The virtuous circle of housing price appreciation building defaults go down building lending lax building housing be grateful for even more
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Housing Conundrum (part 4)
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@TheMailprasad I remember watching this series a while back. I reckon he meant that financing got simpler because of lax lending policies, like no down payments, extended mortgages and terrible credit lending. While housing prices went up because of excessive lending mean’t that everybody may possibly own a house and the demand skyrocketed for housing. Demand = prices rise. I’m sure he just made a small slip if that’s even what he said.
In part 3, you said, financing got simpler because housing prices went up and here you say housing prices go up because financing got simpler. Isn’t this logic recursive ?
Fantastic videos Mr. Khan!!
It force sound naive, but I reckon the main reason for all this is that people wanted to live beyond their means…Because they wanted borrow a tone of money to pay for a house that they couldn’t really afford.
thankfulness for posting these awesome videos!
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One item that I didn’t see covered was, the change made to the Community Reinvestment Act. In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act. This law repealed the part of the Glass–Steagall Act that had prohibited a bank from offering a full array of investment, commercial banking, and insurance services.
If you’ve ever heard of Foreclosure Phil well this is the guy Phil Gramm.
Very excellent video(s), I agree wholeheatedly. Bankers used to know their communities and were able to be with you who would and would not be suitable to give a loan to. The problem arose when there was just a rating like AAA, which was to be taken on faith. I really reckon that is the genesis of the problem.
Integrated Financial Group is that name that you have been looking for getting the best mortgage plot to suite your wallet and wishes.
@ZakBrownrigg123 Excellent question.
People whould should not have qualified in the first place may have been unable to pay their loans,because of the Sub prime.America since the Dot com bubble was only interested in speculitive wealth rather than creative wealth.China was building all the stuff.If banks of a country lend beyond its economic capacity like in Argentina then financial problems will occur.
Cheers!
@ZakBrownrigg123 Its the next video on the, “credit crisis” playlist.
Very vital question:
It was well clarified how the string reaction caused credit to be tightened and defaults to be widespread.
It was not clarified how the first houses lost their market value, and started the whole string reaction. It was only said that they did.
Question:
What caused the initial houses to lose such a significant amount of their value? If the demand had not yet been lowered due to tight credit, what caused these housing to fall into the abyss?
Were these awesome videos posted in 2008? Do you have very recent ones (made in 2010) that talk more in detail about the loan modification act Obama set in place and the foreclosure crisis (currently at 50k foreclosures/month)? Thank you for taking your time to clarify these complex concepts!
This is so awesome. Thank you sir.
Fantastic video. Very informative and clarified simply.
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very excellent video. Learned allot
banks lost money because investors keep their money in banks!
Watch the credit default swaps videos. Also, reckon about who is buying the securities?… banks, funds, companies, etc… Another point is a game of musical chairs, they got stuck with some when the game stopped.
The banks lost money because they had to buy and pool mortgages from mortgage brokers and package them into a mortgage backed security and sell it to investors. When the system collapsed they still had inventory of mortgages not yet packaged or they they sliced and diced the best parts and sold it to the most risk adverse pension funds at a huge premium and held on to the lower level tranches in suspense an investor with higher risk appetite would take then later.
Why the banks pretending they lost money when they really made huge volumes of money. The only people who lost money are the investors who the banks sold the schemes to. Why are banks reporting huge losses and asking for government to rescue them with public money. How does it go forward from here for property prices.
now i be with you why in the location were i went you can see people with very low income owning huge houses…..and rusted cars parked on the driveway!
I reckon you didn’ t mention one other huge reason for the housing bubble. With the FED lowering the interest rates, people may possibly get larger loans for the same mortgage payment. And we know that people, expecially the less sofisticated, buy stuff they can afford pay by instalment , not caring about the principal. Larger aggregate loans made larger aggregate demand.
Thankfulness for the information. Fantastic videos.
PS – I before E, except after C
Also the Fed lowered interest rates dramatically in the 2000s.