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>>it seems like this might not be entirely bad The problems start when they can't pay back their $600K mortgages with a $17 an hour job or freelancing here and

>>it seems like this might not be entirely bad The problems start when they can't pay back their $600K mortgages with a $17 an hour job or freelancing here and there. Mortgages are pretty old as a product, banks know who is likely to afford it and who isn't. Mortgage payments are due every month of the year for 15-20-25-30 years, and that's the problem.

matthewmacleod 8y ago
Mortgages are pretty old as a product, banks know who is likely to afford it and who isn't. Doesn't the sub-prime crisis basically blow that theory out of the water?
- giarc 8y ago
  Mortgage lenders likely knew these people couldn't pay it back, that's why they sold the debt as fast as they could.
  - patio11 8y ago
    If this were true, you’d expect America’s largest banks to have had only 60 days or so of subprime mortgages on the books, which would have meant minimal exposure in the scheme of things. In the world we live in, Bank of America fell by 95% or so, Citibank missed nationalization by a whisker, Wachovia was forced to merge, etc etc, and that’s not even counting the investment banks, because they were happily engaged in the traditional business of banking in addition to securitization.
- onetimemanytime 8y ago
  Nope, the sub-prime lenders deviated from the norm
derekp7 8y ago
The other piece is loan to value. So depending on how many other people the nursing student in the article had to buy out, her share could be as high as 50% of the house (if it was split between 2 people). In that case, there is really no risk for the bank as they would more than recoup their losses in a foreclosure.
- onetimemanytime 8y ago
  OK, but did you read such mortgages grew by xx% and conventional mortgages went down last year? Not all of them were buying out their relatives. "Lenders issued $34 billion worth of these unconventional mortgages in the first three quarters of 2018, a 24% increase from the same period a year earlier....the growth is notable because it came as traditional home loans declined. Those originations fell 1.2% over the same period and were on track for a second down year in 2018."

matthewmacleod 8y ago

Mortgages are pretty old as a product, banks know who is likely to afford it and who isn't. Doesn't the sub-prime crisis basically blow that theory out of the water?

giarc 8y ago
Mortgage lenders likely knew these people couldn't pay it back, that's why they sold the debt as fast as they could.
- patio11 8y ago
  If this were true, you’d expect America’s largest banks to have had only 60 days or so of subprime mortgages on the books, which would have meant minimal exposure in the scheme of things. In the world we live in, Bank of America fell by 95% or so, Citibank missed nationalization by a whisker, Wachovia was forced to merge, etc etc, and that’s not even counting the investment banks, because they were happily engaged in the traditional business of banking in addition to securitization.
onetimemanytime 8y ago
Nope, the sub-prime lenders deviated from the norm

derekp7 8y ago

The other piece is loan to value. So depending on how many other people the nursing student in the article had to buy out, her share could be as high as 50% of the house (if it was split between 2 people). In that case, there is really no risk for the bank as they would more than recoup their losses in a foreclosure.

onetimemanytime 8y ago
OK, but did you read such mortgages grew by xx% and conventional mortgages went down last year? Not all of them were buying out their relatives. "Lenders issued $34 billion worth of these unconventional mortgages in the first three quarters of 2018, a 24% increase from the same period a year earlier....the growth is notable because it came as traditional home loans declined. Those originations fell 1.2% over the same period and were on track for a second down year in 2018."