Comments by "" (@jmitterii2) on "MHFIN"
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No seriously, small time investors were mortgaging themselves with 10 to 12 units... sometimes up to 20 to 50 units. Units meaning houses as well as duplexes or quad plexes.
I high school during the late 90's, a particular class program I took, one guy was a doctorate in adult learning, another a master's... one of our assignments was to talk to bankers and learn about various loans including mortgages. One particular day, I was visiting yet another bank... I think I was dropping something off to the one teacher too... but he was visiting this one banker to conduct yet another purchase for his rental thing... the banker told me he was his best customer, it was his 18th purchase in just a 2 years. I joked, unless you're buying these outright with little to no financing, it's not a purchase, but a leveraged margin long position like buying stocks on margin. You don't own them... they sort of own you; you're tenant to the brokerage... or to the bank. The banker didn't like that coming from a snot nose senior from high school.
These two teachers both came from California, so I'm not sure how much they were leveraging, and how much was owned 100% how it was collateralized on all their properties they were buying.
All I know is that yes, these "mom and pops" can really go out and splurge. And they do. Fortunately for them, it was the 90's just leading into the huge 2000's blow up bubble. Haven't spoken to them since... hopefully for them they dumped their properties at the top or at least had them all paid off and didn't care whatever rent came in was just enough to at least pay for property taxes and upkeep.
Any amount of buying pressure can cause any asset to stay elevated. So don't count out the ameature individual investor adding enough fugazi buying pressure.
Look at GME and AMC and dozens of other meme stocks that 1,000% to 10,000% ran up. Or the greater full worthless crypto so called money yet nobody accepts going up 100,000% or more in just a year. A stampede is a stampede... and there are many more individuals than large investors.
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Yeah it could, it just doesn't want to go after the rich because the rich own our country, they voted themselves a tax cut permanent in 2017, the bonds that then are issued to pay the deficit spending are largely purchased by the rich... they turned their tax bill in to a loan with interest, with us peons paying their loan and interest back.
So yes, tax rates could be raised where the vast majority of money resides, among the very few plutocrats or pluto-rats.
The plutorats aren't interested in completely completely collapsing the USD... so they would eventually pay a bit higher taxes to stop the bleed. Additionally, interest income on savings would increase and help mitigate some tax losses on taxed on everyone's savings and bonds savings as interest rates increase.
The reason a complete collapse is probably off the table is that our money printing is not true, when the cartel banks aka the Fed increase money supply they do so by lowering interest to encourage borrowing, new borrowing debt is what money supply is in a debt based currency system... so if mass defaults happen, payback on loans, stop taking loans... money supply vanishes and we have a deflationary spiral.
Right now, we're at that inflated asset bubble that will end in a deflationary blow up. And in the mean time if interest rates increase or instability politically happen a deflationary run-away effect will happen...
Inflation always ends up becoming deflation at some point.
Of course the inflationary pressure can last for a while depending on how interest rates act. And how prices are responded to, do wages and other goods/services get accepted? Or do they get rejected? They tend to get rejected when too much debt without ability to pay it spirals into a domino effect. Price then crater... if they don't interest rates will go up until they do crater.
Anyway, we're still at the point slightly higher interest rates wouldn't be too big a factor... keep in mind much of the bonds are in 20 and 30 year notes out for some time with low rates... so it would be flipping of the debt that would slowly get worse over time, not a sudden increase on all of the debt. But a slow grind in higher interest rates should interest rates go up.
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To be frank, market bubbles are often caused my forced buying. Short squeezes, gamma squeezes, margin traders following a ascending trend line.
The opposite takes place when the margin traders stop using much margin, then short squeezes stop happening, and option buying ends with the gamma squeezes, and perhaps drives a reveres gamma squeeze on puts, and a margin call or short squeeze in reverse for those holding long margin positions.
It's the problem with our stock market... forced buying and selling. These side bets with futures and options and use of margin especially, didn't make things stable, but made it more unstable.
CDO and CLO market the banks are still allowed and have been trading it, and the Fed was buying all the worthless trash the banks could lend out, same thing.
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Nah, they were doing that almost as soon as 2009. Giving anyone a mortgage. I know as my, then roommate mortgaged a house around that time; zero down. And his income was rather low at the time... for a $145K he was making only about $35K. His total loan payment was half his income of about $1,180 a month. About half his take home pay.
Why? At first it was the TARP. But Frank Dodd act gave authority directly to Fed Reserve to be buyers of CDO/CLO markets. And QE continued for a decade.
So they were giving anyone a loan. Once again, for a decade now, it was the banks giving a loan the highest possible and quickest they could sell it to the CDO market take their principle leant out along with some interest, and take a realized gain; right back to 1997 to 2007 CDO market. And they could care less quality of credit.
The banks did have to pretend to care, so you have a bit more statements being generated that must attest your ability to pay. Often an extra 3% down requirement wasn't that much because ARMs were coming back along with balloon interest only payments to meet that small down payment.
So no. It just continued. Hence the prices rising so quickly from 2015 to present day. Now that Fed is no longer buying CDO's, CLO's which contain mostly credit cards and other signature loans became an investment bubble going up in price as they provide huge yields compared to other collateralized debts.
And if you have a good FICO you have probably been given 0% rates for 3 months out as far as 1.5 years or further... why? They need some good FICO rates to mix with the crap FICOs on their book, mix it together and bam they can sell that CLO for better rates to investors that are still there for now; banks are looking to dump it. CDO market that contain mostly mortgages and car/truck loans, are faltering hence Wells Fargo's exit from originating mortgages several months back.
Truly, this time is so much worse. It's covered up because many like yourself are thinking two things that make it "different this time"... 1) Lower rates are locked in. Which isn't true completely. 2) Banks have been more diligent this time on issuing loans. Which also isn't true.
What's also not being taken in consideration on once different this time on the negative side that makes it worse:
1) Affordability. Even with full employment by the signers of these loans, those with ARMs and balloon payments are particularly vulnerable. But so are those with fixed lower interest rates because the price of the loans are so much; any disruption to employment will spell inability to pay those loans. Refinancing in the red is never an option; and many will find themselves deeper in the red as the first set of ARM and balloon payment folks end up in foreclosure.
2) Collateral or prices due to affordability is unsustainable. Like a game of levered up stock market or the silly crypto market levered to the tits; the prices are not sustainable. So many will be deep in the red. Worse than a margin trading account, that simply won't let you go into the red for very long as they'll require a margin call or liquidate your position so you're just zeroed out; not negative balance.
So nope. They're still giving just about everyone a loan... they just recently stopped that when Fed exited purchasing CDO's aka halted their QE. And allowed what they already bought to mature and fall off their balance sheet. So those with FICO's in the mid 600's are likely not able to get a big enough loan now to afford property that's excess of $280K with an income household of $40K to $75K; they're sort of complaining of being shut out, that banks won't lend higher to meet the current asking price in the are of 300K to 350K... and higher for better properties.
So only now have banks tightened on the seriously risky borrowers. If you're FICO is better however, they are still giving out ARMs and balloon interest only loans.
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