Tuesday, April 1, 2008

So who is suffering from the subprime mess?

Obviously banks, brokerages, and investors have been burned to a crisp. On the other hand, I don't feel too bad for them, they were dumb or greedy or both. How about the homeowners? How many sub prime borrowers are there? How many of them deserve our compassion, and a bailout? How many are speculators who bought the house to flip it? How many would be better off mailing the keys to the bank and walking away from a gigantic mortgage that is way more than the house is worth? How many can refinance and come out with lower mortgage payments?
Does any one know? Who would be honest about it? I wouldn't want to trust anything I heard from a mortgage broker. The newsies are clueless as usual.
The price of houses is going down. That's good news for those who need a house, 'cause of a child, or another child, or a new job in another town. It's not so good news from home owners.
Why are house prices going down? Partly 'cause the price of a house is set by how much the banks is willing to lend on it. Back when there were gullible investors to take the subprime mortgage backed "bonds" the bank didn't care how much it loaned on a house, cause it would sell the mortgage, and come away with cash. The investors have wised up, so the banks are going back to previous lending standards. This means they will no longer write humongous mortages on cheap new tract houses.

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