* Moodies, S&P, and Fitch are the three rating agencies * Stickmen securitization
CHAPTER 1 – EASY MONEY OR MORTGAGE MARKET ON FIRE
Who the players are? Stakeholders?
Technical and ethical issues are?
What was the relationship about prices and personal incomes?
People started to buy houses that they couldn’t afford and then they were left behind leaving. The economy is falling and so are the communities. Insects, graffiti, dirty pools are left behind since people are evicted and people don’t have were to go.
The lenders are not responsive to customers who want to cooperate to pay for their debts. Wall street only cares about the money they can generate from this foreclosure. During the crisis thousands of people were relieved from their jobs
Housing prices were rising faster than incomes making it impossible to keep with payments. The demand for the houses went down and prices SHOULD HAVE been that prices went down but they went up. People will not be able to pay making prices to fall but they didn’t fell.
“Keep going until someone tells you no” (uniformed and uneducated in finance?) the person didn’t know what he was able to pay right now and in the future, and he asked until someone tell him that he couldn’t do so.
BUT people keep buying houses.
CHAPTER 2 - MORTGAGE MARKET ON FIRE
Subprime mortgage –mortgage for the credit challenged
Freddie and Fannie – the leaders in mortgage lending
Quick Loan – for people who couldn’t afford a down payment You didn’t need to prove how much you made, no verifying incomes or assets
After 2001 things got crazy. Before 2001 it was difficult to get a loan because more verification was needed such as tax returns, how much you make, and down payment. They had good loans until 2001.
**GSE’s accounting scandal (executives could make more bonuses) In 1999 GLB the banks became deregulated causing banks to become commercial banks and mortgage brokers.
Fannie and Freddie buyed loans from mortgages firms. They stated the rules. Until this point they were dominant because they only bought loans in which their investments would pay off. Then came the accounting scandals and they are in the penalty box.
After 9/11 interest rates were lowered by the government and now houses are more appealing (or just buying was more appealing).
Countries that were once stated as poor become wealthy countries and after all this happened (9/11 and Fannie and Freddie).
Moral hazard what Dallas say about the wires crossing.
CHAPTER 3 – DREAM HOUSES
In 2002 government pushed Wall Street and lenders to facilitate mortgages. Adjusting interest rate – low interest rates the first two years and later higher interest rates. He claimed that he made almost four times than what he actually did.
Lots of refinancing and lots of spending by the population
Irresponsibility by the black lady, she could afford it because the mortgage broker gave her the company’s money * but it reality she couldn’t afford it
She should have done a down payment, she didn’t do it
Its an adjustable rate instead of a fixed rate
CHAPTER 4 – LEGIONS OF LENDERS
20-30 minutes to provide a loan
Loan officers with no experience on the industry had the job to provide as much loans as they could, their job was to close the loans.
Health problems by the dirty pools left behind
CHAPTER 5 – STAMPS OF APPROVAL
In 2004 home ownership rates were higher than ever and construction in over 20 years, but they were not sustainable. But we ran out of people who could afford mortgages and even we throw subprime loans. Greater mortgage alternatives rather than the fixed rate loans. Allen came up with the Pay Option Negative Amortization Adjustable Rate Mortgage. Traditional loans had full amortization, fixed rates, and a fixed payment. Instead of having a fixed rate then an adjustable rate was used making possible people...