Why buy a new $125,000 motorhome?
Watch this video...some great advice... http://www.youtube.com/watch?v=SUvN3u41H94 Why buy a new RV costing six figures and having a monthly payment of like almost $1,000 spread over 15 years no...
Forum Discussion
With 30 years in banking let me share a few facts...this was not some grand scheme to defraud the american public through unbridled greed...
Adjustable loans that had balloon payments after 3-5 years were viewed as viable in an escalating market. The last thing a bank wants to do is re-po an asset...ANY asset, whether it is a house, car or RV. The costs involved in the process are significant and the amount they recover on the loan is usally a fraction of what was owed.
After the Great Depression congress passed the Glass-Steagel act in the 30's that banned banks from investing in risky markets like securities and insurance. When this was repealed under the Bush Jr administration, many banks took the opportunity to get into the investments business in a big way.
It's been common practice for years to sell bundles of mortgages as investment securities. You have the investor who owns the security that is backed by the loan and the servicing agent who collects the payments from the homeowner and services the loans for a fee. It's not uncommon for big institutional investors to hold some mortgage backed securities in their portfolios.
The new whiz bang security that was invented in the early 2000's were derivatives of mortgage-backed securities...not just bundles of mortgages but bundles of bundles so to speak. This was a brand new investment vehicle and looked like a great idea at the time. What we found out later was that the effect of investing in mortgage derivatives was that the quality and type of the underlying mortgages were not visible to the derivatives investor...the rating services like Moody's and others had no basis to rate these new securities because there was no comparable type, so they gave them all a "AAA" rating, even though many of them held high risk mortgages that could not withstand that rating.
And in full circle, many of the investors that bought these new mortgage back derivatives were banks, who were now allowed to do so after Glass-Steagel was repealed....
And then it became easier to write these hi-risk mortgages because the mortgage companies could bundle them and then sell the bundles to the investment houses (like Lehman) that would in turn bundle the bundles as derivatives. The mortgage company figured out that the end buyer couldn't see what the detail of what they were buying, and so what were portfolios of mostly 30 year conventional mortgages not mostly consisted of these new ARMs that had balloon payments 1-5 years out.
So the cycle ran away like a runaway diesel spinning faster until it self destructed....
Had Glass-Steagel been left in place for the same reason it was put in place after the depression, this downturn would have been a fraction as bad as it was.
Not to get political, but I voted for Bush but this was one thing that he did that I did not agree with.
To the OP, I wouldn't finance a $125k MH either, but hey, who am I to criticize?
Adjustable loans that had balloon payments after 3-5 years were viewed as viable in an escalating market. The last thing a bank wants to do is re-po an asset...ANY asset, whether it is a house, car or RV. The costs involved in the process are significant and the amount they recover on the loan is usally a fraction of what was owed.
After the Great Depression congress passed the Glass-Steagel act in the 30's that banned banks from investing in risky markets like securities and insurance. When this was repealed under the Bush Jr administration, many banks took the opportunity to get into the investments business in a big way.
It's been common practice for years to sell bundles of mortgages as investment securities. You have the investor who owns the security that is backed by the loan and the servicing agent who collects the payments from the homeowner and services the loans for a fee. It's not uncommon for big institutional investors to hold some mortgage backed securities in their portfolios.
The new whiz bang security that was invented in the early 2000's were derivatives of mortgage-backed securities...not just bundles of mortgages but bundles of bundles so to speak. This was a brand new investment vehicle and looked like a great idea at the time. What we found out later was that the effect of investing in mortgage derivatives was that the quality and type of the underlying mortgages were not visible to the derivatives investor...the rating services like Moody's and others had no basis to rate these new securities because there was no comparable type, so they gave them all a "AAA" rating, even though many of them held high risk mortgages that could not withstand that rating.
And in full circle, many of the investors that bought these new mortgage back derivatives were banks, who were now allowed to do so after Glass-Steagel was repealed....
And then it became easier to write these hi-risk mortgages because the mortgage companies could bundle them and then sell the bundles to the investment houses (like Lehman) that would in turn bundle the bundles as derivatives. The mortgage company figured out that the end buyer couldn't see what the detail of what they were buying, and so what were portfolios of mostly 30 year conventional mortgages not mostly consisted of these new ARMs that had balloon payments 1-5 years out.
So the cycle ran away like a runaway diesel spinning faster until it self destructed....
Had Glass-Steagel been left in place for the same reason it was put in place after the depression, this downturn would have been a fraction as bad as it was.
Not to get political, but I voted for Bush but this was one thing that he did that I did not agree with.
To the OP, I wouldn't finance a $125k MH either, but hey, who am I to criticize?
