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FTA: > A widespread misconception about mortgage securitization is that it was created to make Wall Street rich. … > Mortgage securitization, and secondary sa

FTA: > A widespread misconception about mortgage securitization is that it was created to make Wall Street rich. … > Mortgage securitization, and secondary sales of loans, and other mechanisms cause mortgages to migrate from the banking sector to pools of capital which are more structurally insulated against the interest rate cycle.

yareal 2y ago
Which has the effect of....? At the end of the day, the reasons these choices exist is to make someone rich. The mechanism (shielding from interest rate cycles) is just an implementation detail.
- SpicyLemonZest 2y ago
  It's not just an implementation detail. In the 80s there was a big event known as the S&L crisis (https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis), where an interest rate spike which was not adequately shielded led a substantial fraction of all US mortgage lenders to fail.
- refurb 2y ago
  It has the effect of being able to provide homeowners with cheap 30-year fixed mortgages. I'm surprised you're against it.
  - forgetfreeman 2y ago
    Conversely I remain surprised to this day that several hundred execs didn't end up with multi-decade long prison sentences for bricking the global economy with this bullshit.
    - refurb 2y ago
      I’ll tell you why - because the government promoted it. Fannie and Freddie were complicit.
      - scarface_74 2y ago
        This is another widespread misconception. The mortgages that got the economy in trouble were the no-doc, no income verification type mortgages - ie “non conforming”. By definition, a non conforming loan isn’t backed by Fannie and Freddie. I had multiple non conforming loans I got before the crash. Yes they ended up just like you suspect.
        forgetfreeman 2y ago
        I have news for you... Source: worked briefly in mortgage underwriting before the crash.
        scarface_74 2y ago
        Are you denying the fact that a “non conforming loan” by definition means it isn’t eligible for Freddie and Fannie backing? I’ve had 5 first mortgages in my lifetime and only one was “conforming”. My latest one was a unit in a condotel where I live the majority of the year. No government institution would ever back and no income verification loan on a mixed use commercial/personal secondary home.
        forgetfreeman 2y ago
        I'm reporting observed reality homeboy. I watched thousands of loans a week get pumped through the system with everything from income verification fields left blank to literally fraudulent (as in the loan officer got tech support on the phone to help them generate random numbers) information get pushed through with zero pushback. A point for you to consider: "non conforming loan" is only a meaningful phrase when the criteria for non conforming loans is actually being verified.
        scarface_74 2y ago
        Yes. But how many of those were “conforming loans” that were officially backed by Fannie Mae
    - hkt 2y ago
      What bothers me is that in various european countries - the UK, in my case - right wingers who created the mortgage market in the 1980s successfully pinned the global financial crisis on politicians.
      - forgetfreeman 2y ago
        There's a case to be made there if you assume one of government's responsibilities is to keep the financial industry from blowing up the planet.
      - Joel_Mckay 2y ago
        I haven't really thought about the effectiveness of blame given the scope of the issues. https://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog https://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog It is an interesting backdrop of power that politics play out upon though. =3
  - maxerickson 2y ago
    Adding leverage to the housing market probably isn't a net good thing. Especially when you have a mismatch between demand for desirable housing and the available supply. It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supply problems).
    - jjav 2y ago
      > Adding leverage to the housing market probably isn't a net good thing. The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know). But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor. If we complain today that raising a 20% down payment towards a million dollar house is very difficult, would it be any easier if that house cost (let's say) 600K but you have to raise the whole 600k up front? I'm generally against having debt, but mortgages are a wonderful thing.
      - maxerickson 2y ago
        The comments I replied to are pretty specifically talking about government supported 30 year fixed mortgages, rather than mortgages in general. I guess I could have spelled out the context I thought was implied?
      - Joel_Mckay 2y ago
        "mortgages are a wonderful thing" If you are still seeing negative amortization for 15% of buyers (will rise with interest rates). Indeed, repurchasing your defaulted mortgage for equity liquidation is a very profitable posture to take for some folks. Have a nice day =)
      - hakfoo 2y ago
        What answers do we get if "market" isn't part of the platform? If we start with the question "how do we affordably house the most people possible", I'd think we end up with something like "the state owns the housing stock and leases it out on a long-term basis with very tight (and obviously political-third-rail) restrictions on pricing and allocation".
  - yareal 2y ago
    I'm against the idea of hosting as a commodity generally.
    - astrange 2y ago
      Commodities are good. They're cheap and don't need ceremony to buy. The opposite is when distribution is controlled by someone subjectively judging if you're worth having it. This is very bad for minorities (the judger will be racist) and women (the judger will make you pay for it with your body). Example in the US is the mass manufactured Sears homes, which whites in the South hated because they'd sell to blacks.
Joel_Mckay 2y ago
Michael Milken is the man that popularized mortgage securitization on wall-street. Eventually convicted, then pardoned by #45.. Exactly how is this not dodging accountability son?
- JumpCrisscross 2y ago
  > Michael Milken is the man that popularized mortgage securitization on wall-street No, he didn’t. He did high-yield corporate debt. Mortgages are neither high yield nor corporate.
  - blackhawkC17 2y ago
    It’s usually people with the least financial knowledge that rant the most and lie a lot too. Suddenly, mortgages have become a bad thing..
    - Joel_Mckay 2y ago
      "Like everything else, it started off with great intentions" https://financialpost.com/financial-times/how-bonds-ate-the-entire-financial-system https://financialpost.com/financial-times/how-bonds-ate-the-... ..and people like you... easily swayed by sycophantic idealism, and irrational greed. Have a wonderful day, and please refrain from resorting to straw-man arguments and slander if you are feeling upset by facts. =3
      - JumpCrisscross 2y ago
        You’re both wrong. I’ve worked with some of the people who invented these products and still had to double check your reference to make sure I was correct. I was—Milken didn’t popularise mortgage securitisation. Ranieri did.
        Joel_Mckay 2y ago
        If you actually read the posted article it describes Lewis Ranieri's role in detail. There is no right or wrong here in my opinion... just history and documented facts validated through a vetted jury conviction. I wish it was an ill informed opinion kid... I really do... I'd feel much less guilty seeing families growing up in Condos the size of a garden shed.

yareal 2y ago

Which has the effect of....? At the end of the day, the reasons these choices exist is to make someone rich. The mechanism (shielding from interest rate cycles) is just an implementation detail.

SpicyLemonZest 2y ago
It's not just an implementation detail. In the 80s there was a big event known as the S&L crisis (https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis), where an interest rate spike which was not adequately shielded led a substantial fraction of all US mortgage lenders to fail.
refurb 2y ago
It has the effect of being able to provide homeowners with cheap 30-year fixed mortgages. I'm surprised you're against it.
- forgetfreeman 2y ago
  Conversely I remain surprised to this day that several hundred execs didn't end up with multi-decade long prison sentences for bricking the global economy with this bullshit.
  - refurb 2y ago
    I’ll tell you why - because the government promoted it. Fannie and Freddie were complicit.
    - scarface_74 2y ago
      This is another widespread misconception. The mortgages that got the economy in trouble were the no-doc, no income verification type mortgages - ie “non conforming”. By definition, a non conforming loan isn’t backed by Fannie and Freddie. I had multiple non conforming loans I got before the crash. Yes they ended up just like you suspect.
      - forgetfreeman 2y ago
        I have news for you... Source: worked briefly in mortgage underwriting before the crash.
        scarface_74 2y ago
        Are you denying the fact that a “non conforming loan” by definition means it isn’t eligible for Freddie and Fannie backing? I’ve had 5 first mortgages in my lifetime and only one was “conforming”. My latest one was a unit in a condotel where I live the majority of the year. No government institution would ever back and no income verification loan on a mixed use commercial/personal secondary home.
        forgetfreeman 2y ago
        I'm reporting observed reality homeboy. I watched thousands of loans a week get pumped through the system with everything from income verification fields left blank to literally fraudulent (as in the loan officer got tech support on the phone to help them generate random numbers) information get pushed through with zero pushback. A point for you to consider: "non conforming loan" is only a meaningful phrase when the criteria for non conforming loans is actually being verified.
        scarface_74 2y ago
        Yes. But how many of those were “conforming loans” that were officially backed by Fannie Mae
  - hkt 2y ago
    What bothers me is that in various european countries - the UK, in my case - right wingers who created the mortgage market in the 1980s successfully pinned the global financial crisis on politicians.
    - forgetfreeman 2y ago
      There's a case to be made there if you assume one of government's responsibilities is to keep the financial industry from blowing up the planet.
    - Joel_Mckay 2y ago
      I haven't really thought about the effectiveness of blame given the scope of the issues. https://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog https://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog It is an interesting backdrop of power that politics play out upon though. =3
- maxerickson 2y ago
  Adding leverage to the housing market probably isn't a net good thing. Especially when you have a mismatch between demand for desirable housing and the available supply. It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supply problems).
  - jjav 2y ago
    > Adding leverage to the housing market probably isn't a net good thing. The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know). But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor. If we complain today that raising a 20% down payment towards a million dollar house is very difficult, would it be any easier if that house cost (let's say) 600K but you have to raise the whole 600k up front? I'm generally against having debt, but mortgages are a wonderful thing.
    - maxerickson 2y ago
      The comments I replied to are pretty specifically talking about government supported 30 year fixed mortgages, rather than mortgages in general. I guess I could have spelled out the context I thought was implied?
    - Joel_Mckay 2y ago
      "mortgages are a wonderful thing" If you are still seeing negative amortization for 15% of buyers (will rise with interest rates). Indeed, repurchasing your defaulted mortgage for equity liquidation is a very profitable posture to take for some folks. Have a nice day =)
    - hakfoo 2y ago
      What answers do we get if "market" isn't part of the platform? If we start with the question "how do we affordably house the most people possible", I'd think we end up with something like "the state owns the housing stock and leases it out on a long-term basis with very tight (and obviously political-third-rail) restrictions on pricing and allocation".
- yareal 2y ago
  I'm against the idea of hosting as a commodity generally.
  - astrange 2y ago
    Commodities are good. They're cheap and don't need ceremony to buy. The opposite is when distribution is controlled by someone subjectively judging if you're worth having it. This is very bad for minorities (the judger will be racist) and women (the judger will make you pay for it with your body). Example in the US is the mass manufactured Sears homes, which whites in the South hated because they'd sell to blacks.

Joel_Mckay 2y ago

Michael Milken is the man that popularized mortgage securitization on wall-street. Eventually convicted, then pardoned by #45.. Exactly how is this not dodging accountability son?

JumpCrisscross 2y ago
> Michael Milken is the man that popularized mortgage securitization on wall-street No, he didn’t. He did high-yield corporate debt. Mortgages are neither high yield nor corporate.
- blackhawkC17 2y ago
  It’s usually people with the least financial knowledge that rant the most and lie a lot too. Suddenly, mortgages have become a bad thing..
  - Joel_Mckay 2y ago
    "Like everything else, it started off with great intentions" https://financialpost.com/financial-times/how-bonds-ate-the-entire-financial-system https://financialpost.com/financial-times/how-bonds-ate-the-... ..and people like you... easily swayed by sycophantic idealism, and irrational greed. Have a wonderful day, and please refrain from resorting to straw-man arguments and slander if you are feeling upset by facts. =3
    - JumpCrisscross 2y ago
      You’re both wrong. I’ve worked with some of the people who invented these products and still had to double check your reference to make sure I was correct. I was—Milken didn’t popularise mortgage securitisation. Ranieri did.
      - Joel_Mckay 2y ago
        If you actually read the posted article it describes Lewis Ranieri's role in detail. There is no right or wrong here in my opinion... just history and documented facts validated through a vetted jury conviction. I wish it was an ill informed opinion kid... I really do... I'd feel much less guilty seeing families growing up in Condos the size of a garden shed.