Market Conditions in 33133>Question Details

Brian Halste…, Real Estate Pro in Miami, FL

Did the real estate market collapse because of the bank unrestricted lending or was it simple bad government?

Asked by Brian Halstead, Miami, FL Mon Jan 24, 2011

Was it no regulations too little regulations, Capitalism well I do not care people are still suffering out there losing their homes, I see it almost everyday and people with little options. Have you ever seen a person with a job and family begs a landlord to give them housing, a common basic need because their credit is mess up for the next god knows how many years because of a foreclosure? Well I have and it is no joke.
I think one of my colleague said it best “The government (meaning all of them) are in a bubble a political bubble”, they don’t really know what the people or feeling or facing daily like some Realtors do, they are insensitive that is what they are and if they were not they would have fix this problem already, only one word can be used to describe what has happened to many citizens in this our America land we love and it is “Evil”.

Selah (It is a signature exhortation for our thoughtful reflection and weighing of what we have just read)
Brian Halstead Lic Bro

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If the lenders had to keep the loans in their own portfolios, they never would have given them. It was only with the knowledge that the mortgages and notes would be packaged and sold and hen re-sold that the "who cares" attitude prevailed. There was no risk to those giving the loans, only fees and commissions.
This was the damage done by unrestctined lending.

However, Wall Street will continue to try find ways of lining their pockets at the expense of the middle class. Look at their profitability today, while many of our citizens are still unemployed. Bonuses will once again be in the millions and billions. It's disgusting.

This is pure greed, and perhaps this is where government and regulation must step in. Unfortunately, just as they protect us from street crime, they must also protect us from greed. They need to create laws to stay ahead of the clever, creative ways that skirt current laws. So yes, our bad government played a major role in the collapse as well.

Chris Crystal
Miami Real Estate Co
2 votes Thank Flag Link Tue Jan 25, 2011
Banks caused a great deal of this problem in the fact that they were at one point not looking at ones income, but rather the appraised value to lending value. Now I know that if my relatives ask for a loan, some can and will pay you back, and then their are others that will pay everyone else back but you. If you lend to the the last option you are just giving away your money, now when the wife asks me when will I get the loan back, I really hope that I can say as soon as possible dear because the family member I lent to is one that will do everything possible to pay me back quickly. Inlike the banks however, I will get no bailout if the family member burns me on the loan and I will have to face the wrath of my lovely wife, and I will hear the I told you so comments for many years to come!
1 vote Thank Flag Link Mon Jan 24, 2011
I think the mortgage market was not properly regulated (which I believe it is now). There were a few loan products out there (100% financing, no income no verification, interest only) - interest only in particular that should not have been made to the general public without a sizable downpayment. I met a few customers through short sales presentations that had a combination of a few referenced above and the result was not good. I also feel the media plays a big part in "manipulating" the housing market and has done so in the past....and will continue to do so in the future.
0 votes Thank Flag Link Wed Oct 26, 2011

I think it was both, AND a big helping of greed. People saw the Joneses were moving up, and lenders were throwing out the paperwork like it was a party, so why not? And why not take money out of the house and buy bigger cars, take vacations? It was a combination of ignorance and bad governing. What is truly sad is the people like those you mentioned who were good, hardworking people, who were trying to provide for their families and were tricked into bad loans. I have seen it too and it is devastating.

Like I responded to your other question, we need to fix so many things in this country. We need to rebuild consumer confidence once again. We need to LISTEN more, you are right, to those who understand problem areas. Government should listen to Realtors on the housing market, because who is closer to the issues? I agree with that, and hope that we can shape things up soon.

Rachel LaMar, J.D.
LaMar Real Estate, Inc.
0 votes Thank Flag Link Mon Jan 31, 2011
Sorry but I have to chime in again.... a 2nd grader could have figured out that someone working at McDonald's for mimimum wage shouldn't be able to buy a $500k home. No prudent investor would have lent money in that scenario--unless they also had an insurance policy to cover their bets.

The "greed" was caused by AIG and other companiews that "insured" these certain-to-fail mortgages. That company and others should have been wiped out and bankrupt and so should the foreign "for profit" corporations (banks) that didn't do their due diligence about the viability of their "insurance". Those corporate managers have laughed all the way to the bank with their disgustingly high bonus checks and our "politicians" let them get away with it! We have the best paid politicians in the world. Seems treasonist to take US taxpayer money and pay it out to French, British and German investment banks!
0 votes Thank Flag Link Tue Jan 25, 2011
Its greed and dumbness which brought about all this.
1.Loan officers were greedy to get their commissions thus they manipulated documents and defrauded the home buyers.
2.Banks were greedy to give more loans for any one and every one with one hand (to sign) and two legs (to walk into the bank) even though the borrower had never had a paycheck in his life.
3.Democrats were greedy to increase their vote bank so they allowed underwriting risky loans.
4.Republicans would go into category#2 as they own and are supported by most of the financial sector.
5.Home buyers were greedy to buy a home in bubbling market without thinking for a second why the house rate increased from last week to this week. They were busy standing in lines to see houses.
6.Last but not the least in any way, home owners were greedy for money and they took and spent money from banks by refinancing homes. They obviously spent the money they did not have.

1.Dumb home buyers were sold ARM's. If you cant read your purchase contract then dont buy a home and dont blame the Loan officer. Blame your dumbness.
2.Banks and underwriters were dumb enough to approve loans to buyers with bad credit and no down payment. They can blame the democrats for the easing the regulation and letting underwriters approve risky loans, but the regulation did not make them to do it.
3.Insurers like AIG were dumb enough to insure risky loans for 3 to 5%.
4.Home buyers were dumb enough to buy when they cant pay a loan. You buy a home when you need one and have some money to put down and make 250% more than the mortgage payment. you dont buy a home because the rats are low.
5.Home buyers who bought to resell thought they were wise enough to buy and sell the home before the rates falls. May be some were but is every one capable of that?

My opinion: Its the fault of home buyers to enable all the others do things which would ruin them and country.
Bank unrestricted lending did not cause it. If every home buyer thought rationally, who would the banks give unrestricted loans to?

Personal note: Sadly Canada did not seem to learn from our fiasco and they are currently giving loans with virtually no down payment to any Tom, Dick and Harry (walking into the bank) for about 2% APR.
Note:Canada doesnt have 30 years fixed loans. Max fixed is 5 yrs.
So get ready for another downturn caused by Canada this time.
0 votes Thank Flag Link Tue Jan 25, 2011
Good question. I think I agree most with Gerard and Chris, it was essentially: fraud.

Since the Great Collapse of 2008, we're finding out that significant percentages of loans issued did not meet the issuers own underwriting standards.

While it's easy to point fingers at the grunts on the ground, it would have had to be one saintly profession for it's retail practitioners to decide, on their own, that even though the loan didn't appear to make sense, and that there was somebody ready to buy it within hours after closing, they weren't going to approve the loan.

I'm not trying to excuse anybody, and I'm not an "unbridled free market" kind of guy, but a restaurant likes fat customers, and bars like drinkers, and we don't point our fingers at the chefs and bartenders of the country for making us fat and alcoholic. Along the same lines, customers came to real estate agents and loan reps, and the loan reps soon learned that the person with a 550 credit score could be "helped" with a NINA loan, and I'm really not sure that it was the loan rep's responsibility to counsel that client otherwise.

Now, perhaps in the next iteration, we may decide to do just that. I would be fine with that.

As far as whether "they" are in a political bubble or not, just go to and find out where Congress is getting its campaign financing from. Go ahead and type in or click on a name. If you're not one of the top five donors, they're probably not paying much attention to your concerns.
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0 votes Thank Flag Link Tue Jan 25, 2011
Bad government.

If our "leaders" had simply allowed AIG to fail then prices would have been stabilized and the huge losses would have been assumed by those fmany foreign (for profit) banks that took the risk. AIG sold "insurance" on the worthless mortgages and when they could no longer pay off on those bad mortgages our "leaders" took the money out of our pockets and gave it to AIG. Ridiculous!
0 votes Thank Flag Link Tue Jan 25, 2011
While the unrestricted lending is a product of bad government, there were many other causes as well, like exorbitant exuberance on the part of the American consumer.
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0 votes Thank Flag Link Tue Jan 25, 2011
Of course this was greed but not just by the banks. Yes, they were willing to lend under less than ideal circumstances but the public has to take some responsibility. Just because you can get a mortgage loan (credit card, shiny new car, boat) doesn't mean that you should. With home values rising at a fast pace people just wanted to jump on board at any cost. Surely there was fraud but there was also ignorance and greed. I don't believe that we can blame this solely on the government. At some point we have to bring personal responsibility back into the equation. But as is always the case we are now going to have an entire generation that thinks it is A-OK to have a foreclosure on their credit history because it just wasn't their fault. Surely there are some with this legitimate claim but there are many more in number that are just jumping onthe band wagon.
0 votes Thank Flag Link Tue Jan 25, 2011

In my was the banks and the banks alone...

The buyers and the banks were not forthcoming at the time.

If you could fog a mirror, you qualified for a loan. The loans were no-doc (no documentation needed) just tell them about your assets.

You also could not get a loan with a fixed rate...they were all ballon payments in a few years or increasing interest rates and VOILA, here we are!

Also, the people that were borrowing with no doc loans did not allways tell the truth. "I make 10,000 a month" was not checked! I am sure that both the banks and some of the borrowers are Totally responsible.

Now we have bailed them out--- good people have lost their homes --- The Newest problem is "stratigic default" (which I think is totally wrong, wrong, wrond).

Hope this helps! Remember, this is my opinion.

Debbie Albert, PA
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0 votes Thank Flag Link Tue Jan 25, 2011
Don't underestimate the other person's greed.
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0 votes Thank Flag Link Tue Jan 25, 2011
In my opinion, over regulation. The community reinvestment act demanded lenders make loans to people with rough credit histories. They further went on to support the packaging of the loans creating the unrestricted flow of money to a very tenuous borrower base. The new buyers coming into the market increased demand scooping up the affordable homes and pushing up values throughout the entire housing segment. Everyone got caught up in the frenzy and either bought or borrowed against historical precedent until the bubble eventually popped leaving us where we are.
The tax credit last year was an attempt to assist the recovery but I feel all it managed to do was move some fall business into the spring. I believe things are starting to stabilize now, and if congress can leave things alone we may start to climb out.
But I could be wrong.
0 votes Thank Flag Link Mon Jan 24, 2011
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