It’s official: the wave of defaults still sweeping California and the nation is the result of irresponsible lending practices, which peaked in late 2006, according to a just-released report.
MDA DataQuick, a real estate analyst, reports that three lenders were on the tip of that wave, making a stunning number of bad loans. Between 65 percent and 75 percent of the loans made by the three—ResMAE Mortgage, Master Financial and Ownit Mortgage Solutions—have since gone south, DataQuick reports. Between them, the three are responsible for 8,000 loans that went into default. They sold almost all of these loans to other banks, which then repackaged them into the now-familiar house-of-cards arrangements that have since collapsed.
An analysis in today’s Mercury News, headlined “Report: Reckless mortgage lending in late 2006 fueled California default wave,” quotes DataQuick’s John Karevoll calling mid- to late 2006 a “pocket of nastiness.”
More than 9 percent of the mortgages originating between August and November 2006 are now in default. That’s almost double the default rate for all loans made in 2005 4.9 percent. In 2004, the default rate was less than 1 percent.
“This whole process, at least for a while there, just broke down,” Karevoll said. “There was nobody out there minding the store.”
Merc reporter Sue McAllister makes the point that the DataQuick report “provides grist for those who say the industry needs greater regulation to avoid repeats of the subprime mortgage lending debacle.”
According to the Merc, defaults in Santa Clara County jumped 95 percent from the fourth quarter of 2008 to the first quarter of this year: “A total of 4,090 notices were issued in the county in January, February and March.”
“IT’S OFFICIAL.”
Progressive, PC “Silicon Valley Newsroom” has gotten to the bottom of things. There’s no further need for any of us to try figure out what happened, who was responsible, or how to avoid future recurrences . Silicon Valley Newsroom has done it for us.
Back to your koolaid everybody.
Funny, i thought defaults happened when people didn’t pay back their loans. But now I get it: the problem isn’t that people took on debt they couldn’t afford, it’s that organizations lent them the money. Thanks for clearing that up.
#2- Rosegarden Dad said,
“Funny, i thought defaults happened when people didn’t pay back their loans. But now I get it: the problem isn’t that people took on debt they couldn’t afford, it’s that organizations lent them the money.”
It is BOTH, along with no over sight, or accountability of these lending institutions.
It takes two to tango. Both the lenders and the borrowers were at fault.
But the honest people who never defaulted on a loan get stuck paying the bill for those who messed up, thanks to our pandering politicians. No wonder people are going to tea parties.
Everyone involved has the goods on the other guy… here is a video defending the just-as-culpable Bush side:
http://www.youtube.com/watch?v=cMnSp4qEXNM&NR=1
The scoundrels want to keep the idiots busy in a finger-pointing contest. Kudos to the Mercury News and Silicon Valley Newsroom for doing their part.
Its articles like this (and its pitiful summary here on SJI) that are destroying the Merc and other liberal rags like it.
By all means, go ahead and report on what’s happening with the housing market if you want. But don’t spin the news into the standard liberal rallying cry for more regulation.
And if you just can’t resist pushing an agenda off as news, at least have the decency to also report on how these regulatory bureaucrats pushed the lending and housing markets to their breaking point.
No one has yet mentioned that asshat, Bawny Fwank. Had he and a handful of others not stymied proposed legislation meant to prevent neer-do-wells, crooks, and tunnel-visioned/“blameless” consumers from signing total crap mortgages, we wouldn’t be where we are today.
Yeah, it’s all the fault of the big, bad liberal media along with deregulation. We certainly wouldn’t want more oversight of any of these runaway industries. It worked wonders for the airlines, and you must love how the financial markets played out. Wouldn’t want any of those nasty, liberal watchdogs trying to lookout for the consumer.
I don’t care if they are liberal or conservative, just put protections in place so the real Joe Average doesn’t continue to get screwed.
The paranoids on this site can keep dredging up the dreaded liberal bogeyman but that does nothing to solve the problems we are facing. Neither does resisting regulation. If you like the way things are now keep blaming the liberals and deregulation and see how long it takes for anything to improve.
I certainly wouldn’t expect any of you naysayers to come up with any kind of a solution. You are much more content to sit back, criticize, and blame the mythical liberal press. Enjoy your stay in fantasyland—the rest of us will deal with reality.
liberal liberal liberal! dumb stupid PC! lying left losers! get off my lawn!
Joe II #8-
I’m not sure how to approach a discussion with someone who thinks the liberal press is “mythical”, especially in light of such an obvious example as the article at hand. Not one mention at all of the regulators or the gov’t role. Why do you think that is?
Where does your need for more regulation come from? Do you think people are too stupid to make decisions for themselves? Do they need someone smarter overseeing their decision making? Do you think the gov’t should not let people make bad decisions? Do you think the gov’t should add a few hundred more pages to sign off on when you buy a home?
I would bet you don’t really know what to think, or think at all for that matter. Given your “get screwed” statement, I’d guess you’re just another weak soul searching for victims.
Joe Average II,
You wanted regulation? You HAD regulation. Barney Frank & Chris Dodd were doing the regulating. They f***ed up the job.
You want me to propose a solution? Here’s the solution. The next time you see the Feds, the State, or your wonderful City Government trying to help people buy stuff that they can’t afford, get on the phone, call your representative, and tell them to BUTT OUT. If you’d done this over the last decade we’d be about 2 trillion dollars less in the hole so get off your high horse. YOU are the blame.
Does anyone know what regulations were on the table between 2000 and 2005?
It would be good to know who was proposing what regulations before this all hit.
Right on!!!! #4—The mewling press would have us believe that this is all the fault of the big evil lenders, especially SV Newsroom and the other panderers to the masses of defaulting borrowers. Of course there were never reckless borrowers, in their one-sided view.
The government pressed to get more “minorities” into homes starting with Bill Clinton. The liberal agenda of equalizing people of unequal financial means started us down this slippery slope. Once the lenders realized that government was pushing them to lend to unqualified buyers, greed took over and got us where we are today—most of us have lost half our net worth due to government manipulation of the marketplace.
Soon as I heard government was going to investigate this I knew… the outcome.
Never let the instigators investigate themselves. Sure, a “private” study, but we all know all the shrill voices from Congress last fall.
Blame Shifting.
The government forced the banks to loan money to anyone under the guise of “community reinvestment” meaning they have little or no means to pay it back.
Yea, I qualified for one of those but I spent 10 years saving up for a down payment.
I didn’t meet any of the normal standards for loans at the time, but with that huge down payment. I also bought the lowest priced home in Blossom Valley at the time in a market destined to go mad.
See? I was motivated to hold and respect my property because I had spent so much time to get there.
Fast Forward to Zero down, no background checks, no job verification is a sure sign of danger to come and did. Loans that had seen no such lower rates than the depression era. They had to go nowhere but up. All this in a rising bubble economy.
What were people thinking?
We can all blame the lenders but the BLAME SHIFTED from the ignorant individuals who were caught up in the crazy government scheme, astounding speculator created real estate bubble and now want everyone else to pay for their stupidity.
I have the upmost sympathy for a truly desiring homeowner who makes sacrifices, but I think we should do something to make the most outrageous examples most comfortable in cheap rental housing in depressed markets areas.
Also, end the bad government practice that rewards incompetence. We don’t want to relive this in another example.