….turning the subprime mortgage troubles into an excuse to criminalize shoddy business practice.

Wrong. Washington Mutual stands accused of influencing appraisals to help folks get loans who probably shouldn’t have gotten them. If Cuomo can prove that WaMu knew the mortgage-backed securities containing these liar loans had problems and did not disclose to the buyers, they may be made to buy back the questionable securities, which would freeze an already greatly chilled MBS market. Wouldn’t do WaMu much good either.

Cramer is fundamentally wrong. He blames Cuomo’s actions for possibly ruining the mortgage industry by scaring away investors in mrtgage-backed securities. In fact, homes have simply become unaffordable, having year-over-year double-digit price gains against single-digit income advances.

Alternative loans like adjustable rate, no down payment and negative ammortization vehicles only served to make the unaffordable temporarily affordable, but now that the time has come to refinance, when the arms reset and the minimum payments go away, there is none to negative equity in these homes as prices have fallen. They cannot refinance. As the homeowners race to put their houses on the market to beat foreclosure, prices are beaten up further.

Folks who didn’t qualify for a mortgage at the local bank went down the street to Counrtywide where they got a subprime loan. That loan was bundled with other loans and sold at a profit to institutions like the bank that turned down similar loans in the first place. The loan originator has to “launder” the loan in such a way that it smelled quite diferent going out to market than it did coming in off the street.

Purchasers of mortgage-backed paper had no idea of the shennanigans going on with these loans at the originator’s table. There was a lot of lying and deception on the part of the lender and the buyer that has resulted in the downgrading of these securities. Coumo and others need to find the lawbreakers, even if it is the howmowner who lied abot income, and deal with them or else face the consequenses of a complete collapse in confidence in these securities.

shuzilla on November 8, 2007 at 4:38 PM

Well, unseen, Cramer is off his rocker on this one. As I stated before, homes have gotten to be unaffordable. That is a fundamental problem with the mortgage industry today, almost nationwide.

Making the unaffordable seem affordable was the niche of the subprime brokers. But that was an illusion which brought so many people into the market that prices rose significantly in relation to income and rents. Keeping housing unaffordable, with the illusion of affordability lent by the subprime industry, helps no one.

The promise of double-digit appreciation got many to overextend themselves to buy their “investment” but those gains are gone for a decade, regardless of Cuomo’s actions. Further, hundreds of billions of dollars over-rated toxic mortgage securities have already been purchased and have huge losses from defaults. The MARKET has rejected them.

So, homes are overpriced and are an unattractive investment, while the demand for mortgage-backed securities has dried up. There’s no demand for either until 1) home prices fall to historical norms and 2) the market can trust the ratings on the securities made up of subprime paper… enter Mr. Cuomo.

Meanwhile, you want the fed to flood the market with more liquidity – print more money – to buy overpriced homes and prop-up overextended homeowners in the face of a falling dollar? You know the dollar tanking is related to the increased money supply, do you not? Why diminish my savings with inflationary policies just to bail out a mortgage industry constructed from deception and poor fiscal decisions? Cramer only sees the damage to stocks from a correction in the mortgage industry. I say come on, correction, and let’s pray that most of the toxic securities are held outside of the U.S. and our corporations and pension funds.

shuzilla on November 8, 2007 at 11:15 PM

From KUTV.com:

Dave says it was his good credit alone that bought a home in Draper and a house in St. George, both with no money out of his pocket.

Now at the age of 27, Dave owes more than a million dollars in mortgage loans.

Sounds like he makes a lot of money, but quite the opposite is true.

Dave is a college student and waits tables after school.

He makes maybe $11,000 a year, yet he bought the Draper house for more than $700,000.

“You’re a server at a restaurant. How can you afford a $719,000 house? I can’t” says Dave.

Dave claims a man by the name of Ron Haycock, who he met through a mutual friend, set up the whole deal.

According to a list we obtained from a former employee of Ron Haycock there are at least 69 homes that went through Lawrence Skinner and Associates’ office in the past year and we confirmed at least 40 of those are in default or foreclosure.

Ron Haycock says none of those foreclosures are his fault, “Let me tell you what the deal is. OK. I’m an accountant. I go in and analyze a business proposition. I let them take a look at the business proposition. They take their own decisions, we turn it over to a mortgage broker, the mortgage broker does her own thing.”

But how could a college student making $11,000 a year convince any lender to give him a million dollars in mortgages?

Take a closer look at Dave Ormsbee’s loan application. It shows him as the owner of his own company, Ormsbee Graphic Design.

But there is no such physical company, it’s all created on paper, he says, under the direction of Ron Haycock.

“That’s the company that they had me make up,” says David.

And the loan documents show David doesn’t make $11,000 per year, but $18,500 a month.

“Do you make $18,500 a month? Nope. I don’t make that a year,” says David.

Dave says he didn’t fill-out the documents; they were done at Lawrence Skinner and Associates.

He admits he made the mistake of never looking at what he was signing.

“There just so much signing going on that you just don’t care what you’re signing after a while,” says Dave.

Now, whom shall we bail out in order to keep the housing bubble afloat, Mr. Cramer? The kid who swears he didn’t know that his $11,000 yearly earnings weren’t actually enough to pay for a $700k home? How about the broker that Haycock sent this guy to? Maybe the folks who bought this loan from the broker, thinking the kid was making $18k per month, could use some liquidity restoration right about now?

The only reason I can think of that the fraud-induced unwinding of the housing bubble isn’t the biggest story of the year is that the MSM has not figured out a way to blame W, either through action or inaction on his part. But the victimization of absolute idiots has begun as evident in this article that takes the kid’s ignorance of his stated income as gospel.

shuzilla on November 9, 2007 at 12:39 AM