Act on subprime mortgages

Communities across New England and the nation are grappling with the souring of subprime mortgages and a jump in foreclosures.

[Chet Huntley]

I hardly feel sorry for the river boat gamblers that jumped into these high risk mortgage arrangements. I have been prudent all my life when it comes borrowing money. Why should the govenment (my money) bail them out for being stupid? They get no pity from me.

[Jim from Mass]

Chet Huntley wrote:

I hardly feel sorry for the river boat gamblers that jumped into these high risk mortgage arrangements. I have been prudent all my life when it comes borrowing money. Why should the govenment (my money) bail them out for being stupid? They get no pity from me.

Mr Rosengren's letter is useful, I agree there are those who should be hung out to dry but there are good (if naive )people caught up in this who should be helped if only to prevent disastrous damage to neighborhoods. I too have a cautious approach to borrowing money, mainly because I hate being gouged by the ridiculous interest the Federal govt is letting the thieves get away with

[GMHeller]

Berkshire Bank hasn't done its shareowners any favors by being so profligate about loaning money up the kazoo either for property that doesn't warrant extreme valuations or to organizations the balance sheets of which don't warrant large loans.
Two obvious cases in point:
Spice -- with a $7.8 million mortgage on a property purchased for $300,000; and
The Mount (aka Edith Wharton Restoration, Inc.)-- with a $3.745 million loan that is now in technical default.
For a series of articles on The Mount's financial monkeyshines, please see:
http://berkshireeagle.blogspot.com/

GMHeller
Monterey,MA
Bethesda,MD
McLean,VA
http://www.berkshireeagle.blogspot.com/
http://www.wamcnet.blogspot.com/
http://www.wamc.net/

[Berkshire Bank Employee]

GMHeller,

Actually, we'll end up making some very good profits off of those mortgages you referenced. You see, when a bank writes a mortgage the borrower signs over the right for the bank to hold or sell the paper.

We were able to package and sell the paper (not separately, but each as a separate tranche defined by maturity) as collateralized debt obligations (CDOs).

Essentially, what we do is get paid on the transaction, get paid more on the collection, and pass on all the risk. That risk (the CDOs) are re-packaged and re-sold to institutions that sell products to individual investors, pension plans, etc.

I hope you now better understand how banking works. It might be worth your while to do a little bit of research before you slander one of the largest employers in the area. We would apprecite it, and you would not come across as quite so ignorant.

[GMHeller]

Berkshire Bank Employee wrote:

GMHeller,
Actually, we'll end up making some very good profits off of those mortgages you referenced. You see, when a bank writes a mortgage the borrower signs over the right for the bank to hold or sell the paper.
We were able to package and sell the paper (not separately, but each as a separate tranche defined by maturity) as collateralized debt obligations (CDOs).
Essentially, what we do is get paid on the transaction, get paid more on the collection, and pass on all the risk. That risk (the CDOs) are re-packaged and re-sold to institutions that sell products to individual investors, pension plans, etc.
I hope you now better understand how banking works. It might be worth your while to do a little bit of research before you slander one of the largest employers in the area. We would apprecite it, and you would not come across as quite so ignorant.

Are you saying that Berkshire Bank aka Berkshire Hills Bancorp, Inc. will have ZERO liability in the event there is a foreclosure on either loan?

[GMHeller]

Correction: Are you saying that Berkshire Bank aka Berkshire Hills Bancorp, Inc. will have ZERO liability in the event there is a foreclosure for default on either loan?

[GMHeller]

Berkshire Bank Employee wrote:

GMHeller,
Actually, we'll end up making some very good profits off of those mortgages you referenced. You see, when a bank writes a mortgage the borrower signs over the right for the bank to hold or sell the paper.
We were able to package and sell the paper (not separately, but each as a separate tranche defined by maturity) as collateralized debt obligations (CDOs).
Essentially, what we do is get paid on the transaction, get paid more on the collection, and pass on all the risk. That risk (the CDOs) are re-packaged and re-sold to institutions that sell products to individual investors, pension plans, etc.
I hope you now better understand how banking works. It might be worth your while to do a little bit of research before you slander one of the largest employers in the area. We would apprecite it, and you would not come across as quite so ignorant.

Berkshire Bank Employee,
Still waiting for an answer to my question:
Are you saying that Berkshire Hills Bancorp, Inc. will have ZERO liability in the event there is a foreclosure for default on either loan?

And while we are at it:
How many other loans made by Berkshire Bank and secured by real estate are in default?

[i am SPARKLING]

GMHeller wrote:

Correction: Are you saying that Berkshire Bank aka Berkshire Hills Bancorp, Inc. will have ZERO liability in the event there is a foreclosure for default on either loan?

I noticed you still haven't gotten an answer.
The Bank (or the borrowers) must have insured both deals to the hilt ...
As for Spice -
Nancy Fitzpatrick gave me a few hearty chuckles when she stated to the Berkshire Eagle that Joyce Bernstein is ’a born restauranteur’ with an ’innate knack for the business’.(ROFLMAO)
but ...
7.8 million dollars is "too much to invest in a restaurant in the Berkshires"
Tell me that BB higher ups didn't know this ...
It's refreshing to know that these so-called entrepreneurs can get an exhorbant loan based on the premise of a 'hope' that the business might work - ESPECIALLY in this economic climate.
Tomorrow, I am going to apply for a mortgage.
When they ask me if i'll be able to afford the payments - i'll give them a wink, and say with confidence, "Gosh, I hope so!"

[GMHeller]

Just tell them you're buying an old building in Pittsfield for $300,000 and intend to put $7 million into fixing it up.
And if they question why it'd cost $7 mil to rehab something you could knock down and erect from scratch for about $3.5 mil, just shrug your shoulders, smile and say, "Nancy Fitzpatrick says I have an innate knack for business!"
You'll have a check in minutes.
Then they'll package your mortgage and sell it as a CDO to someone at Bear Stearns.

[RAMDAN]

So is berkshire bank employee saying that the bank doesn't care if they put people into mortgages they can't afford'because the bank stands to lose nothing,only their poor customers?

[Swinson]

If you were dumb enough to buy into the sub-prime mortgage scheme, to the point that you lost your home, it is ONLY your fault.

[Berkshire Bank Employee]

"Berkshire Bank Employee,
Still waiting for an answer to my question: "

Sorry to keep you waiting, but some of us have lives and friends and business to attend to.

We're a public company, go download the information or call investor services if you want to know how many mortgages we wrote are in default. Here's a clue: there are something like 101 homes in default in Berkshire County. We write about certain percentage of those loans - now extrapolate.

I am NOT saying that a bank (ours or otherwise) will have zero exposure of a mortgage they write and then later sell defaults. I am saying that we MAKE MONEY on the transaction and then we make more money on the collection of payments.

All in all, we would prefer no defaults because we can then keep receiving the collection revenue. But at that point, we've already made the money on the sale.

Now stop your slander.

[Berkshire Bank Employee]

"If you were dumb enough to buy into the sub-prime mortgage scheme, to the point that you lost your home, it is ONLY your fault."

If you are dis-trusting to the point where you read closely every document you sign, then congratulations to you. After all, perfect paranois is perfect awareness.

However, truth is, a lot of mortgage companies took full advantage of a lot of folks that they pretty much knew would not be able to afford their loans after ARM adjustments.

I'm not saying that it ISN'T the fault of the home buyers (because they should read and understand what they sign), but most people (especially uneducated people who weren't smart enough in life to get a prime loan) trust what they hear (typically the best parts) and just sign on the dotted line.

It was, largely, a combination of predatory lending as well as buyer ignorance.

[Swinson]

Again if you are buying a home, arguably the largest purchase many will ever make, it is ABSOLUTELY your responsibility to understand the terms of the loan.
EVERY DETAIL...as it will impact you for the rest of your life.

Yes I agree a portion of this was due to predatory lending, but I know probably equal amounts of people that were "smart enough" to know better and got caught up in the irrational exuberances of "cheap money" and did stupid stuff and now are losing their homes.

[GMHeller]

Berkshire Bank Employee wrote:

"It might be worth your while to do a little bit of research before you slander one of the largest employers in the area. We would apprecite it, and you would not come across as quite so ignorant.

Berkshire Bank Employee wrote:

"Sorry to keep you waiting, but some of us have lives and friends and business to attend to.
We're a public company, go download the information or call investor services if you want to know how many mortgages we wrote are in default. Here's a clue: there are something like 101 homes in default in Berkshire County. We write about certain percentage of those loans - now extrapolate.
I am NOT saying that a bank (ours or otherwise) will have zero exposure of a mortgage they write and then later sell defaults. I am saying that we MAKE MONEY on the transaction and then we make more money on the collection of payments.
All in all, we would prefer no defaults because we can then keep receiving the collection revenue. But at that point, we've already made the money on the sale.
Now stop your slander.

Berkshire Bank Employee wrote:

"If you were dumb enough to buy into the sub-prime mortgage scheme, to the point that you lost your home, it is ONLY your fault."
If you are dis-trusting to the point where you read closely every document you sign, then congratulations to you. After all, perfect paranois is perfect awareness.
However, truth is, a lot of mortgage companies took full advantage of a lot of folks that they pretty much knew would not be able to afford their loans after ARM adjustments.
I'm not saying that it ISN'T the fault of the home buyers (because they should read and understand what they sign), but most people (especially uneducated people who weren't smart enough in life to get a prime loan) trust what they hear (typically the best parts) and just sign on the dotted line.
It was, largely, a combination of predatory lending as well as buyer ignorance.

WOW!
Don't you just love the way this arrogant 'Berkshire Bank Employee' first alleges 'slander', then claims anyone being critical of the bank's loose lending comes 'across as ... ignorant'.
(This guy must be taking lessons from WAMC's Alan Chartock!)
Then, rather than just responding specifically to legitimate questions, tells readers "...go download the information or call investor services if you want to know how many mortgages we wrote are in default."
Notice he doesn't even provide a direct Web link to the specific information.
Notice also, that he still doesn't say exactly how much potential exposure the bank has when a mortgage it writes later defaults.
Is it the full amount of the loan?
Or is the possible loss the difference between the amount still owed on the loan and the amount generated when the property is eventually sold at a fire-sale price?
Further,'Berkshire Bank Employee' fails to give the potential TOTAL amount of exposure the bank has in the event all the loans presently in default in its portfolio were to be foreclosed.
Then the guy ends up being accusatory again, commanding for a second time "Now stop your slander."
This sounds to me like a nervous corporate exec who'd rather threaten and avoid responding to questions rather than being upfront, forthcoming, and open to answering legitimate queries about his bank's current exposure, and how his bank could possibly justify, for example, loaning $7.8 million to Spice's owners on a property purchased for less than $300,000; and loaning close to $4 million to The Mount, when for years that organization has been hemorraging red ink.
Good luck to any shareowners who decide to ask similarly pointed questions at this year's Berkshire Hills Bancorp shareowners' meeting.
GMHeller
Monterey,MA
Bethesda,MD
McLean,VA
http://www.berkshireeagle.blogspot.com/
http://www.wamcnet.blogspot.com/
http://www.wamc.net/

[i am SPARKLING]

Swinson wrote:

If you were dumb enough to buy into the sub-prime mortgage scheme, to the point that you lost your home, it is ONLY your fault.

There are so many people out there longing for the 'American Dream'- which usually includes a house for their 2.5 children.
Not everyone is a banker ... and not everyone has perfect credit.
If a borrower doesn't have the credit, funds, or income to pay a mortgage, then the financial institution should NOT lend the money.
I am a realist, & life sucks sometimes. I would rather a bank deny me a loan than eventually wind up homeless & bankrupt because of a foreclosure.
People need to be more accepting of (& more willing to say) the word 'NO'. There's a reason the word exists.
This is one of the reasons why banks & homeowners are in the messes they're in.
Subprime mortgage schemes are NOT always the fault of the borrower. There are ALOT of snake oil salespeople out there.
It is the responsibility of legitimate mortgagees to TRUTHFULLY educate possible borrowers about different types of mortgage loans (including subprime mortgages & SPM schemes) & disclose possible or imminent rate changes (before the papers are signed), and how it can or will affect one's mortgage payments in the future. It is also the duty of lenders to put greed & the 'big picture' aside, & say NO to high risk borrowers.

[Swinson]

It is trhe RESPONSIBILITY of the person applying for the loan to understand the terms of the loan. It is unfortunately that simple.

[i am SPARKLING]

Swinson wrote:

It is trhe RESPONSIBILITY of the person applying for the loan to understand the terms of the loan. It is unfortunately that simple.

It's NOT that simple. Buying a home is an intimidating process & people often don't know the questions to ask (or questions aren't answered in a manner which is understandable to those who aren't financially 'savvy').
There are ways of making sure that a person is better informed before the loan is given. Financial Institutions make enough money with fees, penalties and interest rates & they should take the time to educate potential homebuyers. It should be a federally mandated part of the process of buying a home.
If the borrower does not fully understand the payback process, then mortgagee should not lend the money.
The banks have the money - and they are loaning the money - therefore the majority of the responsibility lies with them.

[Swinson]

I have bought 9 homes, it IS that simple. As well if you don't understand it you HIRE someone that does and can explain it to you.

Not hard.

[i am SPARKLING]

Swinson wrote:

I have bought 9 homes, it IS that simple. As well if you don't understand it you HIRE someone that does and can explain it to you.
Not hard.

Wow, 9 homes.
Leave me your e-mail & if I ever need any advice i'll hire YOU - LOL.
Chances are, if one doesn't know about bank loans, they wont know enough to hire someone to explain it to them.
A couple of friends of mine (first time homebuyers) at first signed on to a subprime loan for their home - & just recently re-financed.
Their mortgage for a small 3 bed 1 bath home was over $1300 a month, & the rate was about to go up 1/2 a point - which would have shot their payment up to almost $1500 dollars.
ON TOP of that, in 2007 they wound up 2 days away from having their home foreclosed upon due to a mortgage refinance scheme (one of those too-good-to-be-true deals where they were told that they would get X amount of dollars at the signing, & they would NOT have to pay a mortgage for a couple of months (enough time for foreclosure to take place). I balked at this when I heard them talk about it & voiced my concern, but they insisted it was legit) and almost lost their home.
What a mess, eh?