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Joined: Sep 2006
Posts: 40,399 Likes: 280
Legend
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Legend
Joined: Sep 2006
Posts: 40,399 Likes: 280 |
My point was real simple.. it is possible to have a negative net worth, in fact quite a few people do... and owing more on the house than its worth creates negative net worth...
yebat' Putin
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Joined: Sep 2006
Posts: 30,822 Likes: 516
Legend
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Legend
Joined: Sep 2006
Posts: 30,822 Likes: 516 |
Seriously? If you owe $250,000 on a house valued at $200,000................and the bank takes it............maybe your net worth doesn't go up - but it sure goes up $50,000. If "up" means you have 0 - that's better than being negative $50 grand.
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Joined: Sep 2009
Posts: 798
All Pro
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All Pro
Joined: Sep 2009
Posts: 798 |
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The worst of it may have happened DURING the Bush administration, but it didn't happen UNDER the Bush administration.. it happened under multiple administrations, it just came to ahead while Bush was in office... and none of the Presidents actually overvalued homes, they just worked with banks to make loans that people with lower incomes could get so they could enjoy the prospertity of homeownership... and what happened, as happens with almost everything the government does, it didn't turn out the way they had planned and houses were built at an alarming rate, initial buyers, instead of enjoying the $120K house they bought, realized they could sell it for $250K and use the equity to buy a much bigger house.. then the economy collapsed and they were left with a house they couldn't afford. Poor decisions by the government? Without a doubt... Greed from the bankers and lenders? Absolutely... Greed on the part of the homeowners? Certainly...
You are missing a big key in the chain. The federal govt. did spend 40 years trying to get banks to lend to people of lower incomes or of various backgrounds. However, that lending was still subject to regulation and relatively strict underwriting. The vast majority of the worst of the worst loans that cratered the whole system came from independent, unregulated mortgage companies. In many cases, the large investment firms a large stake in these companies in what the industry terms "vertical integration."
And then, as you say in a later post, the banks passed the loans and the risk off to the federally backed entities Fannie and Freddie. The link you are missing is that the risk of these loans was completely hidden b/c Wall St. investment firms sliced and diced them into huge piles of loans (mortgage-backed securities) that looked OK at first glance and were highly rated b/c the rating agencies were using Wall St's models.
Trying to increase homeownership for people using guidelines that prevent things like "redlining" and that try to expand the repertoire of reasonable underwriting standards is one thing, and I think is a valuable thing to do. The problem came when Wall St. took advantage of this to essentially defraud the country by hiding all the risk in the system. Hiding risk is a nice way of saying defrauding someone.
If people don't believe me that there was essentially fraud, consider the models Wall St. was using. At their core, the models were based on the assumption that housing prices would never go down and that no income no asset loans would default only rarely (instead we are seeing default rates in these types of loans that ultimately may reach 80%). Only a complete fool or a con artist would accept those assumptions.
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What is being left out of this conversation is the impact of the expanding global market. Some people post as if the US can just fix itself without significant improvements in the rest of the world and the fact is that is not the case any more. Like it or not, we are linked to the rest of the world through imports/exports, currency exchanges, information sharing, energy production/consumption, etc.. We can't run this country like we exist in a vacuum any more.
Agree 100%.
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Joined: Sep 2006
Posts: 15,015 Likes: 147
Legend
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Legend
Joined: Sep 2006
Posts: 15,015 Likes: 147 |
Quote:
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But what about the millions that flat out lost their homes? Their net worth would be impacted immensely.
If you owe $250K on a house and the house is only worth $200K and the bank takes it from you, your net worth just went up by $50K.... 
Agreed, but we are talking about average net worth as relative to levels 15 years ago. I hope the fool didn't carry an upside down mortgage the last 15 years, cause that means he severely overpaid long before over-paying was the "in-thing", 
We don't have to agree with each other, to respect each others opinion.
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