From: suds mcduff
Newsgroups: misc.invest.stocks misc.consumers.frugal-living misc.invest.real-estate
Subject: Re: Where did the 400 billion USD in subprime mortgage losses go
Date: Thu, 22 Nov 2007 09:37:55 -0500
Bytes: 4091
RightEagle wrote:
> On Nov 20, 1:28 pm, "Rod Speed" wrote:
>> FrediFizzx wrote:
>>> "Shaun Eli" wrote in message
>>> news:00b8ce53-93d1-4559-a800-a5f190dada63@b36g2000hsa.googlegroups.com...
>>>> An example:
>>>> Pedro bought a house ten years ago for $100,000. Last year it was
>>>> worth $500,000 ('worth' because someone was willing to pay that
>>>> much). Pedro takes his $400,000 gain by selling the house to Joe.
>>>> Now-- Joe wasn't actually qualified for his mortgage, and defaults,
>>>> owing, let's say, $490,000.
>>>> Because there are a lot of these circumstances, and more sellers than
>>>> buyers, the house is now worth only $300,000.
>>>> Joe defaults on his mortgage, loses his $10,000 down payment. The
>>>> bank sells the house for $300,000, losing $190,000.
>>>> Where'd the money go? Into Pedro's new house, or his bank account,
>>>> or whatever. But it's not Pedro's fault that someone was willing to
>>>> pay $500,000 for his house last year. It's also not Joe's fault
>>>> that the house is worth only $300,000 today. Of course if Joe
>>>> hadn't defaulted it wouldn't have mattered, because he'd still be
>>>> living in the house and making payments on it, regardless of what
>>>> it's actually worth at any random point in time. And you could say
>>>> that it's maybe Joe's fault that he took a mortgage he couldn't
>>>> really afford, as well as maybe the bank's (and/or mortgage
>>>> broker's) fault for lending him the money. There's plenty of blame
>>>> to go around but the one who may have ended up with the money isn't
>>>> necessarily the culprit, if there is any in any particular case.
>>> Good example. The money is still out there. The people that sold at the top have the money.
>> No they dont when the whole market drops significantly due to the large
>> oversupply of houses that are the result of mortgage defaults with those
>> who should never have been given that mortgage in the first place.- Hide quoted text -
>>
>> - Show quoted text -
>
> Hedge funds drive up the price of Subprime Funds, and the Media in
> turn, caused a huge drop in the prices because of the negative slant
> of news in general. Thus investment firms lost billions on a bet that
> these funds would keep rising, which they could not because of rising
> interest rates.
>
> http://www.globaltreeregistry.com/Home_Page.html
>
I suppose it was only a matter of time until a right wingnut blamed the
sub-prime defaults on the media....
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