I know a REAL HOUSING FINANCE EXPERT!

My game is shameless.  I have a good friend who is a Housing Expert and I shamelessly Jacked her comment from my post yesterday and Used it to make a post. 

You should go show her some love

 

As a housing finance expert, I am really annoyed at this whole notion that a whole bunch of Muufuucas went out and blatently bought houses they could not afford.  While there was some of that, the data has never demonstrated that shit to be true. As a matter of fact 2006 and 2007 data demonstrate that nearly 40% of mortgages delinquent were held by owner/investors. i.e. folks who just want to get paid.  Additionally, the reason a lot of folks homes are unsellable or have mortgages that are upside down is because they were overvalued by who? The banks and mortgage brokers.  Appraisers have been warning about pressure to appraise upward and the problem it might cause as the market got to costly for new buyers to enter.  This is especially true in hot markets.

Many people are losing their shirts because of over valuation not imprudent home purchases. As a matter of fact nearly 25% of the folks who are currently in pre or foreclosure are there because of other economic conditions–not sub-prime loans.

Lastly, once again this thing most vastly effects minority homeowners. Financial literacy is key to buying a home. It is easy to say, that people were being greedy. But once again, financial literacy among minorities and lowincome individuals makes it difficult for homeowners to understand how to work it out when they get into trouble. Its always easy when you have the knowledge to think that others should too.

7 comments

  1. thepoliticalassistant

    When you are locked up for a crime, you cannot use ignorance as an excuse. Same applies here. Your miseducation does not in anyway absolve you of the risk you as a homeowner took. Are housing issues complicated? You damn skippy they are. Are those that bought these homes that were overvalued the primary cause of our financial crisis?…I don’t think so, seems way deeper than that to me, but I can’t discount their contribution. It does hold some weight. I cannot agree more with preadatory aspect of this, because when someone holds a house in your face (most likely your dream) it is hard to say no, no matter what the terms are.

    This is what I know…Banks don’t loan us (poor people) 30 year mortage money, we’re too risky. They will give us money for a shorter period of time (say two years) if they think we can build up some equity and pay back. If we are able to do that, they’ll give us another loan, maybe a long-term loan. Problem is to build up equity you need housing prices to rise, when that doesn’t happen, you’re screwed. Seems to me this system allowed folks to use their homes as ATM’s, which we know that sooner or later will let you know that you have insufficient funds.

  2. Jazzy

    I’m glad someone out there realizes that the mess we are in is not soley regulated to minorities having a desire to own a home. Greed is what did this greed and the concept of flip this house for a quick profit did this. The need to out do the Jones did this. We live in a culture were we feel the need to one up one another. Maybe this is what we needed to get back to being a community that helps one another.

  3. Jonzee

    Politicalassistant,

    Once again, you miss the point. Consumer law, in all actuality, does protect consumers from lack of disclosure on the part of the seller–i.e consumer “ignorance” as you purport. The reason the Truth in Lending Act exists is primarily to protect consumers against unscrupulous sales tactics in which terms for repayment and credit granting are not clearly explained. The regulatory teeth to inforce the Truth in Lending Act however is nearly non-existant unless a buyer is informed of those rights. Its like buying a lemon. The lemon law is very much like the Truth in Lending Act.

    As a former banker, let me further say that overvaluation is not something that is ever really in control of the buyer. Bankers hire appraisers. Big banks have appraisers on payroll–which is where a significant amount of overvaluation occurs. What I find even more hilarious about your statement that banks don’t loan poor people money is that, as I stated before the community development banks big banks with high CRA ratings do actually loan money to poor folks for 30 years at fixed rates–and have the lowest portfolio at risk ratios, and delinquency issues.

    So, what then, does that say?

  4. thepoliticalassistant

    I don’t think I missed the point at all.

    You yourself admitted that SOME folks knew what the risks were and jumped anyway.
    All this talk about lending acts and appraisers is self-promotion. I was, in fact, speaking to the idea that we do a disservice to each other when we excuse our ignorance, particularly in this issue. How long have we been talking about discrimination in real estate practices? How long? How long have we been talking about studying the terms of your loan? I know banks hire appraisers and how long have we been talking about the importance of being able to choose your own appraiser. They tell you this on the TODAY show for pete’s sake! If there is a group of people that should be keenly aware of being taken advantaged of in these matters, it is us. So the question is…do we care? There is where my frustration lies. A shifty lender is not a new animal.

    Now…

    I’m not sure what is hilarious about the statement that banks don’t lend poor people 30 year mortgage money. What I said was sad, serious and based in fact. The fact is, the dominant view amongst bankers is that poor people are in fact riskier to loan to. I am aware of the exceptions, I’m talking about the rule. Can you get these loans? Sure. Are they as readily available as you make them out to be, they can’t possibly be. C’mon, real talk, not idealism for a second. As a former banker, you should know that amongst other things banks feel the income of poor people can’t always be documented and is more volatile, In fact, this is the question they and mortgage orignators have asked themselves since the beginning–“How do you lend money to poor people and get paid?” Nothing I wrote spoke to our success in repaying when given the opportunity, I know what we can and have done when given the opportunity.

    Again, I don’t disagree with the preadatory aspect of this, I don’t disagree with the deception and greed aspect of this. I”m just not willing to play the victim, nor support a portrayal of victimhood. To me, that is part of the reason why we consistantly find ourselves at short end of these crises, we’re always trying to find a way to exclude ourselves from any responsibility.

    Good stuff. I am in fact done with these long ass comments, feel like I’m posting on my own blog or sumpthin.

  5. Jonzee

    Actually,

    REAL TALK. They are readily available–from plenty of responsible lenders who did not bastardize Fannie’s underwriting standards for their own profits. Bank of America and Chase–currently the banks with the soundest balance sheet and the highest CRA rating made these “risky loans” and put sound underwriting practices into place to protect their investments. So, why is it, that other banks have said this bull about poor people “being risky”, when now they are being sold to the highest bidder. And on top of that, many people who were offered “predatory loans” met the standard underwriting for a regular loan. Poor people “are risky” is simply putting a bow on redlining.

    This is not about people failing to read their loan documents. This is about a bastardization of housing lending practices from the tippy top of the scale. FANNIE does not make loans. They underwrite banks who as FANNIE MAE lenders are supposed to follow certain underwriting standards to get the loans done. FANNIE purchases the loans in order to buy down the interest rates under its various programs. Credit Default Swaps further declined the integrity of the paper that FANNIE and FREDDIE bought.

    And I still find it hilarious that you basically excuse the banks for breaking THE LAW. The Truth in Lending Act is law. Its not about ignorance its about fairness. Understanding what loan terms mean in plain english. ITS the LAW. Now, if you chose to ignore that–of course it will take a class action suit from folks like NACA to take you to task.

    Regardless of whether we agree or disagree, the fact remains that if we let the absolute bottom of the housing market fall out we will have the following:

    1) An even greater surplus of reo and bank-owned real estate. This will destroy stable communities, increase blight, and create what we don’t want—1000’s of investor owners who do not take care of their property and who will do what 40% of these mortgages holders have already done–leave the keys in the mailbox and walk away. It will be a national “Harlem in 70’s” situation.

    2) An even greater decline in consumer confidence. The backbone of the economy is spending. If people don’t spend, then what?

    3) Declining property tax basis which will further remove funding from the public education system-and this time the middle class will really know what it means to send your kids to underfunded over crowded schools.

    Yes, clearly we need to intervene at the top of the market. But if we do nothing to shore up the bottom…well Hell hath no fury like an capitalist economy that makes nothing and won’t buy anything.

  6. thepoliticalassistant

    I made my point on how banks view poor people and I stand by that. I never excused it, I told you like it is…not that I liked it or excused it.

    You wrote in your piece that financial illiteracy was the main reason minorities are vastly affected by this, then you say this is not about reading the terms of your loan.
    You blame this situation on the decline in ethics as it pertains to housing lending practices. That is the dominant view, I understand that, but to me its more than that.

    And I stated why I felt that way.

    I’ve been asked to end this little debate and as much as I’d love to continue it, I concede. We can agree to disagree, but one thing I think we should be able to agree on is that we have got to stop giving power to those who prey on our ignorance or in SOME cases co-signs our need to get rich quick. We expect those that provide goods and services to us to be educated and accountable–Why should we expect any less from ourselves as consumers.

  7. inkognegro

    WHOA WHOA…EYE didn’t say bring this foolishness to a close so it didn’t get said.

    Unless Mrs. Political Assistant said shut it down…you have every right to make your point.

    WHile I am here, both of your points have merits.

    NEITHER viewpoint should be overlooked.

    We are all responsible.

    I think JOnzee is only making the critical point that those who tried to get rich quick have GOTTEN Their punishment…for Wall Street to walk free and clear from all this.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s