Originally Posted by Mike Dunbar
Scott,

I'm no economist either, but I agree with almost everything you said.

I only disagree with two points. One where I disagree is that the banks, lending institutions, and speculators most certainly made money. They made money by reselling the worthless paper. They sold that stuff all around the world. My mortgage has gone through five different companies since we bought our house. Along with my mortgage which is good paper (we can afford our house and have never once in 20 years been late with a payment), they sold many bad loans (people who couldn't afford the houses and are late on their payments). Then there were the short sellers, they've made a bundle on this. Of course now, the smart ones, the smart real estate flippers, builders, bankers, traders, and speculators, have cashed out. So who pays for it? The poor? How do they pay for it?...they're poor! No, it's the 401K.

Don't depend on the government.


First of all, lenders make about a quarter to half a point when they do a loan...so, a $200,000 loan (let's use half) makes the lender about $1000...then they sell the loan to Freddie or Fannie in a huge block by bundling alot of loans together. THAT'S ALL THEY MAKE ON IT PEOPLE...NOW...If you can't sell that loan anymore and the client goes into foreclosure...AND you put the house on the market and CAN'T sell it...and then it's value drops (let's say it appraised for $250k, a nice clean 80% loan to value)...NOW it's only worth the $200k that he borrowed...The lender is eating the daily interest (THEY have cost of money too!) Let's say that's 40 per day. NOW the house stays on the market 8 months (that's at LEAST the time now) ...That is $9600...NOW add in attorney's fees, realtor fees and your own administration costs....that loan you tried to make 1000 on, your are now losing $15,000, ASSUMING YOU CAN SELL IT FOR $200,000! That's just ONE small house...Multiply that at least by 3 in CA ! ! AND...I used an 80% Loan to Value deal which is very conservative. ALot of deals were NO down or 5% down. Now add that loss in too ! !
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Then there were the short sellers, they've made a bundle on this. Of course now, the smart ones, the smart real estate flippers, builders, bankers, traders, and speculators, have cashed out. So who pays for it? The poor? How do they pay for it?...
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Cashed out? You HAVE to be kidding ! ! ALMOST NO ONE got out of their investments....NO ONE...It came so fast, and it takes time to sell a home...I know people that have 3, 4, even 10 investment properties...and they still own them! ! You CAN'T get out, even if you want to, there are NO buyers...People that bought them pre 2000 still have a little equity..anything bought after 2005?...They are UNDER WATER...And still, no one is buying, as they don't know where the bottom is...THAT is what will start us out of this whole thing, knowing where the bottom is...they are praying this package helps the market figure out that a bottom has been made...nothing will happen until then....

Could another shoe drop, even if they come up with something? Impossible to guess...but read THIS article...
http://money.cnn.com/2008/09/30/mag...fortune/index.htm?postversion=2008093012

Herbie
JPF Chicago Chapter Coordinator
http://www.herbietunes.com