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Nietzsche13 · 10-11-2008, 06:53 PM

Great thread.

Its good to see Kingstu back on the throne.

This has been very helpful. Contributions by Mode Rogue and GermanBJJ shed light on a dark situation.

I think one of the main reasons why the financial system is locked up is that the bottom of the housing market has not been determined. Essentially, the value of a property is the collateral for these loans and if there is a threat that it will continue to go down, there is a great deal of risk regardless of the qualifications of the buyer/borrower.

What the banks are doing is raising the down payment requirement. The days of no money down are gone forever. You will need 20% for now on plus great credit. In commercial lending, the borrower will be responsible for guaranteeing new loans with additional collateral on top of the property itself.

The problem is that savings is being wiped out and cash liquidity is hard to find right now. There aren't enough borrowers who 1. want to buy something now and 2. have the ability to secure the funds even if they want to. Its the exact opposite of where things were beetween 2003-2005.

To make matters even worse, there is a glut of supply on the market. Too much inventory, not enough buyers: prices are going down down down. Its the only way to sell right now. Problem: The sellers cannot afford to pay money at the closing table to sell their properties. Who would do that? Answer: Give the keys to the bank and go into foreclosure.

Downward spiral. The plan is in a tailspin, and if you know a pilot ask them what you do. They will tell you that your instincts will guide you to do exactly the wrong move to pull out of it. This is what our government and the federal reserve is doing right now. They are trying to put out a fire with gasoline. The same gasoline they used to start the fire in 2002-2004.

The government is spending and borrowing money it doesn't have. The Federal Reserve is increasing the supply of money. Maybe they should ease up on the throttle and stop interfering with the natural functioning of the markets. We need to believe in capitalism again.

10-11-2008, 06:53 PM	#57 (permalink)
Nietzsche13 Cultural Engineer Join Date: Jul 2003 Location: Outskirts of Infinity Posts: 21,692	Great thread. Its good to see Kingstu back on the throne. This has been very helpful. Contributions by Mode Rogue and GermanBJJ shed light on a dark situation. I think one of the main reasons why the financial system is locked up is that the bottom of the housing market has not been determined. Essentially, the value of a property is the collateral for these loans and if there is a threat that it will continue to go down, there is a great deal of risk regardless of the qualifications of the buyer/borrower. What the banks are doing is raising the down payment requirement. The days of no money down are gone forever. You will need 20% for now on plus great credit. In commercial lending, the borrower will be responsible for guaranteeing new loans with additional collateral on top of the property itself. The problem is that savings is being wiped out and cash liquidity is hard to find right now. There aren't enough borrowers who 1. want to buy something now and 2. have the ability to secure the funds even if they want to. Its the exact opposite of where things were beetween 2003-2005. To make matters even worse, there is a glut of supply on the market. Too much inventory, not enough buyers: prices are going down down down. Its the only way to sell right now. Problem: The sellers cannot afford to pay money at the closing table to sell their properties. Who would do that? Answer: Give the keys to the bank and go into foreclosure. Downward spiral. The plan is in a tailspin, and if you know a pilot ask them what you do. They will tell you that your instincts will guide you to do exactly the wrong move to pull out of it. This is what our government and the federal reserve is doing right now. They are trying to put out a fire with gasoline. The same gasoline they used to start the fire in 2002-2004. The government is spending and borrowing money it doesn't have. The Federal Reserve is increasing the supply of money. Maybe they should ease up on the throttle and stop interfering with the natural functioning of the markets. We need to believe in capitalism again. __________________ Let's climb high mountains together for a while, but don't follow me. Find your own way. Only then can we be free. Its never too late to be what you thought you could have been.