Boz
Blue & Gray (over 10,000 posts)
123 Fireballs!
Posts: 10,355
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Post by Boz on Sept 9, 2008 11:03:04 GMT -5
PushyGuyFanClub has given me an aneurysm!
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Post by PushyGuyFanClub on Sept 9, 2008 12:48:51 GMT -5
Just think of all the girls you're going to be pick up this weekend with this information.
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Boz
Blue & Gray (over 10,000 posts)
123 Fireballs!
Posts: 10,355
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Post by Boz on Sept 9, 2008 14:37:59 GMT -5
Just think of all the girls you're going to be pick up this weekend with this information. Hey baby.....I'd like to broker your mortgage. Eh. Kinda catchy. Beats anything else I've got. ;D
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FewFAC
Golden Hoya (over 1000 posts)
Posts: 1,032
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Post by FewFAC on Sept 9, 2008 18:30:47 GMT -5
I'd like to also point out that most of the mortgages weren't necessarily bad per se, but price deflation forced the writedowns that caused banks to stop lending while raising massive amounts of capital to balance the books.
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EasyEd
Platinum Hoya (over 5000 posts)
Posts: 7,272
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Post by EasyEd on Sept 9, 2008 18:37:58 GMT -5
Not allowing landlords to deduct interest on their mortgage loans would do one thing for sure. Rents would go up as landlords passed this onto the renter. As one person said TANSTAFL - There Ain't No Such Thing As a Free Lunch.
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SFHoya99
Blue & Gray (over 10,000 posts)
Posts: 17,791
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Post by SFHoya99 on Sept 9, 2008 18:54:20 GMT -5
Not allowing landlords to deduct interest on their mortgage loans would do one thing for sure. Rents would go up as landlords passed this onto the renter. As one person said TANSTAFL - There Ain't No Such Thing As a Free Lunch. Right. And removing the tax deduction on interest would cause massive defaults. It might not be how you'd set it up, but changing it would be very taxing on the system in the latter situation and kinda pointless in the former.
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Post by PushyGuyFanClub on Sept 9, 2008 20:28:01 GMT -5
removing the tax deduction on interest would cause massive defaults. --- That's not on the table. I didn't propose removing the interest deduction for primary residences, but rather for second homes and/or investment properties. I'm skeptical that the folks owning these aren't affording their mortgages by the skin of their tax deduction, and if they are, these are the people that need to be weeded out of the system.
Rents would go up as landlords passed this onto the renter. ---- As you note, there is no free lunch...on either side. Rental rates are effectively capped by the cost of buying, and if they get too close to that, then prospective renters will just buy (there's certainly plenty of inventory out there). Moreover, if investment properties can't find renters, then they'll go on the open market to sell assuming a real estate investor won't carry dead inventory while servicing the debt they took out to finance it.
Finally, why should real estate investment be subsidized by the government when equity and bond investment (save municipal) is taxed? If anything, it should be reversed. People need places to live. Let's try to keep speculators out of that market to drive prices down, but give them free reign in stocks where people don't *need* to be invested. Institutional equity investors will quickly teach some of the idiot real estate "investors" of the past few years (I'm looking at you Bravo network et al) about the lesson of price v. value, as in price is what you pay, but value is what you get.
I'd like to also point out that most of the mortgages weren't necessarily bad per se, but price deflation forced the writedowns ---- If you wrote a loan that relied on an asset class to continue an unprecedented rise in value in order to work out, then that was a bad loan. Now, liquidity issues meant that some lenders ran out of money to finance an otherwise reasonable business (see Thornburg Mortgage and its jumbo portfolio), but that was a symptom of a broken system that assumed IO and ARMs could refi based on asset appreciation, which is a base assumption.
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FewFAC
Golden Hoya (over 1000 posts)
Posts: 1,032
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Post by FewFAC on Sept 10, 2008 18:53:04 GMT -5
I'd like to also point out that most of the mortgages weren't necessarily bad per se, but price deflation forced the writedowns ---- If you wrote a loan that relied on an asset class to continue an unprecedented rise in value in order to work out, then that was a bad loan. Now, liquidity issues meant that some lenders ran out of money to finance an otherwise reasonable business (see Thornburg Mortgage and its jumbo portfolio), but that was a symptom of a broken system that assumed IO and ARMs could refi based on asset appreciation, which is a base assumption. I don't doubt there was a lot of mispriced risk in the mortgage arena, but I don't think that blame can be largely pointed at FRE/FNM. And I'm not including in that argument ARMs, etc. because the risks had to be known, though I suspect the fine print wasn't exactly laid out in the rush to supply them with backend HELOCs. The FRE/FNM business was mostly solid loans that for whatever reason (job loss, etc) suddenly became delinquent. As an underwriter, there's only so much you can do to prepare for such a scenario, and based on historical default models, the blowup seems extreme. The real problem, as I see it, is that the repackaging of the loans, managed by people who fundamentally misunderstood (or neglected to understand in the lemming rush for profit) the product, as hedges created massive, misplanned, unregulated risk. And when those markets dried up, the lenders had no method of leveraging their asset base to acquire new capital (ie. selling mortgage securities to an institutional investor looking for stable, long-term cash flow), which, in combination with deflating asset prices (for which appraisers and local governments attempting to drive up their tax bases must bear some responsibility) cut the spigot in a near perfect storm.
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