4 ms·

Ah, okay. Then it depends on how I feel about the investors taking the hit. I imagine(incorrectly?) the investors as a group of wealthy people that won't suffer

by smtddr 13y ago

Ah, okay. Then it depends on how I feel about the investors taking the hit. I imagine(incorrectly?) the investors as a group of wealthy people that won't suffer a huge decrease in quality-of-life by taking the hit but all the "regular" people in underwater mortgages would have significant gain in quality-of-life by the freed financial resources. This is me thinking that for a lot of people about 40% to 50% of their income goes to mortgage payments. The other problem though, is that wealthy people always seem to have a way of passing the damage down to the working class.

cinquemb 13y ago
More than likely, investors in these cases are probably mostly compromised of 401k's and such. Small institutional folks (group of wealthy) who have been looking at the financials of some bond markets closely are probably getting out of risky areas like these…
smsm42 13y ago
Investors are probably a group of middleman that are managing money for pension funds, municipal funds, endowments, and such. Of course, if you take 100K out of billion-size pension fund, that alone wouldn't do much difference. That alone happening on scale means some pension funds would be in deficit, which means somebody who joins the workforce now would have to pay much more for their pension than before (since it is almost impossible to change conditions in an existing pension plan if unions are involved) or somebody's taxes would be raised, or somebody's tuition would go up. >>> The other problem though, is that wealthy people always seem to have a way of passing the damage down to the working class. There's no such thing as "wealthy people vs. working class", if they ever were. Look up how much money largest unions manage, how big are largest pension funds, how big are all pension funds combined. We're talking trillions here. Of course, there are some very rich people, but thinking that messing with economy you're only influencing those rich top-hat wearing monocle-donning monopoly men is completely wrong. Everything is connected, and "working class" is as interested in good investment climate as the wealthiest of the wealthy. Maybe even more - if Bill Gates loses 50% of his money, he'd be ok. If your average Joe's pension fund loses 50%, he's screwed.
chiph 13y ago
Uhh, I'm probably one of those "wealthy" investors, via my 401k retirement savings. I assure you, I'm not in the 1%. Please don't default. > 40 to 50% That would be very unusual in most of the US, as the lenders typically want a 28/36 front-end/back-end ratios. Obviously, during the bubble things were a little ... looser.
refurb 13y ago
You're not following the impact to the end. The problem with this is that a person makes an investment with a known risk profile. That needs to be known in order to just the worthiness of the investment: the higher the risk, the higher the return needs to be. When someone comes in and changes the rules, that messes up everything. Suddenly those safe mortgage investments that you felt were a good investment at a 5% return become absolutely shit because you run the risk of taking a huge loss. What is the impact? All those people that bought up the mortgages a while back now want another 5% in return to offset the risk of having the mortgages suddenly lose value. Who loses? Homeowners because now you can only find mortgages at 10%, not 5%.
- mbreese 13y ago
  > The problem with this is that a person makes an investment with a known risk profile Which gets back to the root of the problem. Mortgage companies were not properly assessing (or outright lying about) the risk for some of these mortgages. A lot of those seemingly safe mortgages were in reality very unsafe. Everyone needs to feel some pain on this one. Homeowners, mortgage companies, and investors - everyone who underestimated their risks should see some loss. If that risk wasn't properly assessed the first time around, then yes, it will cost more. Mortgages are at ridiculously low rates from a historical perspective, so it wouldn't be unreasonable to see those rates rise. The people who really got screwed were those that had a properly sized mortgage, ability to pay it, but then had the value of their home drop when the rest of the market failed. If they were unable to ride out the collapse, it was brutal.

by smtddr 13y ago

cinquemb 13y ago

More than likely, investors in these cases are probably mostly compromised of 401k's and such. Small institutional folks (group of wealthy) who have been looking at the financials of some bond markets closely are probably getting out of risky areas like these…

smsm42 13y ago

Investors are probably a group of middleman that are managing money for pension funds, municipal funds, endowments, and such. Of course, if you take 100K out of billion-size pension fund, that alone wouldn't do much difference. That alone happening on scale means some pension funds would be in deficit, which means somebody who joins the workforce now would have to pay much more for their pension than before (since it is almost impossible to change conditions in an existing pension plan if unions are involved) or somebody's taxes would be raised, or somebody's tuition would go up. >>> The other problem though, is that wealthy people always seem to have a way of passing the damage down to the working class. There's no such thing as "wealthy people vs. working class", if they ever were. Look up how much money largest unions manage, how big are largest pension funds, how big are all pension funds combined. We're talking trillions here. Of course, there are some very rich people, but thinking that messing with economy you're only influencing those rich top-hat wearing monocle-donning monopoly men is completely wrong. Everything is connected, and "working class" is as interested in good investment climate as the wealthiest of the wealthy. Maybe even more - if Bill Gates loses 50% of his money, he'd be ok. If your average Joe's pension fund loses 50%, he's screwed.

chiph 13y ago

Uhh, I'm probably one of those "wealthy" investors, via my 401k retirement savings. I assure you, I'm not in the 1%. Please don't default. > 40 to 50% That would be very unusual in most of the US, as the lenders typically want a 28/36 front-end/back-end ratios. Obviously, during the bubble things were a little ... looser.

refurb 13y ago

You're not following the impact to the end. The problem with this is that a person makes an investment with a known risk profile. That needs to be known in order to just the worthiness of the investment: the higher the risk, the higher the return needs to be. When someone comes in and changes the rules, that messes up everything. Suddenly those safe mortgage investments that you felt were a good investment at a 5% return become absolutely shit because you run the risk of taking a huge loss. What is the impact? All those people that bought up the mortgages a while back now want another 5% in return to offset the risk of having the mortgages suddenly lose value. Who loses? Homeowners because now you can only find mortgages at 10%, not 5%.

mbreese 13y ago
> The problem with this is that a person makes an investment with a known risk profile Which gets back to the root of the problem. Mortgage companies were not properly assessing (or outright lying about) the risk for some of these mortgages. A lot of those seemingly safe mortgages were in reality very unsafe. Everyone needs to feel some pain on this one. Homeowners, mortgage companies, and investors - everyone who underestimated their risks should see some loss. If that risk wasn't properly assessed the first time around, then yes, it will cost more. Mortgages are at ridiculously low rates from a historical perspective, so it wouldn't be unreasonable to see those rates rise. The people who really got screwed were those that had a properly sized mortgage, ability to pay it, but then had the value of their home drop when the rest of the market failed. If they were unable to ride out the collapse, it was brutal.