Math and Rage: Obama update

[RobbyPants]

Also you'll get heavy metal poisoning in your groundwater.

Goddammit! I'm thinking about moving back to Holland!

[Zinegata]

I live on around $10K a year (single guy with his own studio under a 15-year mortgage plan), but I live in the Philippines where cost of living is considerably lower.

I looked up the cost of living. According to a website I consulted, an apartment similar to what I have costs the equivalent of $20 a month. I pay $425 a month. And that's considered a deal in my area (it eats up about half my monthly income).

$20 is way too low for a major city in the Philippines unless you're fine with sleeping on a cardboard sheet with 20 other guys. Minimum is around $100.

I'm currently on a 15-year mortgage plan, where I pay $140 a month for a decent condo in a fairly posh area (US equivalent of a suburb). That our mortgage system shrugged while the American mortgage system exploded is one of those minor imponderables about how the world works.

[mean_liar]

I don't know about your area, but CA construction is tanking super hard. My stepdad is in management in underground construction, and the news he's getting says that companies are either dying outright or bidding at cost or below cost in an effort to still have a company when the recession ends and construction picks back up.

I'm seeing a lot of mergers on the east coast (Suffolk buying Berry locally, with AECOM buying up Tishman being the bigger national news) rather than bankruptcies. There's no doubt that the industry is having a hard time, but bidding below cost is a strange thing to do when you could otherwise find a buyer.

My exposure to tunnel work is basically nil, though. I'm only really familiar with commercial and infrastructure work here and petrochemical stuff from contacts.

Lago, Americans are retarded monkeys. They already are blaming the democrats for the recession. There is no hope for our country. Anyone who is capable of leaving needs to do so now.

There's plenty of good news if you're white and upper-middle-class.

[Lago PARANOIA]

Anyway, I think the chances for an actual depression are pretty low.

Even though wages and jobedness has been pretty stagnant/decreasing over the past few years, productivity and GDP have actually been going upwards. There is wealth being created, it's just not going to the unwashed masses.

[RobbyPants]

I guess that makes sense, given tax cuts to the rich 10 years ago. Is there some other reason as well?

[Lago PARANOIA]

Not just that, but it's also a factor of improving technology permanently rendering some old jobs obsolete. And of course NAFTA and the shifting of blue-collar jobs overseas. The first is pretty much unavoidable. But it (or rather, people trying to avoid becoming a victim of it) is the major reason as to why college attendance rates have exploded in the U.S. over the past couple of decades.

Like mean_liar said, if you're part of the 'professional' middle class then the future looks pretty okay for you. Not really that okay because income inequality will continue to create downwards pressure on your wages and prospects even if you survive the economy overhaul. But you're going to be better off than the working-class and lower-middle-class.

[Crissa]

That our mortgage system shrugged while the American mortgage system exploded is one of those minor imponderables about how the world works.

It has to do with a couple things, one being the difference between rents and mortgages did not explode; the limited exposure of banks and population to debt compared to the US; and a lack of speculation.

I've pointed out several times that Santa Clara (where San Jose is) has more bedrooms than people. And at the same time, rental apartments were occupied fully with two to five people per bedroom - in our complex, we were strange to have only one to a bedroom. Purchasing the same quality / square footage would cost two to three times as much as renting. Speculators were buying houses on margin, and trying to sell them three or six months later at a higher price.

That's a recipe for a bubble burst, not something indescribable.

-Crissa

[Rathe]

In relation to renting versus buying:
Here is an interesting calculator that lets you see when one or the other is a better use of your money.

- Rathe

[Zinegata]

That's a recipe for a bubble burst, not something indescribable.

-Crissa

I refer more to the imponderable of a Third World mortgage program having a more sound credit screening policy than the mortgage fuck up in America.

[Crissa]

I don't think the word 'sound' means what you think it means.

Anyhow, it's not that people can't pay their mortgages because they're un creditworthy. The defaults are nearly entirely because of 'unable to pay because their loan was written so that they wouldn't be able to pay under circumstances which became true later' such as massive layoffs, unregulated balloon payments and interest jacking, and the remained of underwater loans are then created by this situation.

For instance, did you know that the value of a home (for a loan) is docked 20% by having a foreclosure in the neighborhood? So say you put down the standard 20%. Your new neighbor, unbeknownst to you, suffers a layoff or injury and suddenly can't make their house payment. They return their home to the bank - and suddenly your house is underwater.

Banks totally know that other banks make terrible neighbors.

So if you have a majority of home owner-occupied (like in the US), and there's a recession, those houses lose value. Any finances based upon having that value are now shot through - which could be other businesses (like my neighbor the painter, who uses his home as part of the value to get loans to complete jobs at his business) which then suffer and cannot hire people, who then can't afford their home, etc.

The soundness has nothing to do with credit and everything to do with the regulation of the system.

-Crissa

[Zinegata]

Crissa, fuck you and your "I am holier than you" attitude. Do not seek to educate me on what the word "sound" means when you are a bitch who doesn't even live in the same fucking universe as the rest of us.

Anyway...

A friend of a friend of mine from the US (who worked for one of the lending companies) have said that quite a number of people in the US had mortgaged the same property to two or three lending companies. Meaning if all the loans went kaput, three companies would be fighting for possesion of a single house.

Which happened. Often. Leading to the firm he worked for to go bankrupt, along with other lending companies, which in turn caused the big banks to blow up.

That has nothing to do with interest jacking or any other form of excuse-making for people who aren't able to pay for their loans. That's the US credit screening policy being less sound than the Philippines. Our mortgage system isn't retarded enough to allow a single house to serve as collateral for multiple loans. And our banks aren't dumb enough not to cross-check each other's records to make sure the same house isn't already being used as collateral for somebody else.

However, in America, it seemed that a few retarded greedy people just allowed lending to happen stupidly in the name of short-term profits. If this is wrong, then let someone other than Crissa explain it.

[Koumei]

Except it basically is what Crissa said, even if that does hurt your feelings. The right wing desperately wants people to feel it's all the fault of poor people who shouldn't be owning houses in the first place (firstly because they get off on that, secondly because they're lining up for their multi-million dollar bonuses and don't feel like answering questions about where the fault really lies), but the fact is most of the people who took out a mortgage, only for it to later fall through, felt secure that they could pay it all off when they first took it out.

The real people to blame are those that walked out of this with pockets stuffed full of cash. Which is usually the situation: look for whoever made the most money, ten will get you twenty that they caused the problem.

[fbmf]

How is Zinegeta blaming the poor folk?

The way I read it, he is blaming the irresponsible lending policies of banks who didn't research what would happen if one of Crissa scenario's (layoff/injury/whathaveyou) occurred.

Game On,
fbmf

[Count Arioch the 28th]

In reality both Crissa and Zinegata were right. Banks were giving mortgages to people that they shouldn't have been giving them to, while at the same time Banks were allowed to do things that before the Reagan administration was against the law to do.

Banks were giving mortgages to people and setting the terms for them to fail so they could resell the house over and over again, and it bit them in the ass.

Also, my econ teacher was telling the class about something banks were doing right before the recession. I forget what it's called, (I want to say it was called a DMR fund or something, but I am probably wrong).

Basikcally, two banks that had nothing to do with a given mortgage would make bets on mortgages held by other banks. If someone defaulted on a mortgage, a third bank that the person might not have ever heard of also might owe a fourth bank hundreds of thousands of dollars too.

[Koumei]

I probably just read too much hostility in it when none was even there (aside from that directed at Crissa). I read it as the blaming of the person who uses the one house for several loans and the few cases of "Oh, and uh... my boss is an asshole, so if you call him to ask if I work for him he'll lie and tell you I'm not." "That's okay, we won't bother checking so you can happily lie to us. After all, someone else is buying our loans so it's not our problem!"

[violence in the media]

It does sound like he's partly blaming the mortgage lenders and banks for the debacle by zeroing in on particular cases of potential fraud and/or poor diligence. Though I am curious about why a purportedly free-market type is raising objections about a salesman being unconcerned with anything beyond making the sale at hand? That's implying a level of nannying that I can't imagine you'd actually be comfortable with, in this or in other aspects of life. Loaning money is ALL gambles and risk, even with the most desirable of borrowers.

Getting into assessments of a borrower's ability to repay a loan under potential future circumstances seems like it would either be incredibly intrusive or unrealistically restrictive. Also, it seems that at some level of future prognostication requirements you might as well start consulting star charts, tea leaves, and Nostradamus. "Jenkins, have you properly accounted for the 2012 apocalypse when considering this client's ability to service the loan?"

How does it work in the Philippines? What percentage of the population is able to purchase a home? What do home prices there look like in relation to median income? What's a typical down payment look like? What is a typical mortgage? How long do lenders expect or require a borrower to weather a period of unemployment (or other financial catastrophe)? What happens in the unthinkable scenario of someone actually being unable to repay?

[Rathe]

All this talk about improper lending leading to the credit crisis makes me think about Jonathan Jarvis's video Crisis of Credit . I found it both informative and well done.

This is also an interesting site for additional information:
http://www.good.is/post/making-sense-of ... cial-mess/

- Rathe

[K]

The problem with the lending crisis is not that the wrong people were getting loans, it was that they were getting variable rate loans that cause your monthly payments to skyrocket the instant the interest rates go up (which they always do).

[Crissa]

The thing is, interest rates didn't go up. They just made the loans go up because now that they're using their credit, their credit is worse, and so their rate is worse. It's a self-defeating cycle. But the people writing the loans didn't care because either they didn't own the loan, see next paragraph.

Yes, there is a third thing which happened, called securitized mortgages and a fourth thing, called credit default swaps.

So, what would happen is that you'd have a Mortgage Agent, a Mortgage Underwriter, and a Mortgage Lender. This is still how it work, btw. So the Agent would get paid for how many loans they completed. This person is also responsible for the accuracy of your loan application. They'd submit it to the Lender, who would give it to the Underwriter for acceptance (but with your details scrubbed into numbers and yes/no boxes) to see if it met the terms they were okay with. The Lender would choose the Underwriter that would approve the most loans, rather than one that is strict, because they could. FHA (fannie may and freddie mac) are underwriters, for instance.) Then the Lender gave the loan to you.

Then the Lender would sell off the loans they didn't like, because there was a market for them. Some lenders sucked at this, and bought the wrong loans - like Countrywide - and some lenders excelled at covering up their tracks - like Bank of America. There was a market for them because of Mortgage-backed Securities. Mortgage-backed securities are like buying a share of a savings and loan bank. (Except there's no savings and no actual bank responsible for the loans!) It's a great investment... You get a little bit of money back every month over a long period.

Enter Credit Default Swaps. Basically, insurance on your investment. If your investment goes sour, your CDS pays out your initial investment (or in eventual use, a value determined on the outcome of the investment). This allowed investors to: A) Not care about the quality of their investment B) Get the highest 'safety' rating on their investment - because they'd get paid back, right? Well... What happens when the market sours? How is the insurer supposed to pay off all those insurance policies at the same time? That's how AIG lost a trillion dollars - and since most of those investors were things like pension funds, the US government stepped in to pay out the badly written policies.

There's a few other tricks, like choosing the appraiser that gives the best value or reverse loans or flippers or whatnot, but that's small potatoes compared to this stuff.

But what hasn't happened is banning any of the steps that got us here: CDS is still legal. Mortgage-backed securities are still allowed to be sold opaquely (as opposed to on an exchange). There's no laws involving paying mortgage agents per mortgage.

Instead, we're getting laws penalizing individual owners occupied mortgages who suffer foreclosure while ignoring that they're outweighed by the speculative and commercial mortgage market. Did you know that the vast majority of bad mortgages were issued to corporations? The number of office blocks under foreclosure exceeds the number of houses, at a time when we have more houses under foreclosure than 1930.

Look, people are gonna get laid off or otherwise have horrible things happen to them. It's not their fault. They lose their home, that's what's supposed to happen. Why penalize them, and why blame them for their creditor not planning around perfectly normal occurrences like that?

I've personally seen banks holding properties do the following: Not accept a sale because 'it didn't increase in value from the prior sale'; not accepting a buyer because 'they're using an FHA loan which might take 45 days instead of 30 days to complete' (when no loans were taking 30 days to complete at all); kicking out renters in foreclosed properties and leaving the home empty; to just plain sitting on properties and letting them rot rather than sell them at market value.

Banks didn't want the values to go down. But they did go down, and they've been using their leverage to make sure it's anyone but them who gets hurt by this. They're doing their darnedest to cripple the market and not write down the value of their investments. That is illegal.

-Crissa

PS, follow Rathe's links. They're awesome.

[cthulhu]

The problem with the lending crisis is not that the wrong people were getting loans, it was that they were getting variable rate loans that cause your monthly payments to skyrocket the instant the interest rates go up (which they always do).

]

Most countries operate on a 'all mortgages are variable basis'

The US did have 'teaser rate' mortgages that are not common elsewhere.

[Username17]

Anyway, I think the chances for an actual depression are pretty low.

If you go by the standards of economics from the 1920s, we are already in a depression. We are running a "real" (U6) jobless rate of 16%, and we've been doing it for 2 years straight.

While GDP is not negative anymore, a good portion of that is simply paper bullshit based on people buying up the scraps from all the failed banks and businesses. This is a depression. Already. The only question is how long the economy is going to be running catastrophically below capacity with grinding deflation. And I don't see any prognosticators who are predicting less than 5 years of this shit.

-Username17

[Prak]

As pointed out earlier, you guys don't live in California.

-Crissa

Nothing personal, but California is an entity unto itself. I'm not saying that's good or bad, but I am saying that it is so far removed from the rest of the American experience that it might as well be a different nation entirely.

Not to say that I wouldn't love to visit one day, I totally would. I have heard great things about Callie.

(And my older brother went to callie, told the people at the welfare office he was homeless, and they gave him $300 a month in food stamps, and made about what I make at walmart collecting old bottles. As opposed to Virginia, where the Tea Party has been running the show for 20+ years and single adults don't get food stamps for any reason.)

...fucking... fuck! I'm going about this unemployment thing all wrong...

[Prak]

We don't actually have a problem that we couldn't solve for a trillion dollars a year for five years. We have a problem that the Democrats are too spineless and the Republicans too ass backwards and evil to do anything meaningful about at all. Prepare for the Third Depression. Grab your ankles.

Can I lie back and think of England instead?

I looked up the cost of living. According to a website I consulted, an apartment similar to what I have costs the equivalent of $20 a month. I pay $425 a month. And that's considered a deal in my area (it eats up about half my monthly income).

...I now officially hate Zine and everyone who lives in the phillipines...

$20 is way too low for a major city in the Philippines unless you're fine with sleeping on a cardboard sheet with 20 other guys. Minimum is around $100.

...I still hate you all.

[Count Arioch the 28th]

I hate Zine because today it was less hot anywhere in the phillipines than it was here (36 C, if you're interested)


Hate hot hate hot hate hot hate hot hate hot

[Crissa]

We love you, too, Count.

-Crissa