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I just cashed in 1/2 of my IRA to pay off my unsecured debit and paying horrendous tax penalties for it so that I could be an honest man and not default on my debits.
Now the tax penalties I am paying are going to pay off the B-Tards who are defaulting!?!
Why do I bother?
newguy49
15 years ago
Thanks for the link to the Times article. I had been hearing about adding foreign banks to the list but the rest of this stuff is ridiculous. Student loans?
As someone noted in the Times comment section, this is a result of debt/spending — government, corporate and personal. And, lack of consequence to those who make poor decisions or are incompentent.
I read this type of stuff and my blood just boils… I AM sending emails to my elected officials today.
It’s nothing more than a giant step towards socialism. And that will lead to economic decline!
ThomNJ
15 years ago
I also complained to my Senators/Congressman – but that was before I knew about the school loans and such – I am even more incensed by this entire idea. What really grates on me as well is the fact that the execs at all these “distressed” firms are still and did make oodles of cash – all while they knew things were tanking. After some investigation a lot of the problems were disclosed in these firms during early 2006, but many did not change their lending policies until late 2007. I am fine wiht execs makign big bucks for leading a company forward but not for sitting back and milking the business when they KNOW there are problems.
If the government wants to spend money – I would rather see them investigate the individual loan defaults. For all those people who falsified their financial picture to get a house they couldn’t afford – even when the firm granting the loan was complicit – too bad. You lose. The house gets sold and proceeds go to Uncle Sam – to pay for the cost of the investigation and then some. The firm that made the orginal loan takes the hit for any damages or losses. Period. Those borrowers who were truly victimized get their mortgage re-cast and forgiven of previous penalties and such….and I do believe they are not the bulk of the failed loans….and they still have to pay their loan or sell the house.
Car loans? Student loans? Pay your own darn loan like the rest of us did. (Are colleges and universities scamming the public – yes, but that’s another story – the college level education in this country needs a serious overhaul – there is no way they should be able to justify costs growing exponentially and way out of line with inflation – there are a lot of trash courses and superfluous professors in the mix – not to mention the financial games the schools play to deliberatley bleed families of money).
nunaim
15 years ago
It’s nothing more than a giant step towards socialism. And that will lead to economic decline!
This whole thing is socialistic, and it is being rushed forward by a Republican Administration! What’s going on?!
Yes Fit Fit, The government is taking over everything.
When do I get some money???? I haven debt and no school loans or car loans. Why do those that have done wrong are getting a reward. this is just too damn ridiculous. I am getting more andmore pissed everytime they add sometihng new to this bail out. Let the damn thing fall and let the market fix itself. If not we are going to be paying more an more for every bank in America out of our tax dollars.
And if any Republican votes for this travesty, they should be voted out.
OMG… this is one issue where Fit and I are agreeing… and even Mike’s A. This is called “unity” folks! LOL Yes… socialism in varying degrees has been infused into our culture for several generations now.
I’m really beyond disgruntled this is being rushed thru, and sanctioned by the Bush WH. Wrong, wrong, wrong! My guess is he doesn’t want to leave office under the impression he and Congress did nothing about it.
But nothing is what they should do… and perhaps allow write offs for the lending losses instead of doing a bail out. Then have Congress tighten THEIR belts, just as we peon citizens are going to have to do.
But the problem is everyone is turning their eyes to the government and the candidates to “do” something. And that is the perfect illustration of what Fit Fit wisely said…. the notion that those who broke the system are the solution to the fix.
Wow… that must have blown you away, eh Fit?
ThomNJ said
I would rather see them investigate the individual loan defaults. For all those people who falsified their financial picture to get a house they couldn’t afford – even when the firm granting the loan was complicit – too bad. You lose. The house gets sold and proceeds go to Uncle Sam – to pay for the cost of the investigation and then some. The firm that made the orginal loan takes the hit for any damages or losses. Period. Those borrowers who were truly victimized get their mortgage re-cast and forgiven of previous penalties and such….and I do believe they are not the bulk of the failed loans….and they still have to pay their loan or sell the house.
Too easy, too general for casting of blame, Thom. Not to mention, unbelievably expensive for so many individual investigations. The increase of govt personnel to do that would be astromonical. And who would the sue to recoup the costs? Can you say blood from a turnip? The layoffs in the mortgage industry have been massive. Many of the “predators” aren’t even in the business anymore.
I don’t know if you read my post, US Economy – A “perfect storm”. But if you do, you will learn two important factors which bust that idea:
1: Clinton’s revamp of the CRA in 1995 made it possible for so many not to *have* to falsify their information to get a loan. Because lenders were required to show performance proof by numbers of loans for minority lending, the no-docs/low docs, lower credit criteria, and exotic loan packages were in place for those numbers to be achieved. It was basically regulations by government that mandated lenders show a certain amount of minority/risky loans to prove they weren’t “redlining”.
2: Most borrowers were not “victimized”. What they did was have their eyes get too big for their wallets…. like kids in a candy store. They never thought about the future. They looked at the entry ARM rate, and how much money that would buy, and ignored the ARM reset reality 3-10 years down line (they had 3-5-7-10 year ARMs offered during that era).
As I stated, loan officers/lenders are required to disclose those payments will change at the reset day, and it will be within a certain percentage of the going prime rate. But you can *not* disclose what a payment will be, because you have no idea what the rates are going to be 3-10 years down the road. How do you disclose a payment on an unknown figure in the future?
Bottom line, borrowers must take responsibility for their involvement as well. Just as sellers, listing agents and appraisers must accept their responsibility in the abnormal and unsustainable price inflation of homes… which is really the final component that made this a “perfect storm”.
The problem is that Fit Fit would be all for MORE of the same.
Craig
15 years ago
The worst thing a government can do is to put his nose into the Market. Because of comrade Clinton, Market is now having a huge problem. If comrade Clinton would have stayed out of it, Market would be healthy now, they would have never given loans to people who couldn’t afford it.
I would suggest that Government stayed out of it now and let the people who took risky loans be responsible for their stupid behaviour. This is how people grow-up. Socialism & communism only creates irresponsible childish citizens.
Fit fit
15 years ago
This is real socialism. Not the “he’s a socialist because he’s for raising taxes” faux socialism, but the very real “state owning a portion of the economy” socialism. It’s being welcomed with open legs by Bush and Wall Street, while you guys waste time trying to find new ways of blaming things on Democrats and minorities. Idiots.
I got a little secret to tell you Fit Fit. We are upset with Bush on this and any of the Republicans that goes along with this BS.
This is not being pushes thru by the Conservative Republicans, it is by the squishy middle people in CONgress.
Fit fit
15 years ago
We’ll see if anyone has the balls to stand in the way of this or if they’ll just make mumbling noises as this gets rammed through.
1) Fundamentally alters the nation’s free-market system in that it broadly socializes firm’s money-losing mortgage assets and places the U.S. on a slippery slope whereby profits will also be nationalized. Even if one accepts the idea that such a proposal could work, valid questions about whether such a cost is an acceptable trade-off for the market turmoil we are hoping to avoid must be raised.
2) Fails to penalize the debtholders and shareholders (including many of the executives themselves), who should bear the risk of any losses, and indirectly infuses capital onto the books of financial institutions with no recourse.
3) Cedes massive authority to Treasury, with virtually no accountability. The Presidential election is a mere six weeks away and a new Secretary will take office in January 2009. Lawmakers and taxpayers have no idea what individual will ultimately be exercising this vast new authority over the long-term.
4) What if it fails? The plan does not give any consideration to what would occur if this authority failed to solve the current crisis. Those reasons could potentially include risk from other private sector failures outside of mortgage-backed assets, international financial services failures, lack of willing sellers, lack of willing buyers, an understatement of the depth of the problem or the financial commitment needed to abate it, or even the fact that the program might work according to planned but produce no beneficial impact.
5) Forces Treasury to pay inflated prices for assets. Since there is nothing in the proposal that forces financial institutions to sell their assets at a discount rate, or even at all, many of these owners may simply wait out the government to increase their bid, leading to more inflated prices than the market would currently bear.
6) Increases the federal deficit and national debt. The new mandatory spending will cause a massive increase in the national debt and the federal deficit. These annual deficits are funded by selling government bonds purchased by a host of large investors, including foreign countries. There is a limit to the amount of bonds that a government can float without adverse financial effects.
7) Contains no taxpayer protections, such as requiring the cost of purchasing these assets to flow through the annual appropriations process or requiring a participation fee or premium so that firms have to “pay to play.”
8) Insulates financial institutions that do not even pose a systemic risk. Some companies may truly pose a systemic risk to the entire market. However, there is no requirement under the proposal that a company truly be “too big to fail.” Instead, any financial institution with mortgage-related assets would be eligible.
9) Contains no safeguards against favoritism. Treasury officials will have no criteria for which to prioritize which mortgage-related assets to purchase first, from who, and when.
10) Bails out foreign-owned banks. The latest incarnation of the proposal allows foreign-owned banks and their U.S. subsidiaries to participate. This change runs the risk of forcing taxpayers to subsidize the poor decisions of foreign companies at a time when their local governments are refusing to supply their own capital to make such a subsidy themselves.
Fit fit
15 years ago
Another under reported problem is with the houses these sub prime mortages were written to buy. Mass market builders like Beazer Homes cranked out some seriously shitty product to meet the the demands of the housing boom. The government is going to end up owning all these properties for years trying to make the money back while the houses sit there vacant, slowly collapsing from a combination of neglect and shoddy construction.
I’m right with you still, Fit Fit. This is most definitely a “new” and even more insidious brand of socialism.
There is, however, a mixture in this “blaming”. I tried to be more objective with my “perfect storm” post… but it is unquestionably Clinton who reformed the CRA, replacing an “intent” compliance with basically a “numbers/performance” compliance.
I might the Riegle Bill (which is technically not the reforms… the WH seemed to do that all it it’s own… change the compliance standards) had bipartisan support between both parties, and appeared to pass the Senate with Unanimous Consent.
So Congress… as a total sum of financial bozos… all contributed to the CRA reform that allowed (and mandated performance numbers) of the influx of exotic loans, lowered lending criteria, and flooded the market with risky buyers.
Fit fit
15 years ago
I wonder if they’ll end up turning foreclosed houses over to HUD. What a nightmare that would be.
Hey Fit Fit: If you want to vote against President Bush, show up at your polling place on Wednesday, November 5th. That’s when the ballot with Bush’s name on it is being offered.
For the conventional foreclosures, and some proposed government buyout making the taxpayers owners of over valued real estate, I doubt they will flood HUD with the same paperwork for the add’l. This nonsense is not only seriously bad juju for socialism, but will most definitely grow an already mammoth government.
Fit fit
15 years ago
Early voting ballots will be ready in Charleston County next week. By this time next Tuesday, I will have already cast my ballot.
Well F.F. at least we know Obama will get one vote from Charleston.
Just wait until you see the results from Beaufort County.
The Mike’s America battalions are on the march.
Craig
15 years ago
Henry Paulson’s bailout plan is a bad plan. It is full of interventionism and regulations and it will make the situation much worse, especially with the interdiction of the “short selling” that nobody mentioned so far.
J
15 years ago
What has always bothered me about the way financial institutions work these days is that when we agree to whatever loan terms for whatever we’re using the money for we cannot then sell that deal to someone else for profit, but the financial institutions can. It seems to me that making a deal with one entity should mean that the deal stays between the original entities. I also feel that all these financial problems we have are a direct result of the practice of selling and reselling loans. Along the way each “middleman” will compensate his or herself by taking a cut which would pretty obviously make the deal less and less sensible as it moves further along.
Maybe I’m just a purist, but I think a deal is a deal between those who made the deal.
I do have a goofy question that I tried to find an answer for – the search led me to this interesting (and wonderfully designed) blog:
I have a car loan and pay my bills on time, but I’m curious about what would happen if the bank or institution that handled my loan went bankrupt – would it take my car? Would someone else begin sending me bills? Would those bills get larger?
It seems to me that in such a case I should be able to buy out my remaining debt for “pennies on the dollar” as is common in the upper echelon of the financial realm, but I know that’ll never happen…
@J: That’s a good question J and one I don’t have a good answer for.
Someone correct me if I am wrong, but my understanding is that if a bank goes bust and gets bought out by another they may buy your loans at a fraction of the loan’s actual value (and the amount you are obligated to pay).
I would think it only fair that you should go to the new bank and say look, you bought this loan for a fraction of it’s value so I’ll pay you less than the original.
Thanks for the reminder, guys. I meant to respond to J #24.
Your loan contract is your loan contract. If the company who signed that contract went under, they sell the assets (your contract and others) for dimes on the dollar to another.
Your contract remains the same for the duration. They cannot renegotiate it, and if they try… you can take them to court. No, they cannot repossess your vehicle unless you default on your contract.
And no.. you can’t ignore it because the company you made the deal with went out of business… bummer, eh? LOL
This is the same if you purchase a home that has a tenant with a lease to rent. When you buy the house, you buy the contract. You can’t remove them until the contract expires/comes up for renewal. It’s part of the “business” and “assets” purchased from another.
Does this help?
J
15 years ago
Thank you for your thoughts!
The car thing was just something that occurred to me while learning about the bailout. I figured that if a bank pays a dealer for my car and I pay the bank – then at some point the bank goes bankrupt it would leave my car in limbo. I was just wondering what would happen if nobody bought out (or bailed out) a failed bank. I wonder if any banks have actually failed beyond a point where their debtors have been left with nobody to pay. If the auto dealer (or whatever) has already been paid there would be nobody to go after those who owe the debt. Is the government bailing out these banks because they want to ensure the “balance” of debt?
I guess I can see why people buy out failing financial institutions because they get a larger return on their investment. One might even think they want and encourage things to fail so they can reap additional profits (gasp!) This is especially true when they know that they can acquire the outstanding loans for less, then turn around and sell them to another institution for a profit.
I’m not used to thinking about these things – I tend to just go about my life dealing with daily issues as they come along, but this recent crisis has me paying more attention to the world at large.
Thanks again for your thoughts – puts things into perspective a bit.
@J:”One might even think they want and encourage things to fail so they can reap additional profits …” On Wall Street speculators try and drive the value down on stocks all the time so they can make money short selling.
I’ve never heard of a financial insitution going bust that no one wanted to buy. It is actually a good deal to get the loans at a fraction of the original cost.
J, when a business goes bankrupt, they don’t instantly cease to exist. They still have bank accounts and creditors, all diving at what money does come in.
So the payments on loans per contract that are received still go into the account, which generally sits there until a bankruptcy trustee decides how to allocate the percentage to each of the creditors.
And yes… it is a good deal to buy up defaulting businesses and notes. Why wouldn’t anyone want to pick up an asset on a fire sale, and turn it for a profit? Which is why the feds are trying to push this “it’s going to be profitable for the tax payer” bit on us.
As I said, my problem with this is twofold:
1: is it’s not the business of the government to get into being a real estate investor for the tax payers. There will be new government agencies set up to handle this, no doubt… or at least an expansion of the Treasury Dept.
2: why not let the bulk of it get sold to the private sector, and have the govt provide insurance for the rest until the banks off load it? Because the feds are trying to keep the prices high.
But as I said, the housing prices are still above what they should be. It would be healthy to have the prices decline… much as everyone would whine. They have become accustomed to extraordinarily high annual appreciation… which is part of the perfect storm component.
joe smoe
15 years ago
THIS IS NATIONALIZATION AT WORK>> IF THE TREASURY IS GOING TO NATIONALIZE BANKS> PURE AND SIMPLE BY ALL DEFINITIONS AS THIS BUYOUT OPPS I MEAN BAIL OUT WILL PROVE>
Now I am getting P.O.’d !!!
I just cashed in 1/2 of my IRA to pay off my unsecured debit and paying horrendous tax penalties for it so that I could be an honest man and not default on my debits.
Now the tax penalties I am paying are going to pay off the B-Tards who are defaulting!?!
Why do I bother?
Thanks for the link to the Times article. I had been hearing about adding foreign banks to the list but the rest of this stuff is ridiculous. Student loans?
As someone noted in the Times comment section, this is a result of debt/spending — government, corporate and personal. And, lack of consequence to those who make poor decisions or are incompentent.
I read this type of stuff and my blood just boils… I AM sending emails to my elected officials today.
It’s nothing more than a giant step towards socialism. And that will lead to economic decline!
I also complained to my Senators/Congressman – but that was before I knew about the school loans and such – I am even more incensed by this entire idea. What really grates on me as well is the fact that the execs at all these “distressed” firms are still and did make oodles of cash – all while they knew things were tanking. After some investigation a lot of the problems were disclosed in these firms during early 2006, but many did not change their lending policies until late 2007. I am fine wiht execs makign big bucks for leading a company forward but not for sitting back and milking the business when they KNOW there are problems.
If the government wants to spend money – I would rather see them investigate the individual loan defaults. For all those people who falsified their financial picture to get a house they couldn’t afford – even when the firm granting the loan was complicit – too bad. You lose. The house gets sold and proceeds go to Uncle Sam – to pay for the cost of the investigation and then some. The firm that made the orginal loan takes the hit for any damages or losses. Period. Those borrowers who were truly victimized get their mortgage re-cast and forgiven of previous penalties and such….and I do believe they are not the bulk of the failed loans….and they still have to pay their loan or sell the house.
Car loans? Student loans? Pay your own darn loan like the rest of us did. (Are colleges and universities scamming the public – yes, but that’s another story – the college level education in this country needs a serious overhaul – there is no way they should be able to justify costs growing exponentially and way out of line with inflation – there are a lot of trash courses and superfluous professors in the mix – not to mention the financial games the schools play to deliberatley bleed families of money).
This whole thing is socialistic, and it is being rushed forward by a Republican Administration! What’s going on?!
“What’s going on?!”
PANIC!
Towards?
Towards socialism?
We are all socialists now, with or without these porkish add-ons.
Yes Fit Fit, The government is taking over everything.
When do I get some money???? I haven debt and no school loans or car loans. Why do those that have done wrong are getting a reward. this is just too damn ridiculous. I am getting more andmore pissed everytime they add sometihng new to this bail out. Let the damn thing fall and let the market fix itself. If not we are going to be paying more an more for every bank in America out of our tax dollars.
And if any Republican votes for this travesty, they should be voted out.
OMG… this is one issue where Fit and I are agreeing… and even Mike’s A. This is called “unity” folks! LOL Yes… socialism in varying degrees has been infused into our culture for several generations now.
I’m really beyond disgruntled this is being rushed thru, and sanctioned by the Bush WH. Wrong, wrong, wrong! My guess is he doesn’t want to leave office under the impression he and Congress did nothing about it.
But nothing is what they should do… and perhaps allow write offs for the lending losses instead of doing a bail out. Then have Congress tighten THEIR belts, just as we peon citizens are going to have to do.
But the problem is everyone is turning their eyes to the government and the candidates to “do” something. And that is the perfect illustration of what Fit Fit wisely said…. the notion that those who broke the system are the solution to the fix.
Wow… that must have blown you away, eh Fit?
ThomNJ said
Too easy, too general for casting of blame, Thom. Not to mention, unbelievably expensive for so many individual investigations. The increase of govt personnel to do that would be astromonical. And who would the sue to recoup the costs? Can you say blood from a turnip? The layoffs in the mortgage industry have been massive. Many of the “predators” aren’t even in the business anymore.
I don’t know if you read my post, US Economy – A “perfect storm”. But if you do, you will learn two important factors which bust that idea:
1: Clinton’s revamp of the CRA in 1995 made it possible for so many not to *have* to falsify their information to get a loan. Because lenders were required to show performance proof by numbers of loans for minority lending, the no-docs/low docs, lower credit criteria, and exotic loan packages were in place for those numbers to be achieved. It was basically regulations by government that mandated lenders show a certain amount of minority/risky loans to prove they weren’t “redlining”.
2: Most borrowers were not “victimized”. What they did was have their eyes get too big for their wallets…. like kids in a candy store. They never thought about the future. They looked at the entry ARM rate, and how much money that would buy, and ignored the ARM reset reality 3-10 years down line (they had 3-5-7-10 year ARMs offered during that era).
As I stated, loan officers/lenders are required to disclose those payments will change at the reset day, and it will be within a certain percentage of the going prime rate. But you can *not* disclose what a payment will be, because you have no idea what the rates are going to be 3-10 years down the road. How do you disclose a payment on an unknown figure in the future?
Bottom line, borrowers must take responsibility for their involvement as well. Just as sellers, listing agents and appraisers must accept their responsibility in the abnormal and unsustainable price inflation of homes… which is really the final component that made this a “perfect storm”.
The problem is that Fit Fit would be all for MORE of the same.
The worst thing a government can do is to put his nose into the Market. Because of comrade Clinton, Market is now having a huge problem. If comrade Clinton would have stayed out of it, Market would be healthy now, they would have never given loans to people who couldn’t afford it.
I would suggest that Government stayed out of it now and let the people who took risky loans be responsible for their stupid behaviour. This is how people grow-up. Socialism & communism only creates irresponsible childish citizens.
This is real socialism. Not the “he’s a socialist because he’s for raising taxes” faux socialism, but the very real “state owning a portion of the economy” socialism. It’s being welcomed with open legs by Bush and Wall Street, while you guys waste time trying to find new ways of blaming things on Democrats and minorities. Idiots.
I got a little secret to tell you Fit Fit. We are upset with Bush on this and any of the Republicans that goes along with this BS.
This is not being pushes thru by the Conservative Republicans, it is by the squishy middle people in CONgress.
We’ll see if anyone has the balls to stand in the way of this or if they’ll just make mumbling noises as this gets rammed through.
Like this Fit Fit
Another under reported problem is with the houses these sub prime mortages were written to buy. Mass market builders like Beazer Homes cranked out some seriously shitty product to meet the the demands of the housing boom. The government is going to end up owning all these properties for years trying to make the money back while the houses sit there vacant, slowly collapsing from a combination of neglect and shoddy construction.
I’m right with you still, Fit Fit. This is most definitely a “new” and even more insidious brand of socialism.
There is, however, a mixture in this “blaming”. I tried to be more objective with my “perfect storm” post… but it is unquestionably Clinton who reformed the CRA, replacing an “intent” compliance with basically a “numbers/performance” compliance.
This took effect on Jan 1st, 1995… before the midterm GOP majority took over. Thus, this makes this this one of the final DNC nails in the financial coffin – compounded by the DNC majority Congress passing the Riegle Community Development and Regulatory Improvement Act of 1994.
I might the Riegle Bill (which is technically not the reforms… the WH seemed to do that all it it’s own… change the compliance standards) had bipartisan support between both parties, and appeared to pass the Senate with Unanimous Consent.
So Congress… as a total sum of financial bozos… all contributed to the CRA reform that allowed (and mandated performance numbers) of the influx of exotic loans, lowered lending criteria, and flooded the market with risky buyers.
I wonder if they’ll end up turning foreclosed houses over to HUD. What a nightmare that would be.
Hey Fit Fit: If you want to vote against President Bush, show up at your polling place on Wednesday, November 5th. That’s when the ballot with Bush’s name on it is being offered.
FHA or VA (ala federally insured or guaranteed) homes are already HUD foreclosures, Fit. This isn’t new to them. In fact, you can go to the HUD site and view their foreclosures for sale.
For the conventional foreclosures, and some proposed government buyout making the taxpayers owners of over valued real estate, I doubt they will flood HUD with the same paperwork for the add’l. This nonsense is not only seriously bad juju for socialism, but will most definitely grow an already mammoth government.
Early voting ballots will be ready in Charleston County next week. By this time next Tuesday, I will have already cast my ballot.
Well F.F. at least we know Obama will get one vote from Charleston.
Just wait until you see the results from Beaufort County.
The Mike’s America battalions are on the march.
Henry Paulson’s bailout plan is a bad plan. It is full of interventionism and regulations and it will make the situation much worse, especially with the interdiction of the “short selling” that nobody mentioned so far.
What has always bothered me about the way financial institutions work these days is that when we agree to whatever loan terms for whatever we’re using the money for we cannot then sell that deal to someone else for profit, but the financial institutions can. It seems to me that making a deal with one entity should mean that the deal stays between the original entities. I also feel that all these financial problems we have are a direct result of the practice of selling and reselling loans. Along the way each “middleman” will compensate his or herself by taking a cut which would pretty obviously make the deal less and less sensible as it moves further along.
Maybe I’m just a purist, but I think a deal is a deal between those who made the deal.
I do have a goofy question that I tried to find an answer for – the search led me to this interesting (and wonderfully designed) blog:
I have a car loan and pay my bills on time, but I’m curious about what would happen if the bank or institution that handled my loan went bankrupt – would it take my car? Would someone else begin sending me bills? Would those bills get larger?
It seems to me that in such a case I should be able to buy out my remaining debt for “pennies on the dollar” as is common in the upper echelon of the financial realm, but I know that’ll never happen…
@J: That’s a good question J and one I don’t have a good answer for.
Someone correct me if I am wrong, but my understanding is that if a bank goes bust and gets bought out by another they may buy your loans at a fraction of the loan’s actual value (and the amount you are obligated to pay).
I would think it only fair that you should go to the new bank and say look, you bought this loan for a fraction of it’s value so I’ll pay you less than the original.
But something tells me they wouldn’t go for it.
Thanks for the reminder, guys. I meant to respond to J #24.
Your loan contract is your loan contract. If the company who signed that contract went under, they sell the assets (your contract and others) for dimes on the dollar to another.
Your contract remains the same for the duration. They cannot renegotiate it, and if they try… you can take them to court. No, they cannot repossess your vehicle unless you default on your contract.
And no.. you can’t ignore it because the company you made the deal with went out of business… bummer, eh? LOL
This is the same if you purchase a home that has a tenant with a lease to rent. When you buy the house, you buy the contract. You can’t remove them until the contract expires/comes up for renewal. It’s part of the “business” and “assets” purchased from another.
Does this help?
Thank you for your thoughts!
The car thing was just something that occurred to me while learning about the bailout. I figured that if a bank pays a dealer for my car and I pay the bank – then at some point the bank goes bankrupt it would leave my car in limbo. I was just wondering what would happen if nobody bought out (or bailed out) a failed bank. I wonder if any banks have actually failed beyond a point where their debtors have been left with nobody to pay. If the auto dealer (or whatever) has already been paid there would be nobody to go after those who owe the debt. Is the government bailing out these banks because they want to ensure the “balance” of debt?
I guess I can see why people buy out failing financial institutions because they get a larger return on their investment. One might even think they want and encourage things to fail so they can reap additional profits (gasp!) This is especially true when they know that they can acquire the outstanding loans for less, then turn around and sell them to another institution for a profit.
I’m not used to thinking about these things – I tend to just go about my life dealing with daily issues as they come along, but this recent crisis has me paying more attention to the world at large.
Thanks again for your thoughts – puts things into perspective a bit.
@J:”One might even think they want and encourage things to fail so they can reap additional profits …” On Wall Street speculators try and drive the value down on stocks all the time so they can make money short selling.
I’ve never heard of a financial insitution going bust that no one wanted to buy. It is actually a good deal to get the loans at a fraction of the original cost.
J, when a business goes bankrupt, they don’t instantly cease to exist. They still have bank accounts and creditors, all diving at what money does come in.
So the payments on loans per contract that are received still go into the account, which generally sits there until a bankruptcy trustee decides how to allocate the percentage to each of the creditors.
And yes… it is a good deal to buy up defaulting businesses and notes. Why wouldn’t anyone want to pick up an asset on a fire sale, and turn it for a profit? Which is why the feds are trying to push this “it’s going to be profitable for the tax payer” bit on us.
As I said, my problem with this is twofold:
1: is it’s not the business of the government to get into being a real estate investor for the tax payers. There will be new government agencies set up to handle this, no doubt… or at least an expansion of the Treasury Dept.
2: why not let the bulk of it get sold to the private sector, and have the govt provide insurance for the rest until the banks off load it? Because the feds are trying to keep the prices high.
But as I said, the housing prices are still above what they should be. It would be healthy to have the prices decline… much as everyone would whine. They have become accustomed to extraordinarily high annual appreciation… which is part of the perfect storm component.
THIS IS NATIONALIZATION AT WORK>> IF THE TREASURY IS GOING TO NATIONALIZE BANKS> PURE AND SIMPLE BY ALL DEFINITIONS AS THIS BUYOUT OPPS I MEAN BAIL OUT WILL PROVE>