The economy pulled out of the Great Recession because lenders wrote down billions in bad loans, not because borrowers paid these debts off. Repost from OC Housing News 2011-2016 The financial mainstream media often tells people what they want to hear. They’ve learned they make more money by providing emotional support to people seeking reassurance rather than providing facts and accurate analysis. This is a shame because people often make important and complex financial decisions based on erroneous or biased information they obtain from the financial press. When these investment decisions go bad, people are often wondering what went wrong. The problem is that they trusted the veracity of what they read in the mainstream media. We’ve seen a great…[READ MORE]

When borrowers and lenders petition the government for relief through debt forgiveness and bailouts for losses, you are the one paying for whatever the borrower did with that money; the government is merely a middleman facilitator of a tax heist. Repost from OC Housing News 2011-2016 In a bygone era, lenders lost money if they made bad loans to irresponsible borrowers. With the advent of securitization, much of this risk of loss transferred to investors, and with the economic catastrophe of 2008, lenders learned the government would bail them out for any losses they were unable to pass on to investors. The too-big-to-fail banks no longer attempt to conceal the moral hazard behind their actions; they know they will be…[READ MORE]

Many people erroneously believe housing recovered because lenders ran out of delinquent borrowers to foreclose on. They didn't. Instead, they stopped foreclosing in order to dry up the inventory to drive prices back up. Repost from OC Housing News 2011-2016 When lenders make loans, they far prefer borrowers to repay those loans; in fact, their entire business plan relies on it. As long as borrowers are current with their payments, lenders are happy and making money. When borrowers don’t make their payments, the end result is a distressed sale. If there are enough of these, market prices are reduced dramatically which causes significant lender losses. Lenders know this too, so when distressed loans became an overwhelming problem, they devised can-kicking methods including loan…[READ MORE]

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