Blown Mortgage - Latest Comments in Pyramid of Greed

Re: Pyramid of Greed

jbinfrisco — Fri, 25 Jul 2008 11:59:10 -0000

Morgan,

Thanks for changing the word broker to originator. It's a subtle difference but more accurate. All originators, both banker and broker, must shoulder the burden when discussing their role in the mortgage crisis.

The banks like to intimate to consumers and the media that they are 'less' to blame. Not true. Keep up the good work.

Re: Pyramid of Greed

Teri — Thu, 24 Jul 2008 10:29:55 -0000

Another word might be influence. And yet another might be culpability.

Re: Pyramid of Greed

Jeff P. — Wed, 23 Jul 2008 14:20:53 -0000

Instead of power how about "influence"?

Re: Pyramid of Greed

sweeney — Wed, 23 Jul 2008 13:18:02 -0000

Hey Morgan-

Great pyramid, that really sums it up. You could also add title companies and credit bureaus. And local lender associations who turned a blind eye. Maybe even state and fed agencies that failed to enforce the laws (specifically RESPA and FTC false/misleading advertising).

That pyramid keeps growing!

Re: Pyramid of Greed

Cindy S — Mon, 21 Jul 2008 19:34:31 -0000

I don't see homebuilders specifically listed there but they should be. As builders they were able to influence appraisers to inflate prices. I don't even live in a real big bubble area and I read two articles quoting two appraisers in my area quoting appraisers saying this was going on. This was not a free market or demand, this was artificial price inflation and some say fraud.

Then, many builders opened their own lending arms, I guess they'd fall into your Lender/Originator category then. They got in on toxic loans, predatory and at times fraudulent lending, etc. Including heavy use of questionable "down payment assistance programs" (DPA's) that the IRS called a scam, HUD tried to shut down, and that some have compared to money laundering. Builders are one of the biggest users of DPA's.

I think the builders have kind of slipped under a lot of people's radars because most of us have this image of builders being just regular guys who are good with their hands, trying to make a living. In reality many building co's are run not by this type but by CEO types. Anything to make a profit.

This industry spends millions annually to change laws and get what they want. It threatened to withdraw congressional campaign donations if it didn't get what it wanted this year. Funding restored a few months later, and it has a bailout bill in progress, labeled as being for homeowners of course.

Shoddy construction is bad enough. Add funny lending to it and I am surpised more have not mentioned builders as being part of this problem. Perhaps it's because many of the co's can afford to pay millions in fines to HUD without admitting wrong-doing.

Re: Pyramid of Greed

Fielding Mellish — Mon, 21 Jul 2008 17:32:26 -0000

The problem with making every person in America "fess up" to having been part of the problem (as the pyramid essentially does) is that it's a little like saying "everyone's equally a lawbreaker - those who drive 56 in a 55mph zone and John Wayne Gacy who murdered 30+ young men & buried them under his house." If an originator never did Option ARMs, never lied about a borrower's stated income, never pressured an appraiser for an unrealistic valuation and never induced a borrower to take on more than they could realistically handle, then that originator should feel pretty darned good about themselves. Not having the foresight to see 30% property devaluations coming was an error common throughout the financial system, but it wasn't maleficent - in contrast to the many scum-sucking bottom feeders, who after years of suckering people into 1% Option ARMs, now look at your pyramid and conclude that they're no worse than anyone else, which is utterly untrue.

Re: Pyramid of Greed

paulemtg — Mon, 21 Jul 2008 15:41:17 -0000

The greed went up up to the presidency? Please, the biggest factor an gains were mader by the selling CDO's and lying about the credit worthiness of the CDO's. Had Moody's and S&P been honest in the ratings none of this would have happend at the same scale. The collapse in equity was the result of foreclosed properties. Had any of the government agencies stepped in and frozen the rate resets, the sub prime contagion would have not had as negative effect on the capitalization of GSE's,CDO's, Banks, and yes the individual home owners. Most point to the negative affect this would have had on the secondary markets. The investors would not have lost as much had the real estate market been stabalized. Greed paid a part, but thats not the only reason, nor is it the only major reason. Its just a part of the problem. Whats happening to the home mortgage market happened in the commercial markets, maybe you don't remember.
Ignorance about history dooms those who don't heed the instruction to repeat the events with similar results.

Paul in Bellevue

Re: Pyramid of Greed

edd browne — Mon, 21 Jul 2008 14:34:31 -0000

I would add appraisers and underwriters.
They can be considered part of lenders,
they are supposed to be "cops".

There is also a case to be made that
one category should be "Passive Citizens",
who don't feel obligation beyond family.
It's more than informed voting and ethics.
It should be raising alarms, agitation,
and sometimes the pain of litigation.

Credit agencies are part of the Wall Street Club,
but they should not be.

Re: Pyramid of Greed

name — Mon, 21 Jul 2008 14:33:05 -0000

forgot appraisers

Re: Pyramid of Greed

RB — Mon, 21 Jul 2008 13:46:22 -0000

Power synonyms = "Authority" or "Influence"

Re: Pyramid of Greed

John — Mon, 21 Jul 2008 13:19:08 -0000

Nick Gogerty's comment that greed is constant ... responsibility and trust failed is right-on.

Starting at the bottom of the pyramid, homeowners trusted real estate agents and mortgage orginators to be responsible and tell them if they couldn't qualify for a lown. Mortgage originators trusted the lender's risk layering guidelines, because they were told the lenders have professional financial analysts and risk mitigators and they are not going to let unqualifed borrowers get loans. What 25 year old originator is going to disagree?

Greed is held in check by responsible and trustworthy authorities at all levels, and moving up the pyramid, the authorities became increasingly negligent.

Remember the proverb: The fish always stinks from the head downwards.

Re: Pyramid of Greed

VacantHomes — Mon, 21 Jul 2008 13:18:05 -0000

I agree that the credit rating agencies absolutely need to be in there, they were one of the lynchpins to the whole scheme. I'd say they deserve their own slice in the pyramid... I think they were probably a bigger factor than, say, Fannie & Freddie. (not that Fannie & Freddie were completely innocent)

Yeah, also add appraisers, but they could be grouped together with real estate agents.

Re: Pyramid of Greed

JohnW — Mon, 21 Jul 2008 13:07:23 -0000

If you subtract refi mills from the pyramid, Real Estate Agents would be placed much higher than mortgage loan officers. Often during my past 20 years in the biz when telling a REALTOR that their client only qualifies for a $200k priced property their first response would be to find another loan agent willing to put a buyer in a higher loan amount. The REALTOR community does not care anything about the long term health of their buyer clients. To prove the point: ask any REALTOR to qualify their buyers as they are supposed to do. I doubt any more than 1 percent could actually pull it off. REALTORS take finance and ethics classes in order to get their licenses. It seems as though that data goes in one ear and out the other.

Re: Pyramid of Greed

Don — Mon, 21 Jul 2008 11:53:52 -0000

I'm sorry Peggy, I could not disagree more. It's not an entitlement to own a home, but Americans do have a RIGHT to access to homeownership. Most home loans before the New Deal were 5 year loans with a balloon payment. Fannie was set up to give people more access to homeownership, because homeownership across the board makes for a stable society. In the end, it provided access to homes after World War II and helped establish a huge middle-class. Yes, sometimes gov't does get it right, but it depends on the culture and people who run things. Unfortantely, we've been on a cultural run of almost three decades thinking more of the "me" and not of the "we". Examples, the junk bond scandal, the crash of '87, the S and L debacle, the tech bubble and now the real estate bubble. No enforcement of the laws on the books and no oversight by Congress has been disasterous.

Re: Pyramid of Greed

AaronP — Mon, 21 Jul 2008 11:31:49 -0000

I would put appraisers in with RE agents, and I think the ratings agencies are probably included in with Wall Street.

Re: Pyramid of Greed

reuch9 — Mon, 21 Jul 2008 11:22:56 -0000

Got to get those appraisers on there somewhere...they had the power to stop it in its tracks.

Re: Pyramid of Greed

morganb — Mon, 21 Jul 2008 10:43:05 -0000

Great points nick - definitely need the ratings agencies in there.
appraisers and ratings agencies will go in asap.

Re: Pyramid of Greed

nick gogerty — Mon, 21 Jul 2008 10:30:57 -0000

what about Moody's and S&P who rated the highly lucratie securities of mortgage related assets as AAA. There is a need for 2 other pyramids, responsibility and trust. Both failed. Greed is constant, negligence and irresponsibility are what ebbed.

Re: Pyramid of Greed

Peggy — Mon, 21 Jul 2008 10:11:41 -0000

I like the pyramid concept because it speaks volumes. I like having the government at the top with a "trickle down" image. It could just as easily be at the base showing the US government as the major force in this fiasco. ....historically, going back to the New Deal, and vociferously, US government intoning homeownership as an entitlement, not a privilege. In 2003, Congress mandated Fannie & Freddie achieve 70% homeownership. Both agencies and everyone in the mortgage business knew there wasn't a large enough pool of creditworthy buyers to achieve that!

Re: Pyramid of Greed

morganb — Mon, 21 Jul 2008 10:07:12 -0000

Gayla - wow, great, great point. I must add them...

Re: Pyramid of Greed

morganb — Mon, 21 Jul 2008 10:02:08 -0000

well put Ann, too true. I did an analysis of all the loans we ever made at
my company - I'll dig it up and repost. It was a huge percentage of 30-year
fixed loans, but I know there are some loans that in retrospect should
probably never have been made...

Re: Pyramid of Greed

morganb — Mon, 21 Jul 2008 10:01:05 -0000

Jim - I like it :)

Re: Pyramid of Greed

Gayla — Mon, 21 Jul 2008 09:33:39 -0000

Appraisers

Re: Pyramid of Greed

Jim — Mon, 21 Jul 2008 09:29:10 -0000

Morgan,
How about "stupidity"?

Re: Pyramid of Greed

Ann — Mon, 21 Jul 2008 08:14:40 -0000

I love your pryamid..and yes..I too am listed on that chain.and like you Morgan I reaped the benefits of the good ole days but I can say that I sleep well at night knowing I did what was right, or advised my clients, who in the end..did what they wanted to anyway..that brings me to the point that you bring up in one simple word..GREED...

Most of the clients that I worked with are ok..but others are in trouble...why?..bad investment properties that were gobbled up when I told them not to buy(everybody wanted to be the next star of Flip This House), people who moved from nice modest homes, to grand McMansions(now I know how they got them...mostly with the toxic Neg Ams) and others who used one the equity in their main home to purchase additional properties for vacations..., they can't take, can't afford, or can't find a renter...but they were all motivated by GREED..more, more and more...

But all along the food chain..from these people..ridiculous amounts of money were made...by everybody...and now unfortunately...we are are going to give it all back...and then some..and as taxpayers, its going to hit us ALL in the wallet..