should just call in a high school math student because it doesn't take much in the way of brains to do the math and show that the loans made were a pile of SH$T.

Anonymous said...

Are you sure he's not the plastic garbage bag guy - you know, the man from glad???

Anonymous said...

"Dodd said he asked executives from HSBC Holdings Plc, New Century Mortgage Corporation, Countrywide Financial Corp., General Electric Co's WMC Mortgage unit and First Franklin Mortgage." -- Asked them what -- how much money they need to stay in business??? God help us.

Anonymous said...

Oh gee, well you see I have an, um, well prior commitment or somethig that day...totally booked up and all, not my fault understand, Gladys handles can I get back to you, er later?

Anonymous said...

It's a global conspiracy. Everyone but the Russians and Iran are "playing ball". Monetary mayhem, and I'm always last in line. Alas.

Anonymous said...

Alright, HP'ers - I'd like your thoughts on a couple of items.

In this great unwinding, doesn't the REIC become an unwitting accomplice? My thought being quite simply that in order to keep the Lexus payments up, Realtors will put downward pressure on prices just to keep an income stream. I'm sure there is an industry that "eating its young" is more commonplace, but I'm hard-pressed to think of one right now.

I want to share a personal story that might shed some light on the pain that the REIC has set about in a whole lot of families. To be fair, my problems were of my own doing and not related to any outside parties, but they shed light on the personal pain of going through ruin...

At the ripe old age of 20, I started a company selling wireless phones. My new bride and I struggled to make ends meet during the first couple years and addition of a baby girl, but we survived as I continued to work and build our company. By 24, I had opened our 8th store and was making a pretty good income. We bought our first house for $265,000 (in Minnesota) with 20% down and all was good. We put some money into the house and decided to upgrade to our dream house the following year.

Again, we added some savings to the proceeds from our initial purchase to come up with 20% and purchased our home for $450,000 in mid-2001. We had a son on the way, two decent used SUVs in the driveway and a little extra cash each month to have some fun with and all was good.

Of course, little did we know the world as we knew it was about to change: 9/11, dot-com bust, recession, etc. Business started to decline, cutbacks had to happen and we were unequipped to deal with the stress of it all.

Fast forward through two years of stress, pain, bill collectors, arguments and a little too much "escapism" and my wife and I separated, I closed the business and our "dream home" was in foreclosure and all was not good.

Luckily, we were able to sell our home during the "retention" period and walk away. We had literally lost EVERYTHING. It was a horrible time and perpetuated itself for quite some time. My entire "man-hood" had been lost.

Fast-forward 4 years...I'm happy to report that my wife and I worked things out, moved to California for a job that pays a decent wage, and while we continue to struggle we have managed to work our way through a lot.

We currently rent a nice 4BR home in a nice neighborhood. My wife continues to stay-at-home with our children (we homeschool) and I make $85K as a software engineer. I have been blessed with abilities that allow me to make an above average wage and we're content to take the slow road back to home ownership (especially given the current circumstances in Southern California real estate).

I'd like to say we've been able to bank a bunch of money over the last 4 years, but we're about as middle-class as it gets. Hopefully, as the future unfolds things will get a little easier. I can't say that I don't have moments of frustration surrounded by 5-series and 500SL's, but I'm content to continue sharing a little Saturn SUV with the Mrs. and living within our means.

I don't wish what I went through on anyone. It's a devastating and depressing world - and very lonely. I can't imagine being even more "stuck" without equity or an above average wage, but so many of the people around us are in that situation. In our community of 28 homes, 7 are currently for sale. It's terribly sad.

My advice for anyone upside down on their home and facing foreclosure. Hold off the bank as long as you can. When you do go into foreclosure, start banking your mortgage payment and live "rent-free" during your 6-month retention period (use it all). Swallow your pride - its worthless. Use some of the money you saved during those 6 months to hire a bankruptcy attorney and for a deposit on a place to live when the bank finally tells you to get out. Its not the honorable way to go, but screw honor - you need to do whats in the best interest of your family at this point. My heart goes out, but don't forget you made your bed.

Anonymous said...

A bit too late, wouldn't you say?

Bill said...

Is it me or does Dodd look like a retarded Newt Gingrich...figuearly speaking of course.

Anonymous said...

As a retired member of the NYPD this is what we called "CYA" or Cover Your Ass

Anonymous said...

Is it me or does Dodd look like a retarded Newt Gingrich...

That is too kind, IMO. He looks like the missing link.

Anonymous said...

One of the biggest lies regarding the current real estate crisis is that the "housing industry" is in the business of putting people in houses; the building of a house is merely the byproduct of what could more properly be termed Venetian-style debt farming, the turning of raw land into vastly overpriced mortgages. It is the mortgage, not the home,which is the primary product!
The United States had a system--the Savings & Loan
system--which was created to help American families buy affordable housing, but the S&L system was deliberately destroyed
in the 1980s, in a process we identified at the time as an aspect
of the Global 2000 depopulation scheme. The S&Ls were bankrupted
precisely because they were successful in their mission, and were replaced by a system in which money, not people, was paramount.
Today, we have housing prices in the stratosphere, and families
and individuals taking on huge debt burdens to cover the
As prices rose and wages declined in real terms, it became
necessary to adopt ever more creative financing schemes to keep
the home sales going; the subprime market, the adjustable-rate
mortgages, and the no-money-down mortgages were all part of a
system designed to sell homes to people whose incomes were
insufficient to pay for them. The subprime lenders were {created}
to fill this function--they are an effect, not the cause, of a
system which uses real estate as a looting mechanism. The issue
is not "predatory lending" by the subprime lenders, but the
predatory nature of the system itself.
Putting families in affordable houses is a good thing;
destroying the economy upon which their lives depend and overcharging them for the necessities of life, is not.
It is the system itself that is subprime.

Anonymous said...

the brass from NEW will plead the 5th.

FlyingMonkeyWarrior said...

Don't Blame the Market for Housing Bubble
By Ron Paul
March 19, 2007

The U.S. housing market, long considered vulnerable by many economists, is now on the verge of suffering a serious collapse in many regions. Commodities guru and hedge fund manager Jim Rogers warns that real estate in expensive bubble areas will drop 40 or 50%. Mainstream media outlets like the New York Times are reporting breathlessly about the possibility of widespread defaults on subprime mortgages.

When the bubble finally bursts completely, millions of Americans will be looking for someone to blame. Look for Congress to hold hearings into subprime lending practices and “predatory” mortgages. We’ll hear a lot of grandstanding about how unscrupulous lenders took advantage of poor people, and how rampant speculation caused real estate markets around the country to overheat. It will be reminiscent of the Enron hearings, and the message will be explicitly or implicitly the same: free-market capitalism, left unchecked, leads to greed, fraud, and unethical if not illegal business practices.

But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.

The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.

This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.

The actions of lenders are directly attributable to the policies of the Fed: when credit is cheap, why not loan money more recklessly to individuals who normally would not qualify? Even with higher default rates, lenders could make huge profits simply through volume. Subprime lending is a symptom of the housing bubble, not the cause of it.

Fed credit also distorts mortgage lending through Fannie Mae and Freddie Mac, two government schemes created by Congress supposedly to help poor people. Fannie and Freddie enjoy an implicit guarantee of a bailout by the federal government if their loans default, and thus are insulated from market forces. This insulation spurred investors to make funds available to Fannie and Freddie that otherwise would have been invested in other securities or more productive endeavors, thereby fueling the housing boom.

The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth,

the blame lies squarely with Alan Greenspan and Ben Bernanke.

HB Bear said...

Leave it to Congress to call hearings AFTER subprime has begun its collapese.

Gee, um, thanks guys.

Anonymous said...

These clowns are just going to say "the worse is over. We have bottomed". Then next week we'll get another mortgage sector plunging. (God willing because I want my puts to come in).

Lord, please wipe out the sinners who borrowed too much. I need a house cheap. Maybe two houses. Maybe three. Amen.

Anonymous said...

They should round up a cross section of mortgage fraud borrowers.

Since when are mortgage brokers their brothers keepers?

A deal is a deal.

These people have to lose their houses (So I can get one of them cheap). Make it so.

Predatory lending. Yeah. Predate this.

Anonymous said...

Why did lending get so out of control? Isn't it the role of the federal reserve to revue bank records including lending and collateral for those loans, loan loss reserves, etc? Is it possible that AG knows more then he's letting on? Is there a federal reserve auditor who might know something about the risky new lending practices?

These guys are just in it for the money. The shareholders should be holding hearings for these guys. Then if there is any fraud let the lawsuits begin.

Markus Arelius said...

Come on! By now, we all know the answer.

They did it all for the nookie.

Anonymous said...

That's more than the republicans did when they had control. Everyone knows republicans encourage people to take advantage of others as long as there's money to be made. Caveat Emptor which means "watch out or republicans will screw you out of money".

Anonymous said...

Ron Paul is full of it. The predicted housing crash has capitalism written all over it. What do we expect from an economic system that depends on nurturing the worst in people in order to function? Greed, selfishness and radical individuality, the forces that capitalism's boosters always cite as being "harnessed", are what got us here.

And those same dark impulses can be blamed for all of the recent CEO thievery scandals, the S&L crisis of the 80s and every other economic debacle to befall this cesspool called a culture.

Anonymous said...

As of hearing this news of bailouts, I am officially a former democrat. I will never vote for Dodd or Clinton , ever, and frankly, they have soured me on the whole Party with this crap.

I wonder if they know that, while they are talking about bailing financial cretins, these loans are still being made. They are advertised all day long in the papers on TV.

Do you think they know that? Yeah I think they probably do. Sarcasm off.

So what's the plan here? The lenders get to keep making these loans and taxpayers get to keep bailing everyone for generations?

These 2 have lost their minds if they think that anyone who did not participate in this insanity is wanting to "help" those who did.

They are also nuts if they think that Americans believe that these bailouts, disguised as bails for stupid homedebtors, are not actually bailouts for corrupt Banks.

Come on Dodd and Clinton, do you really think we are that stupid. It's insulting.

Thanks for posting the Ron Paul commentary. At least what he says makes sense. I'll take that.

A politician who makes sense is a revelation these days. Let's vote Ron Paul for President. He can't possibly be worse than what we've had the last 10 years. And he MIGHT be better.

(to the Anon who lost their house- I really liked your comment. Maybe you can go testify at a Senate hearing someday)

Anonymous said...

Bitter Renter said
Ron Paul is full of it. The predicted housing crash has capitalism written all over it.
The Fed back is ground zero for capitalism, duh.

Anonymous said...

Fed Bank rather.

Anonymous said...

Dear Senator Dodd,

I had no idea that when I got my shint new platinum credit card that the bank eag going to charge me interest. Lots of interest. I'm having trouble paying it back because I bought so much stuff. I really don't feel like selling all my stuff, plus, since it is used stuff it isn't worth as much as what I paid for it.

Can you please put together a bailout for me and lots of other folks like me who got in over our heads?

I mean I really like my new plasma TV and stuff but it sucks having to pay so much to the bank.

--Steve the dog

Anonymous said...

Mr. Dodd has been on the Senate's Finance and Banking Committees for several years now and he presided over the creation of the brewing mess. The chickens are coming home to roost and this is C.Y.A. speak. As the stated income and Alt A mortgage loans reset on their interest rates later this year, someone should remind Mr. Dodd of the Certification Box language on the bottom of the mortgage application 1003 and how that language relates to Title 18 of the US Code and fraud standards.

Smug Bastard

Anonymous said...

(first time posting) I realize this is off topic but the comments on this blog are the best. Being a content renter that silently watched my Placer County city blow up into a massive bubble, I am too rubbing my hands together with glee as the foreclodure numbers skyrocket. There just aren't that many rich people around to afford all of these 800,000 zero clearance lot homes. They won't bulldoze them so... the anticipation is killing me!

I do feel sorry for the children who are losing their homes. Bad parenting comes in many forms.

Anonymous said...

LOl Steve Dog. Send that letter to the brainless Mr. Dodd, and cc. it to Hillary.

Anonymous said...

No bailouts for stupid a$$wipes who helped drive prices into the stratosphere by buying what were CLEARLY overpriced homes.

No buyers = lower prices. Go on a buyers strike until at least 60% is whacked off.

Anonymous said...

I hope Dodd can do something. You see, I was ripped off by my mortgage broker. He said that my interest only loan would stay interest only for ten years. And after that, I would choose how much principal I wanted to pay. He said don't worry, the documents state all that. I trusted him for he had me in his heart. He handed me his business card and it indicated to me that he was an honest Christian, we go to the same church, Saddleback in OC. Lesson learned there, IXOYE on a business card means squat.

Moral of the story? God benefited him, not us. Neighbors tell me that if I had known The Secret, I would of been OK for I would of thought positively and my home value would not have dropped 10% in the last six months. The Secret my ass.

Here is what a neighbor said, "Richard, put up a picture of your potential buyer, what you think he/she will look like. And they will appear. You think about this all day and the buyer will come to you via the universe. Your thoughts convert into physical energy. Think only good things, and good things will happen."

Hmmm.....anybody have a good picture of a potential buyer of my beautiful 1400 sq ft condo? Comps say $520K. I am selling for $450K. Detached. No walls. No sharing. Small yard…but this is OC.

Yes, I know I should of read the documents but the documents are very complicated and everyone around me was buying as fast as anything came up. I've been told for years that RE is the best investment. Especially in OC. I would offer an amount and the seller had three offers the same day. This is what it was like in 2003 and 2004 in Orange County.

Dodd will find a solution for all of us. I am sick and tired of everyone saying I bought for greed by using an interest only loan. Who does not want his/her home to go up in value? This is the American Dream. Yes, yes, yes...a home is not supposed to be an investment, but who honestly believes that it is not.

I have to sell because I took money out to pay for medical expenses. Is this so wrong? So many people have slammed me for using my HELOC, but I did not take a vacation or buy stuff. I used a lower rate loan to pay for a needed operation. Please don’t kick me when I am down. Yes, it is all my fault but Dodd will find a way to help all of us.

Think about it, all these foreclosures coming around the bend. Who is left over to buy the crap from China? We will be subsidized to keep on buying more crap. What a country. Dodd and his cronies will bail us all out. As a Christian, I forgive my mortgage broker. We have to. And you must forgive me. I am thinking posivitely these days, Dodd will find a way. He has Jesus in his heart, I am sure.

Your taxes will go up. So what? Better to live here than Iraq. This is the price we all pay, we help each other out as much as possible. You will end up paying for my mistakes and operation. As I will pay for your roads and schools. Same difference.


Anonymous said...

Richard, you should hunt down your former mortgage broker, rip off his head and sh*t down his neck.

Anonymous said...

No, Richard, you are sadly mistaken. Dodd will not be able to bail people like YOU out of the mess YOU created. Your credit will be hosed, and you will be lucky to live in an apartment. When your house drops down to around 200K a fellow HP'er will be picking it up (pennies on the dollar). And yes, it is your fault completely. Its a business transaction and you should be competent enough to read the contract or hire a lawyer to do it since this is generally the largest purchase of ones life. YOU are so screwed. Oh, here's a little tid bit... Christianity is a farce, and a way to control feeble minded people...

Anonymous said...

People seem to forget that "subprime" lending put millions and millions of people in homes that otherwise would not have been able to. Now everyone is like "subprime, subprime, it's the reason for the housing debt/foreclosure crisis" Subprime lenders are the devil" yada yada yada.... B.S. !! It's a combination of many factors including low interest rates, rapid hosing appreciation, consumers getting into too much debt, etc.... Other than some bad apples out there (like any business-- sad reality) people made their own bed. The best thing we can do as a society is education.... no not useless disclosures at the closing table wasting more paper .... but real education starting with required high school classes. If everyone wants to usesubprime as a scapegoat go ahead, but it's just a piece of the puzzle in a society where lenders of all kinds are more than willing to offer credit because there is a demand for it. Supply and demand..... and subprime lending (I prefer to call it non-conforming lending) when used responsibly, has it's benefit to society just like student loans and many other consumer debt vehicles. It's too bad that people have been taken advantage of and ripped off but you keep crying "subprime! subprime! burn em' at the stake" you're just shooting the messenger.