Will subprime meltdown cost $4 trillion, $400 billion, or $104 billion?

If any subprime borrowers are not wiling to make sacrifices at all, they can always sell their bodies. Look at porno sites, there is billions of movies and pictures out there and they are earning very well. There is no denying that porno help subpirme borrowers a lot!! Or even dealing in dope, barterings, etc. They probably are benefaciries of close relatives' life insurances. They probably are smart stockholders, etc. Just quit blaming the banks and agents because you can fend for yourselves, really! Quite many borrowers got in misfortunes like medical bills, divorces, and others and should be helped by our government. After all, our home prices would never got that high if not for subprime borrowers. We salute subprime borrowers for their determination to become homeowners and many of them could have known better than spending too much and unnecessarily on other items that I mentioned in recent previous comments here.

On second thought, I dont believe that all of our foreclosures stem from subprime borrowers. Many borrowers with excellent ratings went under as well because they are not resourceful or frugal enough to keep their mortgages paid on time because they thought they must buy new furnishings, subscriptions, eat outs, cigarettes, SUVs , etc and got over their heads out of arrogrance!! The press or most of you comment nuts are too quick to blame the banks or agents for the mess!! You are trying to protect Big Oil, tobacco companies, cable TV companies, SUV dealers, restaurants, etc.... You are trying to cover up the issue by labeling it as subprime borrower fiasco, but really subprime borrowers are doing fine , relatively speaking. Oh, I forgot that you are also trying to protect borrowers with excellent ratings. Again, I understand that about half of the home foreclosures are caused by misfortunes like medical bills. Only 2 percent of all mortgages outstanding are being foreclosed yet we are feeling an financial earthquake. I think it is exaggarating things a lot. Probably you dont like subprime borrowers living next door to you.... You snooty, stiff upper-lip comment posters...

There probably would be no need for subprime loans if most of us are willing to save money and earning puny interest rates in money markets or CDs until it is time to take out a normal 80/20 mortgage with no PMI required. We do not do that because we are constantly telling ourselves that we can only live once and we got to blow our paycheck every Friday. We go to rock concerts, sport events, casinos, movies without really thinking about our future as homeowners. That is why banks and agents came up with those crazy schemes to fit our so called American lifestyles!!! I cant really fault anyone. That is how things goes...We have to keep our wheels greased .... If you want to work in a porno site, fine with me, go ahead!! Your choice!! The real issue with our foreclosures stems chiefly from misfortunes like medical bills , etc. So please stop calling it a subprime issue.... You AOL members are talking craps!!

Maybe we are trying to get people to sell out stocks out of imaginary fears about subprime mess, so that you can swoop down and grab the stocks at lower prices. your comments are not worth my time defecating around...

Sell your Big Oil, tobacco, cable TV, magazine, online stocks!!! Not those true value stocks that you are trying to get us to sell... Sell your crap stocks above!!

That is true. The problem right now was caused by the people and their lack of planning on paper...Not the Government.

Peter,

I agree that there needs to be more controls in the US residential lending business, and that it is complicated due to all of the parties you mentioned in the article. I am an executive in the mortgage banking business. The one foundation we need to preserve here is the secondary market for the mortgages originated. The three main parties needed for this are Fannie Mae, Freddie Mac and HUD/FHA. Not long ago, the first two got into trouble also due to greed and politics. Hopefully they have learned their lesson. We need this secondary market, as the banks and financial institutions alone do not have the balance sheet capability for the volume of loans produced in the US. I would recommend that loan limits be increased in higher cost areas and remain the same elsewhere. I would also recommend in the short term that Washington pressure those Non Bank holders of ARM mortgage debt to allow workouts with borrowers as to the reset rates. The banks already can do this right now and are. I will add more in another commentary.

More,

For those HONEST borrowers with resets that are in homes where property values have held up, they will be able to refinance to a lower rate. I say honest, because there are too many borrowers who only qualified by stating their income by inflating it ie: lied. For these, I don't think anyone should bail them out other than those investors who allowed the practice and own the mortgages. They can work with the lenders who were invovled to pay for this messy clean up. The one problem here is many of those lenders have gone out of business. As for the future, from a lending view, halt all Stated Income loan programs. Common sense tells you it leads to problems. Allow loans where there is no income, as long as there is sufficient down payment and existing personal assets. There needs to be boundaries around this too. Also, institute licensing for all loan officers with a defined education process they need to go through on an annual basis. This covers both independent brokers as well as LO's with financial institutions. This is not too much to ask for those who are out there counseling consumers on probably their largest purchase and financial obligation of their lifetimes. Same goes for licensing and education for the appraisal business too. I will stop here, although there are obviously other things needed.

another responsible party for the mortgage mess that isnot to be overlooked, the realtors who helped start this feeding frenzy by allowing sellers to overprice their homes which earned the realtors obscene commissions.....these greedy sellers and brokers are the reason buyers required creative financing and every home to close with a heloc = one home, double debt = today's subprime disaster which has been cooking since the late 80s. i for one am not surprised.....and i am not a victim of this mess - my home was a great buy lost due to a stupid ex-husbands ego . .in 1994!

The entire mortgage system is just too complex and too greedy - all for the good of ...the shareholder! Oh sure! Hmm?...look at the stock prices of the big lenders now! Greed is just so distructive. The answer is simple and costly to the industry, but too bad - Do the RIGHT thing for a change! Preserve home ownership, keep families together, reduce the horrible stress this is causing the average borrower who is just trying to live pay check to paycheck! Solution:MODIFY every one of the ridiculous ARM loans to a reasonable fixed rate.

Subprime meltdown is created by the small group of "Capitalist Criminals" who are running World economy.You can call it conspiracy theory and make fun of it but soon you will be poor as villageman from Bangladesh.
This is not a joke but reality.Just check your bank account at the end of every month and count your bills( credit cards,insurance,mortgage) and you will see that all the money is ending in "Capitalist Criminals" pockets.
These people GREED has no limits.They don't care for our kids or any of us.
Middle class in America is finished and it should be called Slave Class.
We work hard for so many years and still have no savings or secure future.Baby boom generation is broke and greatly depressed.Now we don't have any equity in our homes.We buy things from China and we are so happy since we made a great deal.
When it comes to financing,they are advising us to invest over seas.....great.
Now, China is great.....Communist Dream comming true.
What a life America.What happened to American Dream???
Here are some Answers.
1.Form more then one ( two) political partys.
2.Get rid of Lobbys in Washington.
3.Nationalize Oil Industry,Insurance,Health Care (this would reduce cost more than 50%)
4.Find some decent people for future Presidents,not assholes with lots of influence and money.
5.Try to make our Economy similar to some normal European countries.

Immidiate solution for Subprime problem is that Banks should be forced to keep all the foreclosures and not be alloved to sell them next 5 years.LET THEM RENT !!!
Foreclosure velue is not realistic velue of the market but "PANIC VELUE !!! It should never be used as the velue in the neighborhood.

And conclusions at the end:"There are so many greedy and dangerous people in Washington that at the end they may Kill The World,( Our World)!
We should go to the streets and save Our World !!!

Beauty will save The World !!! ( Beauty of Humanity and Faith in God)!!!

It should be noted that there is a differentiated value for subprime or stated income loans in the commercial lending market. This loan type is not entirely bad despite the abuse of some in the residential lending arena. Oftentimes, individuals that want to start or acquire a small business, purchase a gas station, acquire a motel, open an auto repair shop or any of a myriad of sole proprietor establishments, and do not have the portfolio that would make them attractive to the big box leaders. Lending companies like Ocean Capital in Rhode Island offer subprime and stated income loans by using up close and personal evaluations of the borrower and the opportunity. We need companies like this to support new business opportunities.

Renegotiate loans on a massive scale. Low interest rates like regular homes. If still too high. Extend mortgage periods out to 40 years to keep payments down. As years are paid,then slowly adjust motgage period back towards 30 years. In the long term people will still default, but not at the same rate and banks and lenders will be better able to eat it.

This is my 32nd year in the Mortgage Banking industry. For the greatest majority of my career, mortgage lenders concentrated on making solid residential mortgage loans to qualified applicants with a sufficient, documented, down payment, and the ability to substantiate income. They needed to have the proper credit scores to show both the ability to repay the loan, and the willlingness to repay the loan.
With the implementation of the Home Mortgage Disclosure Act ( HMDA ), every Lender was required to report to those same government regulators the amount of mortgage applications that were received, those that were approved and closed, and those that were denied - for one reason or another.
Annually , those reports were scrutinized ( even as they still are today ) to show which loans were denied and for what reasons. The same congressional people that are now screaming for mortgage broker and lenders heads over the sub-prime mess couldnt wait to stand at the pulpit and scream " discrimination " towards minorities or anyone else that were not approved for their mortgage loan application. The HMDA reports, even to this day, only indicate certain facts like income, race, etc. NOWHERE in the entire HMDA report does it ever require the reporting of the credit scores for any applicant, regardless of race, as a reason for the credit denials.
By taking just the small part of the denial information reported by lenders on their HMDA reports, the government and other interested parties made the approval process of a mortgage loan into a race related issue - rather than a credit related issue.
Hence, when it the pressure became greater to extend mortgage loan approvals to all borrowers - regardless of their credit score ratings - more and more borrowers received mortgage loans than ever before. Due to the higher risk of those lower credit score applicants, investors and lenders had all right to consider that the repayment of those loans was a riskier investment, and that those loans should carry a higher rate of return to the investors to compensate for that risk.
Now, all of this mess just goes to underscore that those borrowers with significantly damaged credit histories should not have been provided access to home ownership, just because of their race - while completely ignoring their credit scores. The government made an issue of the home ownership approval process due to things other than credit scores and the marketplace simply responded with products that achieved that home ownership mandate while supposedly compensating them for the higher risk.
My only point is , there are many segments of the entire industry to blame. However, when the government now wants to sit there in judgment of the industry and wag their fingers at supposed unscupulous mortgage brokers and lenders - and the investment bankers on Wall Street that continued to buy these sub-prime loans for huge profits in fees to them, lets not forget that without the original government intervention for forcing loans to be made to undeserving applicants due to creditworthiness - none of this mess would have started.
A mortgage loan should have always been granted as it originally was, predicated upon creditworthiness, sufficient income, sufficient investment in the form of a down payment, etc. - and not predicated upon government intervention or on a social welfare basis of a race based issue.

A true story: About someone who was fooled into a bad mortgage and how he will affect the economy.

His name is Los and he bought a house with no money down and came out with two high rate mortgages.

He is the hardest working man I know. This is no lie. He is my trustworthy Sous Chef.

After months of misery of trying to make his house payment and all the other bills he gave up!!!! He walked away from his house that would be in foreclosure.

Now, he lives with his parents and still makes $35,000 a year. What will he do with his money now........?

I am a Real Estate Broker, and started noticing over two years ago that the mortgage Industry was doing everything in their power to put Home Buyers into Sub Prime loans. Some clients had minor bruieses on their credit, something that could be removed within 60 days but used the situation instead of credit repair, screw the Buyer with a sub prime loan. Why? To fill the pockets of the Mortgage Industries Pockets$$$$$. The New Home Builder Market was supporting the Economy, with out this market segment the Bush Administation would have been forced to admit that the country was in a recession, but instead stood by while the Mortgage Industry Raped the public. Now the Govmt. will bail out the industy that caused the problem and the greedy bastards that bought these Mortgage backed securities. All of this was happening under the watchful eye of Greenspan and now Burneke. This administration and the previous rubber stamp congress is responsible for this mess.
Three years ago a mortgage loan originator was happy to make $3,000 on a Mortgage, this past two and a half years they have been paid huge bonuses for puting borowers into subprime loan, disgraceful, if not criminal.
RDH - Dallas

There is one other solution -- but no one is going to like it (then again, what solution *do* people like?): we can allow inflation to rise to allow the "nominal price" of the house to rise, eliminating the problem of diminished wealth. It will allow virtually all of the homeowners to remain in their homes IF they move to fixed-rate mortgages NOW. Of course, the banking sector will take a battering and the Fed will have to increase the money supply to provide for that and it will result in a further devaluation of the dollar and higher inflation will be responded to with higher interest rates and . . . well, I TOLD you no one would like the idea. . .

The proposed "solutions" I'm reading here are surprisingly simple-minded, and reflect a total lack of understanding of the complexity of the problem.

Clearly, we need to learn a new vocabulary. We can start with MBS, tranche (equity, mezzanine, and senior), and credit default swaps.

I'm also amazed at the enthusiasm for more regulation. Buried in the posts is a reference to how "fair housing gone wild" helped to plant the seeds of this mess.

Many of the proposed new laws would restrict credit and force decent borrowers to pay more for their loans.

I'm also curious as to how additional licensing and "education" of either lenders or borrowers will help. Many of the white collar crimes in the mortgage business were committed by mortgage BROKERS- who were licensed. Quite often, those crime rings involved attorneys- who are licensed, as I recall. In my state, builders and realtors are licensed. And yet, they're two of the most frequently sued classes of workers on the planet.

Licensing does not instill ethics- no matter how much "ethics training" is in the continuing education course.

And forced education does not often result in learning. If a borrower who I wouldn't lend a dollar to can find a mortgage company to fund a home loan for him, so be it. And if that mortgage company can find a dope to buy that junk, great. And if Wall Street can find a sucker who'll underwrite the default risk in return for a meager income stream, let 'em.

We can't idiot-proof the world, and we can't greed-proof it, either.

What's done is done. We can't fix the past by passing new legislation, and there's always a workaround.

Most of the actions taken in the near-term to "prevent this from happening again" are pointless, like pumping the chest of a stone-cold corpse. Most of the legislation that will be enacted will hurt more than it helps.

Nothing our legislators do now are going to fix what's wrong now, or help those who are hurting at this moment.

There seems to be a compulsion to "Do something!" every time a crisis occurs. I believe the steps we take in the name of action for action's sake will provide little upside, and significant downside.

I know everyone looks for someone to blame and the easy targets are the mortgage companies, realtors, title companies, builders and appraisers. But let's be honest, we are all human and being so it is in our nature to be GREEDY. All of us. Look at our lifestyle, we are the FATTEST nation, we are easily the most materialist. Bigger, shiner, faster. Look at the cars we drive, the jewelry and clothes we wear(or we wish we could if had Beyonces' money) and yes, the houses we live in. But we choose those houses, and the no money down financing to furnish them with crap furniture that won't last as long as the payments. Consumer credit card debit is insane, if most people stopped spending on their credit cards (or similar revolving credit) it would take longer to pay them off than their homes. We are a nation obsessed with excess. I know more people in the last four years that supplemented their income by refinancing their homes than I can count. Not for anything worthy like college or medical bills but for the acquisition of more stuff. Sure the line was always "I want to pay off my credit cards because mortgage interest is tax deductible" and ya, they paid them off, only to turn around and max them back out. Soon wanting to do it again! Never taking the cost of refinancing into the equation, GREEDY. We put ourselves in the position we are in and have no one to blame but ourselves.