Discuss Detroit Archives - Beginning January 2007 Subprime Mortgage Meltdown and Detroit Previous Next
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Dougw
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Username: Dougw

Post Number: 1602
Registered: 11-2003
Posted on Wednesday, March 14, 2007 - 4:48 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I'm not sure if anyone is following the carnage in the subprime mortgage lending industry right now, but I wonder how this will play out in Detroit, and whether local outfits such as Rock Financial will get hit hard or not.

For those not familiar, these "subprime" lenders are banks that provide high-risk loans and mortgages to people who may have poor credit. Some recent articles:

Subprime mortgage meltdown could ripple through economy

Mortgage Report Rattles Markets -- Dow drops 243 points on a big rise in delinquencies "...the number of foreclosures on all homes jumped to its highest level in nearly four decades, according to the survey by the Mortgage Bankers Association."

The Mortgage Lender Implode-O-Meter (this one is pretty entertaining)

I think this may actually be a mix of good & bad news for Detroit. On the bad side, it may become harder for people to get mortgages on homes they want to purchase, or home equity loans.

On the good side though, I think this may eventually slow the tide of foreclosures in the city, as many people were given mortgages which they couldn't afford to begin with. Not only that, there is a mortgage fraud epidemic happening in a lot of city neighborhoods, where people are scamming money from gullible out-of-state banks who are giving out mortgages way too freely, taking the money and leaving the homes to go quickly into foreclosure and sit vacant. This type of activity may finally slow down with these latest developments.

Also, I get the sense that some of the more local banks such as Rock Financial have been a bit more conservative in giving out mortgages to unqualified buyers, since the local real estate market has been a lot slower than the rest of the country in the last couple years, so I wonder if they may pull through this better than some of these other banks that are imploding. Just a theory, though.
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Livernoisyard
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Username: Livernoisyard

Post Number: 2777
Registered: 10-2004
Posted on Wednesday, March 14, 2007 - 4:56 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Quicken Loans has a lot more on their minds than relocating anywhere, I'd wager. That's probably why they haven't been making many of their plans public.

Who knows who really owns all those mortgages? I believe the Chinese own a huge percentage of US mortgages, and they could wreak havoc with the US financial world. However, that doesn't do the Chinese much, if any good, because it's their money,too.
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Quinn
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Username: Quinn

Post Number: 1192
Registered: 01-2005
Posted on Wednesday, March 14, 2007 - 4:59 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Another point about Quicken Loans and Rock, they are mainly loan originators. They sell the loan immediately to someone else. They hold very little.
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Livernoisyard
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Username: Livernoisyard

Post Number: 2778
Registered: 10-2004
Posted on Wednesday, March 14, 2007 - 5:01 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

And so did Andy Jacobs, no? What's he doing lately?
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Lilpup
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Username: Lilpup

Post Number: 1851
Registered: 06-2004
Posted on Wednesday, March 14, 2007 - 5:04 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The shakeout in Detroit started early in 2006, if not in late 2005, so barring collapse of a local that has a lot of holdings elsewhere, Detroit might have seen the worst already. I think some of what's happening now could, in part, be a ripple effect of what's happened here (in automotive and the resultant housing market problem).
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Dougw
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Username: Dougw

Post Number: 1603
Registered: 11-2003
Posted on Wednesday, March 14, 2007 - 5:11 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

That may be true, Lilpup. The bubble never really had a chance to grow as large here before it popped.
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Dougw
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Username: Dougw

Post Number: 1604
Registered: 11-2003
Posted on Wednesday, March 14, 2007 - 5:17 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

Another point about Quicken Loans and Rock, they are mainly loan originators. They sell the loan immediately to someone else. They hold very little.


True, but apparently a lot of the loan buyers are now trying to force the loan originators to buy back these bad loans that have had a high default rate. So the loan originators may get hit, too. (as they well should, if they were being sloppy giving out loans to anyone with a pulse)

See this article: http://www.flippingfrenzy.com/ admin/subprime-mortgages/expec t-a-major-shakeout-in-the-subp rime-mortgage-industry/
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Southwestmap
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Username: Southwestmap

Post Number: 738
Registered: 01-2005
Posted on Wednesday, March 14, 2007 - 5:20 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Banks, in general, were more conservative about loans. that's why people went to the mortgage brokers for loans. Its the the companies that were lending money to shaky people through the brokerages that are going belly-up. New Century is the main one.

The affect on Detroit will be huge - not because New Century and its brotherhood are going under, (as the borrower already has his money and paid it out) but because so many shaky people bought more house than they can keep up with and now their ARM's are coming due and they can't make the payments. All those people are going to have walk away from their homes and those buildings will revert to the consortiums that bought New Century's loans. Those people are far away and could care less about our neighborhoods and who they might re-sell these now discounted properties to.

As Detroit has one of the highest foreclosure rates in the country now, the question is, what will happen to even our most stable neighborhoods? I know that the house next to mine sold at top dollar (for SW Detroit) for $110,000 in November 2005 to a couple who got a sub-prime loan (at a high rate of interest)and now they are sinking. That loan de-stabilized our neighborhood, in my opinion. Thanks a lot, SouthStar Mortgage.
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Lvnthed
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Username: Lvnthed

Post Number: 12
Registered: 03-2007
Posted on Wednesday, March 14, 2007 - 5:33 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

As far as Detroit, I'm not to worried. I am pretty sure their will be some good people caught up in the carnage, but overall it could be a plus.

My hope is that this situation will weed out some of the bad speculators and crooked mortgage lenders in the city. That the market in the city becomes more solid in it's housing values, because the last thing we need is a city with questionable valuation.

I am though, concerned about Predatory Lending in the city. I am all for home ownership, but their are companies selling pipe-dreams to a lot of people in the D, And they need to be kicked out.

There are so many people who just don't have that extended family support when it comes to making tough decisions like buying a Home as I did. And in a city like Detroit, where there are so many people hungry for that dream, that they are easily exploited.

I think Detroit will be OK, But lets still put protections in place for those who are truly trying to do good , and NOT penalize them for trying to create a legacy in there family.
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Professorscott
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Username: Professorscott

Post Number: 257
Registered: 12-2006
Posted on Wednesday, March 14, 2007 - 5:41 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The advantage Metro Detroit has over a lot of places is that our real estate never got bizarrely overvalued as happened elsewhere. In southern California, houses in what you would consider middle class neighborhoods were routinely selling for $200 to $500 a square foot. Here, at the peak of the real estate frenzy, it didn't get that weird overall. Certain places are expensive, but those are the places that have traditionally been expensive.

So this is one of those weird situations where we may find ourselves ahead of the curve.
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Swingline
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Username: Swingline

Post Number: 737
Registered: 11-2003
Posted on Wednesday, March 14, 2007 - 5:44 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Yes, even neighborhoods like Boston Edison, Indian Village and Sherwood Forest have multiple examples of subprime mortgage foreclosures. Some foreclosed houses have gone vacant for months causing security headaches for neighbors. I've seen a couple of $300K sales of nice large homes where the new owners didn't last 12 months. If that happens, the default occured within the first six months. That's living on the edge.
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Dougw
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Username: Dougw

Post Number: 1605
Registered: 11-2003
Posted on Wednesday, March 14, 2007 - 6:01 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

If that happens, the default occured within the first six months. That's living on the edge.


That's more than living on the edge... in all likelihood, that's mortgage fraud. The typical scenario being that the purchaser had no intention of making any mortgage payments whatsoever, and was in cahoots with the real estate agent to take an extra cut of cash from the seller, and live in the house for free for 12 months or so until it is foreclosed. Meanwhile, the house may be trashed or stripped.

This has been happening all over the city. Although there have been a lot of "normal" (non-fraud) foreclosures too. You can usually tell if it's fraud if the default occurs immediately.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 530
Registered: 01-2005
Posted on Wednesday, March 14, 2007 - 6:03 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Quinn/Dougw: I think Quicken/Rock is in very big trouble. While it's true that they sell almost all their loans to Countrywide Mortgage, which then sells them to Wall Street houses (and others, and possibly CW does some packaging in-house); the loans are then packaged (securitized) and various tranches of the income stream are sold, based on real or perceived risk.

As would be customary, Worldwide would require that Q/R would enter into repo agreements which require a loan seller to take back a percentage, or all of the losers (bad loans.)

A possibly greater risk to Q/R is the fact that it is a very high cost lender. It has huge advertising, staffing and other commitments, and there soon will be no purchasers for most of the kinds of loans they do. The overhead rolls on, so expect a lot of employee terminations.

Q/R is a schlock outfit. Its recent advertising campaign stresses that its loans don't have pre-payment penalties, implying that other lenders do. Guess what. Neither do most other lenders. It's very deceptive advertising.

The only good thing about this current loan debacle is, that as far as I know, few of the loans are federally insured (other than some of those securitized by Fanny and Fredddy, and those loans are of much higher quality I would imagine.) The S & L debacle (I was in the heart of it) cost the tax payers $500 billion, and the tax payers were legally on the hook for a fraction of that amount. The largest corporate bailout and taxpayer giveaway to owners of insured deposits who were paid far over their insured amounts.

It's true that foreign owners bought into most of these securities and it's going to be very interesting to see their reactions. My guess is that petro-dollars bought billions of that junk, and will get back their losses by increassing the price of oil. Great for me, as I produce oil and sell at the NYMEX price.
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Gianni
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Username: Gianni

Post Number: 284
Registered: 05-2004
Posted on Wednesday, March 14, 2007 - 6:51 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I personally know of a case involving an immigrant family who bought and lived in a house in Detroit for about 6 years when the father was working at a good job, legally while his claim for political asylum was pending here. Eventually he lost his case (and his job) and faced with deportation was able to get into Canada and make a claim for asylum there. The rest of the family (5 kids and his wife) stayed here. The house was a 2 flat so they were able to rent the upper and keep up the payments. But they were going to be deported too unless they joined the father in Canada. They tried to sell but no one was offering what they thought was fair. (Many houses on the block and in the surrounding blocks were abandoned, up for auction, or burned out shells).

They found a shady broker who did a refinance at top dollar. The broker was fully aware that the owner of the house and principal breadwinner was in Canada seeking political asylum, did not have a job and could not legally work, and that the rest of the family planned to join him there as soon as they got a cash out on the mortgage. They left a renter in the house and went to Canada (after they cashed the check) where they all made political asylum claims. I would be very, very surprised if that house has not since been foreclosed.

I could never understand how the broker got away with lending money to people who were about to permanently leave the country to claim asylum in Canada, who had no jobs and would not be able to work for many months under the best case scenario in Canada, and who would probably never be allowed back into the USA.

The family was completely on the level with the broker. I doubt that the broker was on the level with whoever was financing the mortgage.

The family eventually won their case in Canada and are now legal residents there.

They are renting.
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Livernoisyard
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Username: Livernoisyard

Post Number: 2791
Registered: 10-2004
Posted on Thursday, March 15, 2007 - 2:09 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

The financial analyst guest--Michael Shedlock--on the CoastToCoastAM radio show this morning was predicting 2 million foreclosures stemming from the subprime loans. (January's foreclosures amounted to 130,000.)

And Senator Dodd is now already pushing for another federal bailout like the S&L fiasco from the 1980s.

And it gets even scarier when considering that a $ trillion of ARMs get reset later in the year.

He also predicted that GM may lose $1 billion due to its GMAC obligations.

Another prediction was that the Californian RE market should have value reductions of 30% to possibly 40% due to those houses being vastly overpriced, in addition to the subprime meltdown.

(Message edited by LivernoisYard on March 15, 2007)
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Jt1
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Username: Jt1

Post Number: 8541
Registered: 10-2003
Posted on Thursday, March 15, 2007 - 8:53 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

Another prediction was that the Californian RE market should have value reductions of 30% to possibly 40% due to those houses being vastly overpriced, in addition to the subprime meltdown.



Might be a good time to move to Cali later this year if prices fall that much (I can't believe that people honestly believed 400-500/SQ ft would hold up in some areas). Add in the ARMS being reset and how many people will not be able to finance their homes while owing much more than it is worth.
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Southwestmap
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Username: Southwestmap

Post Number: 739
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 11:10 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I am not so sanguine as Lvnthed about how Detroit will fare as this sub-prime loan shake-out continues. Yesterday I read a WSJ story about a guy in the south who is taking foreclosed properties off the hands of banks.

Detroit is mentioned specifically as a place that banks are dumping properties into the hands of guys like this - guys who buy the property sight unseen and then change the locks and put up lawn signs that its for sale and then sell it to someone on a land contract basis

"within 10 minutes, Mr Barnes has agreed to buy 12 homes in six states for a total of $35,250.

Banks expect to get far more than that for most of their foreclosed homes. In cities where housing is expensive and land is valuable, lenders usually hire real-estate agents to market foreclosed properties.
Mr. Barnes and his investors buy the dregs: homes in depressed neighborhoods in cities like Detroit and Cleveland..."

Most buyers of foreclosed homes spruce them up a little before trying to sell them. Mr. Barnes wants nothing to do with renovation. a time-consuming and expensive process. Houses are sold as-is.

...Stephen A. Nodine (from a bank) says Mr. Barnes buys more homes than anyone he knows..."

Detroit is being milked and its housing stock is further deteriorated when investors like this start to own more and more property here.

I believe that the Sub-Prime mortgage failure will have great and extended affects on the city.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 535
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 12:53 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Southwestmap: Just what would you do if you were a banker in this position? What could possibly be the basis for your allegation that Detroit's housing stock is being "milked" and how does this conduct, putting people into ownership of housing that would otherwise be vacant, constitute "further" deterioration?

Why don't you buy some of those houses, fix them up, and rent or sell them (w/ much greater risk of getting your money back?)

I think the guy is performing quite a service to poor people who could never get conventional financing to own a home w/o financing provided by the seller, as he does. And the city certainly benefits by having an otherwise abandoned building become an occupied one, by an owner, not a renter.

He's found a need and he's filled it. That's why he makes over a million dollars a year. He's doing well by doing good. I admire guys like him.
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Southwestmap
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Username: Southwestmap

Post Number: 740
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 1:33 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

3rdworldcity: I think it is very well-established that putting people in houses when they do not have the financial capability to keep up a house is setting up both the new owner, and the neighborhood, for failure.

If you live in Detroit, you should recognize the effect: owner-occupied homes with tarps for roofs, crumbling porches, plastic for windows, etc. These homes are owned by people who have not a single extra cent for regular maintainance. When they move on (whn the gas is turned off) what next for that house?

The scenario, common in Detroit (which housing stock was referred to as among the "dregs" of the nation in the WSJ article mentioned before, is the result of "milkers" like Mr. Barnes.

I realize that the goal of life is to make money. I was just pointing out that Detroit's neighborhoods stand to lose a great deal in the Sub-prime loan melt-down.
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Brandon48202
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Username: Brandon48202

Post Number: 151
Registered: 12-2004
Posted on Thursday, March 15, 2007 - 2:09 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

For buyers right now, the mortgage meltdown has made it possible to purchase a house in pretty decent condition for as little as $10K to $20K as banks sell off assets backing these non preforming loans.
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Dougw
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Username: Dougw

Post Number: 1606
Registered: 11-2003
Posted on Thursday, March 15, 2007 - 2:13 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

I am not so sanguine as Lvnthed about how Detroit will fare as this sub-prime loan shake-out continues.


Southwest -- I agree. However, I think we're talking about two aspects to this problem:

First, the massive wave of foreclosures sweeping the city (and the country to a lesser extent), due to extremely lax lending.

And second, the fact that these foreclosures/defaults are finally catching up to the subprime lenders, who are now getting hammered and going out of business in many cases.

I was thinking that this second problem may not hit us too hard... most of these lenders are not based in Michigan anyway. At worst, maybe Quicken/Rock will take a hit. I'm not sure there will be a big difference in how the bank-owned properties are handled afterward, whether the bank has gone under or not, that's a good question.

But I agree that the wave of foreclosures itself is a huge problem for the city.

Basically, we (the neighborhoods) are going to have to buckle down for the next year or so and make sure that all of these bank-owned homes are put on the market as soon as possible, and in the meantime protected from scrappers and the elements, with blight and nuisance abatement rules enforced, etc.
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Livernoisyard
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Username: Livernoisyard

Post Number: 2793
Registered: 10-2004
Posted on Thursday, March 15, 2007 - 2:18 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The financial analyst on the radio early this morning mentioned that the national demand for durable goods (white appliances, cars, trucks, etc.) will take a big hit when all the cash set aside for those would be spent on meeting the extra mortgage payments instead. And if one is going bankrupt, he's generally not shopping for durable goods, especially new ones.

Detroit always suffers in a nation-wide recession. This question remains: How will Detroit fare in such a widespread recession coupled to the longstanding recession of its own?
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56packman
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Username: 56packman

Post Number: 1111
Registered: 12-2005
Posted on Thursday, March 15, 2007 - 2:42 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

"If you live in Detroit, you should recognize the effect: owner-occupied homes with tarps for roofs, crumbling porches, plastic for windows, etc. These homes are owned by people who have not a single extra cent for regular maintainance. When they move on (when the gas is turned off) what next for that house?"

But they do have the money for a fancy car and a Satellite dish
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Iheartthed
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Username: Iheartthed

Post Number: 510
Registered: 04-2006
Posted on Thursday, March 15, 2007 - 2:51 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

"How will Detroit fare in such a widespread recession coupled to the longstanding recession of its own?"

My own personal opinion is that Detroit was just the first to feel the effects and an indicator of whats on the way for everyone else. Not to say that everyone else will feel it as tough as the D has felt it, but Detroit is in no way an isolated economy all to its own.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 537
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 3:03 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Southwestmap: OK, so what would you do?

Is it better to not give people at least a chance? (The guy gets only 30% of the houses back, so 70% of the people seem to be making it.)

Keep the people he sells to out on the street?

The alternative is to (i) either get someone to invest big bucks to renovate the houses and hope to find purchasers who qualify for mortgages [lotsa luck] or (ii) demolish the houses. And as to the latter, who pays? We taxpayers. And how long would it take to compel an owner, often an absentee w/ no reason to comply.

Most people who buy homes are financially qualified when they do it but as their circumstances change they become unable to satisfy their obligations. No one is "putting people in houses when they don't have the financial capability to maintain them." Who would do that and why?

I am amazed at how many people on these threads do nothing but criticize while making no constructive proposals to solve a problem.

In a perfect world, there would be enforceable legislation which would require mortgagees to establish an escrow for repairs, like for taxes and insurance, place the burden on mortgagees to renovate the real estate upon foreclosure, and secure and maintain it until sold etc. Of course no one would make loans here, but that's another issue. Or if they did, the loans would be conservatively underwritten, and there wouldn't be any sub-prime loans, which is a prudent thing.
And finally, The City should have the authority to declare real estate abandoned and permit the city to easily acquire title and sell or demolish it, probably the latter. Again, you Detroiters are going to have to pay for it. Are you willing to do that to keep up your own neighborhoods and property values?

Again, what would you do, under the current laws?
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Southwestmap
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Username: Southwestmap

Post Number: 741
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 3:15 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Plenty of people would put people into houses they cannot afford - that's what this entire thread is about: the sub-prime melt-down.

I don't disagree that the guy from S.C. who buys all these houses in 'dreg" cities (his words) like Detroit is "giving people a chance." But you have to know its cynical: he doesn't give a heck about what happens, he just wants his money.

As to the almighty "right" of home ownership: can't you agree that its better for some people to be renters?
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3rdworldcity
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Username: 3rdworldcity

Post Number: 540
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 4:00 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Swm: Clearly, it's better that some people remain renters, and most do. (Try converting a rental project to condos and see how many renters buy, even when you makes them deals they can afford and which would save them money. In those situations, renters are not buyers. I understand the point you're trying to make about the sub-prime meltdown. However, most sub-prime borrowers have not defaulted (yet, they probably will.)And the ones that have were qualified at the time of the loan, under the criteria in place, but had no foresight as to what would happen down the road if certain conditions changed (interest rate, general economy,impact of becoming a one earner family etc.)

Assuming you're correct about the guy's motive ("..he just wants his money back."), what's wrong w/ that? And, of course he cares. It's his money out there.

Again, a solution to the current melt-down problem resulting in so many foreclosures and vacant homes? Anyone?
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Lvnthed
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Username: Lvnthed

Post Number: 26
Registered: 03-2007
Posted on Thursday, March 15, 2007 - 4:29 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Trust me , I'm mot living in some utopian version of detroit, where everything is perfect.

I know, The city is going to take a HIT.

But whats the harm on hoping that we can turn a negative into a positive. My wish is that the speculators and crooked lenders get put out of business. That respectable lenders don't totally freeze out lower income people who want to own. And I mean the good one's, the people who are busting their asses every day trying to get ahead. Just think, if greed wasn't the motive, the banks wouldn't have lost so much money in the sub-prime business. How many of the foreclosures could have been avoided if they had just given them a decent fixed rate from the beginning. And I mean city and sub. Some of these arms are just ridiculous.
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Tlrecruiter
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Username: Tlrecruiter

Post Number: 2
Registered: 03-2007
Posted on Thursday, March 15, 2007 - 6:59 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

CitiMortgage has two decent sized properties in Metro Detroit, however, they are making money on the meltdown. Citi is buying these subprime while they are low, and will make a huge return on investment when market corrects itself.

Citi is US. Big owners/investors are Fannie and Freddie, also US (not China).
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Gianni
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Username: Gianni

Post Number: 285
Registered: 05-2004
Posted on Thursday, March 15, 2007 - 7:27 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I heard the guy from the WSJ article on the radio yesterday. His method is to sell on land contracts with payments that are less than what people in the neighborhood pay for rent. He says the first thing he does is send his people out to find out what people are paying for rent on the street. Then he sells the houses, with very little fix up on his part, to people who would otherwise be renting. He says everyone would rather own than rent, he's giving them an opportunity to do it, and his customers love him. Plus once they own they will do a lot of repairs on their own.

He admits he sells the houses for 3 to 4 times what he paid.

I'm not sure. On the one hand it sounds like a win win situation. People are still better off than they would be renting and it might even stabilize some of the neighborhoods.

On the other hand the guy sounded kind of like a sleazebag.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 544
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 8:38 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Per the WSJ today, Christopher Dodd (D-Conn.), Senate Banking Chmn. and running for President, says he hopes to pass legislation helping "millions of families" fighting foreclosure.

A federal bailout of folks who speculated in the mortgage market and lost. Some were ignorant, true, and some were taken advantage of, true, but no one forced them to take that mortgage money at gunpoint.

How do you feel about bailing out those people?
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Lilpup
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Username: Lilpup

Post Number: 1860
Registered: 06-2004
Posted on Thursday, March 15, 2007 - 8:47 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

How would they determine who's eligible? Would they make it retroactive to, say, 2005 or so, when all the foreclosures here started? Would Katrina victims be exempt based on benefits received as hurricane relief? Or does it only matter now since it's hitting higher income groups?
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3rdworldcity
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Username: 3rdworldcity

Post Number: 545
Registered: 01-2005
Posted on Thursday, March 15, 2007 - 8:53 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Lilpup: "Or does it only matter now since it's hitting higher income groups?"

Yeah, right, Christopher Dodd is interested in doling out tax dollars to higher income groups.

Think before you type. Your sarcastic ability leaves a lot to be desired.
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Jiminnm
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Username: Jiminnm

Post Number: 1207
Registered: 02-2005
Posted on Thursday, March 15, 2007 - 8:54 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Swmap, did you read the whole article? The Detroit example used was a house that wasn't selling (and would likely be put on ebay). Pittsburgh, No Carolina and other places were use as examples of places where homes resold quickly.

The guy prices the houses to produce a monthly payment less than the market rent. So, if someone can afford to pay rent in an area, then they should be able to afford his house.

Also, if he didn't buy and sell those houses, what would happen? In all likelihood, the houses would sit vacant and continue to deteriorate and just become more abandoned homes.

Why do folks have a problem with him selling for 3-4 times what he bought the homes for? Does he owe anyone a low price, especially since he's taking the initial risk? If someone wants to buy a home for less than he's charging, they're free to find out how to buy a foreclosed house.
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Lilpup
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Username: Lilpup

Post Number: 1861
Registered: 06-2004
Posted on Thursday, March 15, 2007 - 9:15 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Foreclosures have only become an issue since the failures started affecting Wall Street - where was Dodd (or any other pol) 18 months ago?
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Dougw
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Username: Dougw

Post Number: 1608
Registered: 11-2003
Posted on Thursday, March 15, 2007 - 11:09 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The foreclosure rates nationwide weren't that high 18 months ago.
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Lilpup
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Username: Lilpup

Post Number: 1865
Registered: 06-2004
Posted on Thursday, March 15, 2007 - 11:41 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Nationwide foreclosure rates aren't that high now, and nowhere near as high as Michigan's have been for the last two or so years. It's the *prediction* of forthcoming foreclosures that's scaring the market (but, hey, the economy's booming and jobs are being created!).




(Message edited by lilpup on March 15, 2007)
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Southwestmap
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Username: Southwestmap

Post Number: 743
Registered: 01-2005
Posted on Friday, March 16, 2007 - 9:54 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Jiminnm and others: Of course, I read the whole WSJ article - I'm not concerned about how nice the solution is for Pittsburgh and N. Carolina!

I live in a Detroit neighborhood that will be/is swamped with these foreclosures. people without a pot to pee in were able to buy houses that are, on average 100 years old and need lots of upkeep. But, with the high rates they were charged, they couldn't do any upkeep (if they knew how or were motivated) and now those houses, sinking fast already, will be sold to people who have EVEN LESS resources. This affects housing stock very negatively.

If you live in Detroit you know that such idealistic thoughts as "maybe these people whose family never owned a house in many generations, who have no tools or husbands or fathers to help, will suddenly become tidy neighbors who replace roofs and sidewalks and windows and furnaces..." are hopeless thoughts.

I would rather have the homes vacant than have the loud, bad neighbors (some of whom are selling drugs to get the mortgage money together!) that this sub-prime mortgage has brought on my neighborhood.

My issue, all along is to add a current to the discussion that will alert readers to the real, local costs of the "sub-prime meltdown."

3rdworldcity: I agree, people got into this with eyes wide open. Turns out that many of the loans were "liar loans" in which people lied about their incomes.
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3rdworldcity
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Username: 3rdworldcity

Post Number: 546
Registered: 01-2005
Posted on Friday, March 16, 2007 - 11:09 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I think we all agree it's a very bad situation and is very likely to get much worse.

It's just one more real estate debacle that I've lived through starting w/ the REIT disaster commencing in the early '70, the S & L scandal of the mid-'80's (I was very involved in both of those), and now this sub-prime business, which anyone that has an ounce of experience or common sense could see coming.

The same root cause: too many (investor) bucks chasing too few good deals (primarily yield wise) fueled on the addiction to short term profits.
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Jelk
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Username: Jelk

Post Number: 4242
Registered: 10-2003
Posted on Friday, March 16, 2007 - 11:25 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I love the smell of a market correction. All of us elitists and skeptics get to sit back and laugh at the foolish, unwashed masses for, once again, buying the snake oil. Funny how the quick-fix cures are always worse than the ailment they promise to treat.

Well in my lifetime we've used public money to bail out Chrysler, the S&L's, and the airlines. I hope this is where a line is drawn and everyone involved in this sub-prime nonsense (from the home owner who can't pay for that adjusted ARM to the CEO's of these rackets) are left to suffer the havoc they brought upon themselves.
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Lilpup
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Username: Lilpup

Post Number: 1873
Registered: 06-2004
Posted on Friday, March 16, 2007 - 11:36 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

we've used public money to bail out Chrysler

FWIW about the Chrysler bailout:

o The federal government guaranteed private loans to Chrysler; the company gave the federal government stock warrants in exchange for the guarantee.
o Chrysler repaid the private loans in full, and the government made a profit on the stock warrants.
o Chrysler gave the US Treasury authority to order management changes.
o Chrysler was required to submit an annual operating plan for federal approval.
o Chrysler put the head of the UAW on its Board.
o The company was banned from issuing stock dividends.
o Unions made labor concessions.
o Executives took huge pay cuts.

can't say the same about the S&L scandal, or others
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Livernoisyard
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Username: Livernoisyard

Post Number: 2805
Registered: 10-2004
Posted on Friday, March 16, 2007 - 11:51 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Iacocca was paid $1/yr during the bailout, if my memory holds.
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Pffft
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Username: Pffft

Post Number: 1225
Registered: 12-2003
Posted on Friday, March 16, 2007 - 12:00 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I really think these subprime loans are responsible for those endless neighborhoods in Rochester Hills and beyond, of McMansions. The people in them aren't CEOs, they're middle class people, in over their heads.
The concept of living within your means is long gone.
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Dds
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Username: Dds

Post Number: 169
Registered: 10-2006
Posted on Friday, March 16, 2007 - 12:22 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

I really think these subprime loans are responsible for those endless neighborhoods in Rochester Hills and beyond, of McMansions.



What about the "McMansions" that have been developed south of Jefferson on the east side for the past 10 years? There's brand new development off of Conner that has some of the ugliest $500,000 cookie cutter homes I've ever seen. I'm sure that just because those houses are in Detroit, they are immune to criticism.
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Jt1
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Username: Jt1

Post Number: 8563
Registered: 10-2003
Posted on Friday, March 16, 2007 - 1:13 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:



What about the "McMansions" that have been developed south of Jefferson on the east side for the past 10 years? There's brand new development off of Conner that has some of the ugliest $500,000 cookie cutter homes I've ever seen. I'm sure that just because those houses are in Detroit, they are immune to criticism.



Or the fact that there are very few in Detroit and tens of thousands through the rest of the region.

Seems like you're fishing for some us vs. them when it isn't in the thread.
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Dds
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Username: Dds

Post Number: 172
Registered: 10-2006
Posted on Friday, March 16, 2007 - 2:13 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Not fishing, it just seems that everybody complains about how ugly they are, and focuses on how they criss-cross the suburbs. I would have to say those houses belong in the suburbs. Suburbs were originally pre-planned communities with cookie-cutter housing.

Nobody in the forum seems to care if the fugly things are built in the city.

To me, I was just pointing out how there are tendencies on this board to turn a blind eye to things that are despised in the suburbs, but are going on right next door, so to speak.

Whether or not it was thread-jacking, I've also noticed in my short time that that's the norm here.
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Jt1
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Username: Jt1

Post Number: 8564
Registered: 10-2003
Posted on Friday, March 16, 2007 - 2:37 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

Nobody in the forum seems to care if the fugly things are built in the city.



Are you selectively reading the forum. There have been tons of threads bitching about the architecture of many 'suburban looking' homes in the city. Also consider that most of the city is laid out in a suburban design. The simple fact is that there are a few in the city compared to the suburbs.

quote:

To me, I was just pointing out how there are tendencies on this board to turn a blind eye to things that are despised in the suburbs, but are going on right next door, so to speak.



You support my point with your incorrect comment above. They are not next door for the vast, vast majority of the people in the city. You are citing a few instance in a city that is 139 Sq. Miles. They certainly are not the norm and I wouldn't be surprised if many, many people in the city did not even know they exist.

quote:

Whether or not it was thread-jacking, I've also noticed in my short time that that's the norm here.



So you complain about the norm but then you keep it alive.
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Dds
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Username: Dds

Post Number: 173
Registered: 10-2006
Posted on Friday, March 16, 2007 - 3:34 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

There have been tons of threads bitching about the architecture of many 'suburban looking' homes in the city.


They certainly are not the norm and I wouldn't be surprised if many, many people in the city did not even know they exist.



Which is it? Are tons of people bitching on threads, or do they not know they exist?

And if folks on the forum are enlightened to the few instances in the city by previous threads, why are they continually focusing on the blight in the suburbs, when it's taking up a, albeit small area, good portion of prime river frontage real estate?

quote:

So you complain about the norm but then you keep it alive.



Et tu.
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Jt1
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Username: Jt1

Post Number: 8565
Registered: 10-2003
Posted on Friday, March 16, 2007 - 3:44 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

There have been tons of threads bitching about the architecture of many 'suburban looking' homes in the city.



I am speaking about forumers.

quote:

They certainly are not the norm and I wouldn't be surprised if many, many people in the city did not even know they exist.



I am speaking about residents of the city which is not representative of the forum.

quote:

And if folks on the forum are enlightened to the few instances in the city by previous threads, why are they continually focusing on the blight in the suburbs, when it's taking up a, albeit small area, good portion of prime river frontage real estate?



I think we are reading completely different forums. You seem to be focusing on a few threads and ignoring the majority. Carry on.

I am not complaining about the norm. I am pointing out the fact that you are making city vs. suburbs coments when they don't exist on this thread. Feel free to keep going since you are really struggling with the concept.
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Johnlodge
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Username: Johnlodge

Post Number: 261
Registered: 10-2003
Posted on Friday, March 16, 2007 - 4:09 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Currently trying to get a home loan. Finding out it's a little more difficult than it would have been. Pisses me off that I have to suffer because these companies chose to give loans to people who could obviously not afford them. Why should I be penalized? I'm looking for a loan well within my limits, but now I have to put down deposits and send in more information off the bat just for a pre-qualification.

Don't punish me for your own bad business practices.
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Jt1
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Username: Jt1

Post Number: 8570
Registered: 10-2003
Posted on Friday, March 16, 2007 - 4:12 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

John - I don't believe that you should have to put a penny down for a pre-qual.

What deposits are being requested?
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Johnlodge
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Username: Johnlodge

Post Number: 262
Registered: 10-2003
Posted on Friday, March 16, 2007 - 4:20 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Quicken said rather than do pre-quals anymore, they want to do straight up letters of approval, and want a $500 deposit. I didn't like it so I decided to keep looking around.
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Jt1
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Username: Jt1

Post Number: 8571
Registered: 10-2003
Posted on Friday, March 16, 2007 - 4:27 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

That sounds shady to me. I have never heard of that. Can anyone in the industry explain that?
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Dougw
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Username: Dougw

Post Number: 1623
Registered: 11-2003
Posted on Wednesday, March 21, 2007 - 12:15 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

They found a shady broker who did a refinance at top dollar. The broker was fully aware that the owner of the house and principal breadwinner was in Canada seeking political asylum, did not have a job and could not legally work, and that the rest of the family planned to join him there as soon as they got a cash out on the mortgage. They left a renter in the house and went to Canada (after they cashed the check) where they all made political asylum claims. I would be very, very surprised if that house has not since been foreclosed.

I could never understand how the broker got away with lending money to people who were about to permanently leave the country to claim asylum in Canada, who had no jobs and would not be able to work for many months under the best case scenario in Canada, and who would probably never be allowed back into the USA.

The family was completely on the level with the broker. I doubt that the broker was on the level with whoever was financing the mortgage.


Gianni -- that sounds like yet another variation of mortgage fraud. In this case a refinance scam, I guess. Oftentimes the person receiving the mortgage only sort of knows what's going on, the family in this case. They're a "straw buyer" who gets hit with a bad credit rating when the foreclosure happens.

Anyhow, that speaks to how stupid some of these subprime lenders were, when a shady broker can successfully get a soon-to-be-deported family a big loan. Most likely the broker just lied on a lot of the forms, and the lenders never bothered to check. These practices are catching up to the lenders now, though!

It would be interesting to know what percentage of foreclosures in the city over the last couple of years were actually mortgage fraud.
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Gannon
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Username: Gannon

Post Number: 8682
Registered: 12-2003
Posted on Wednesday, March 21, 2007 - 7:07 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I suspect these mortgage brokers saw this coming, yet their gravy train was still out from the station with enough momentum for them to keep rolling in cash...so THEY probably lied more and more to keep the deals going.

Had an old high-school friend boasting that he could get me a mortgage on anything, and really wanted to get me 'in the game'...from the simple dealings I had helping him get some cool hifi for his mcschmansion out in Farmington Hills, I realized that I would NEVER do business with him officially. I've stopped talking with him.

He and his buddies in the office were involved with very shady gray-market loans that they graciously 'provided' some pinned to the mat at closing...which I equated with loan sharking.

Seems every person I know, legitimate or not, gets hit with bullshit costs packed into the closing...and these mortgage companies all hire and keep on staff VERY intimidating 'closers' like they have in the car sales industry.

They would 'loan' thousands of dollars to people, desperate to finally join the American Dream...which IF I could search the old archives, I could PROVE I've been calling the American Nightmare for about three years now...and make a tidy sum OFF THE BOOKS.



This is not even CLOSE to being finished. Like most of life, it will be like an onion. They will peel off one later at a time...and there will be LOADS of tears flowing on all sides.
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Dougw
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Username: Dougw

Post Number: 1624
Registered: 11-2003
Posted on Wednesday, March 21, 2007 - 12:29 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Yep, once that gravy train gets rolling, it's hard to know when to jump off, even though you know it's going to ride off the rails at some point. Kind of like the dot-com bust, except there were a lot more shady dealings involved this time, and there will be more pain to go around.
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Jiscodazz
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Username: Jiscodazz

Post Number: 6
Registered: 02-2007
Posted on Wednesday, March 21, 2007 - 11:24 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Americans these days are short-sighted and never plan for hard times. The mortgage brokers were sleazy, the home buyers were stupid.
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Dougw
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Username: Dougw

Post Number: 1632
Registered: 11-2003
Posted on Monday, March 26, 2007 - 11:04 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Front page story in the paper today about the subprime mortgage/foreclosure problem in metro Detroit...

http://freep.com/apps/pbcs.dll /article?AID=/20070326/NEWS07/ 703260363

quote:

Subprime loans rattle a shaky state housing market
March 26, 2007
BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER

Michigan's above-average reliance on risky subprime mortgages is inflaming the state's real-estate downturn and pushing it near the top of the list of states suffering mortgage delinquencies.

Wayne County saw the fourth-highest mortgage foreclosure rate in the nation in February, according to RealtyTrac, a real-estate service firm.

The problems weigh heavily on moderate-income homeowners who have subprime loans -- mortgages given to people with shaky credit histories. Subprime loans allow such buyers to own a home, but only at interest rates that can run several percentage points higher than a standard mortgage rate.

Angela Gavelis inherited her grandmother's house in southwest Detroit and in 2005 took out a $60,000 subprime mortgage at 8.5% to fix it up. But she wasn't able to find a job, fell behind in her payments, and her lender foreclosed last year. She filed for bankruptcy and is fighting the foreclosure.

...

Michigan's main mortgage lenders, which include Rock Financial and LaSalle Bank, the successor to the old Standard Federal, said they have not been hurt much by the rising delinquencies because they have not engaged in a lot of subprime lending. Walters said only 1.5% of Rock's loans have been subprime.

But subprime lending has been a mainstay of many mortgage brokerages, firms that originate loans but do not offer other banking services. Many of those firms, and the investment companies that bankrolled their loans, are now experiencing a wave of failures in national credit markets.

...


I'm a little surprised at the statement that only 1.5% of Rock's loans have been subprime, but I guess that's probably good news for Rock if true.

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