The say that necessity is the mother of invention. By that token, financial desperation and bankruptcy is apparently the mother of lots of probably-illegal property and mortgage schemes. During the last few years, as the housing bubble was perpetually inflated by 100% loans and other crazed financial practices that (inevitably) crashed and may yet bring down the world's banking system, I occasionally received spam urging me to buy now before prices rose even higher, but it wasn't that common. Every week or two a couple such mails would slip past my junk filters, but they weren't anything that special. Their advice wasn't even that crazy. They might have been less enthusiastic than any realtors' organization, or the financial advice delivered daily on TV by respected, mainstream financial analysts.
Now that the house of cards has collapsed and the operators are golden parachuting out while the US tax payers are going to get stuck with $700b in a bailout, desperation has set in for those who were formerly making money gaming the system, and my inbox is bearing the brunt of their death throes. I'm getting several emails a day along these lines; all full of unclear promises and intentionally vague language.
Need a catalyst to increase your originations?
Need to separate yourself from the competition?
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Once your client has paid off their loan (typically 7-10 years early) they can use their Bi-Weekly account on any loan product they wish for LIFE. They can even pass on their account to a family member.
We pay YOU! - 300 Dollars per enrollment AND we can show you how to add this easy option to every loan file just like Greg Frost and many other top producers do.
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I'm not even sure what this is selling. Something to do with lowering your mortgage payment or cutting the interest on it, apparently. I don't see how that's going to help people, since the problem for most is that they bought a house during a bubble (or recklessly HELOCed themselves into the red) that's now worth substantially more than they paid for it. And if they did it with one of those poison pill adjustable rate mortgages, they basically got 2 or 3 years of paying less than half price on their mortgage, in exchange for higher payments down the road. We're now down the road, and since (surprise) housing values didn't continue to increase perpetually, those people are fucked. They can't pay their mortgage once the discounted rate expires, and they can't sell since their house is worth less than they paid for it. I guess, in such dire straits, emails that provide a "catalyst to increase your originations" might be pretty tempting. Which is why various weasels are sending out a million of them an hour, half a dozen of which are slipping through my junk filters.
As for the housing/sub-prime/banking crisis, it's pretty simple. The banks were deregulated and instead of remaining solid, safe, financial anchors, they turned into used car salesmen. They wanted quick profits, so they junked all the sensible loan requirements and started throwing money to virtually anyone who could point to a house they wanted to buy. The banks had nothing to loose; since property always went up, they didn't care if people could afford their zero down mortgage, since they would just sell it to some other sucker in 18 or 24 months. It was nothing to give someone a loan for 80% of their mortgage, knowing some other bank would give them the other 20%, and then throw them another HELOC for $80k in 8 months.
The problem came when the carousel stopped spinning, the bubble popped, and there were suddenly millions of new home owners who'd taken out $600k, $150k, and $80k on a house they'd bought in 2006 for $750k, had appraised for $850k in 2007, and now found to be worth $450k. And falling. People who owe almost $900k on a house worth far less than that, who have almost none of their own money in the deal, and who are looking at a $7000 monthly payment on a house they could rent for $3000, aren't real likely to stick around. Ruined credit rating or not.
There are several examples a week of
exactly this phenomena documented on the schadenfreude-soaked
Irvine Housing Blog. It's a hell of an issue to resolve, since people are greedy, banks enabled their greed, and now tons of people are losing homes they couldn't really afford in the first place, or defaulting and costing the banks hundreds of millions of dollars a week. Allowing the banks to pay the price of their stupid loans by going bankrupt is the natural solution, but they would not do it in isolation, and their failures would create huge ripples that would probably bring down much of the rest of America's, and the world's financial system. Whee.
Labels: business, economics, spam
