Rich Deadbeats

Remove all ads!

Maybe it is my computer, but when I click on the MSNBC link in the first post it takes me to a NYT article and I don't see any graphs or data there. Just the points that I mentioned.

Using your quote, if anything it further proves what NOG was trying to say. If it first hit the poor, then the middle class, and now is hitting the rich it makes perfect sense that since the poor and middle class have already been foreclosed on and lost their houses that the rich would show the worst statistics. Once again, I would like to see the numbers over the entire crisis before I'm willing to villify or praise a "class".

 

Snook - You may have noticed that I commented that a major part of my topic was about how lending companies manage risk. That is what CoreLogic does. The company actually works with lenders to manage that risk. Take a look:

http://www.facorelogic.com/newsroom/newsroom.jsp

Except it doesn't say that. Nice try though. I'll post it again for you:

Sorry, but that comment makes no sense, because the topic is in large part about:

I'm starting to suspect a 'bias" in the conservative chorus line.

---------- Added 0 hours, 52 minutes and 1 seconds later... ----------

NOG made a blatant accusation, that they were "playing" with the statistics. The rest is just meaningless, since the topic is not the actual "meltdown." The topic is not the meltdown as has been clearly stated by the person who crafted it - me. That is unless you want to go back to blaming "the poor" again for those rich who are not paying their mortgages. If that is the lame case you guys are tying to make, bring it on.

 

No-one made the 'blatant accusation' that anyone was playing with the statistics. They merely raised it as a possibility. Why are you getting so god damn defensive? I'm starting to think you have an agenda.

 

Yeah, right.

Because I know how to read a "God damn" post.

An "agenda?" Yes, that's it!

Mordea - I would ask you to go back and read the posts at the beginning of this thread and see how it as evolved into what it has become. I believe it was the intention of some to change this from a discussion about how one cannot judge debt risk by income level into a thread about class warfare, which I have avoided. Class warfare is a diversion from the real facts and issues surrounding the economy and how we view economic events. The company [CoreLogic] that helps lenders manage risk has seen through the issue of class and into the real underlining causes of risk. Certainly the rich are more "ruthless" in managing their investments - they stand to lose more than the average individual. ALL classes of income level have their downsides in managing debt and it makes no sense to blame the rich - just as it was moronic for people to blame "the poor" for the meltdown. I hope this helps you understand why I am defending that postition and holding those - who are distorting the issue - to a very close standard, which I intend to continue to hold them to.

 

I believe that I made it clear that I hadn't been able to read the article in question. It is possible that the stats are bang on, I never said otherwise. I was merely defending NOG's statement:

words like "wondering" and "may" do not make a "blatant accusation" in my book.

To paraphrase Ragusa, I have no horse in this race. But NOG got pilloried for merely stating that spin is a possibility in this world. Your reaction to his post was far more hostile than I believed it merited. In this case I do not speak as a conservative, for or against anything else, so I am not a part of "the conservative chorus", as I believe you called it. I am uncertain why the statement that statistics do not always tell the whole story has made me somehow less of a man, one who needs to become "intellectually man enough" to point out whatever you wanted me to point out. If you want to know the specific comment that you made that prompted my saying that stats can be spun, it was this:

I made no effort to try to identify or vilify anyone in particular, and the idea that "the numbers are what they are" is overly simplistic -- as I tried to demonstrate before, two clever groups can take the same statistics and come to vastly different conclusions for a variety of reasons, not all of them diabolocal in nature. I was not making an accusation against any entity, merely pointing out that spin is possible. For doing that, you got quite hostile -- I'm wondering if perhaps you think I'm false fronting for some group. I'm not, I just made a generalized comment on what is possible and what has happened in the past in other situations.

For the record, again, I don't know much about the economic meltdown, but I do know that I don't blame it on "the poor".

 

He didn't get "pillored" for saying there was the "possibility of spin in the world." I asked him to defend the comment below. You conservatives can pile on and accuse me of "pilloring" or being "unfair," all you want, but the fact is you can't defend that statement. In fact, all of you have gone out of your way to avoid it and have been leaning on words like "wondering" or "may." That's called "dodging." Here is the comment in question:

Nice.

Why don't you stop tying to make this about me and make it about the topic. Show me where the mistakes are in the article, once you are able to read it. Is that a "possibility," LKD?

BTW, show me where I "pillored" NOG. Can you do that? I'll ask a second time for you to show me the comment I made that you don't like. I hate to travel down a pointless road, but I'm just curious why you are making that particular accusation.

 

If this filthy computer will stop being a pain in my posterior, I'll be able to comment on the article.

anyhow, the "pillory" comment came from this line:

I saw no blatant accusation, merely healthy scepticism. And while I can't speak definitively for anyone but myself, blaming the poor for the rich not paying their mortgages, or for the meltdown in general, is most certainly not the case I am trying to make.

 

Really? That? Which part of that do you consider "pilloring?" That's an agressive post, but there is really nothing personal in it, certainly not a personal attack.

I'll just keep on posting it till you comment on it:

Making an accusation of an attempt to "deceive" is not "healthy scepticism." Btw, wasn't it Mark Twain who said that? I really don't know for sure. When the accusation cannot be proven it is slander, and since you know it can't be proven it is, in its turn, deceitful. I know the other side of the data which NOG is trying to refer to, even though it has nothing to do with the topic at hand. But I'll just let him continue to slander CoreLogic with his pointless accusations. But not because I'm unkind, only that his particualr line of slander has nothing to do with the topic.

Here's how the article appeared on FOX. Note that FOX did a small amount of editorializing on the topic, but nothing major:

 

Based on that last post, what they are saying isn't unreasonable. I remember once some obviously wealthy people came into the Tony Roma's where i used to work. They ordered a really expensive meal and paid for it with a Platinum Amex. They tipped the poor girl who served them about 3% or so. She was livid. She mentioned it to her mother that night during one of those nightly phone sessions girls have with their moms, and her mom said "honey, how do you think those people GOT rich?"!!!

I know that I nearly drove myself into the loonie bin trying to pay off my debt, and I had a really hard time declaring bankruptcy. I was always raised to believe that if you incurred a debt you should pay it off, simple as that.

Getting to what I believe is the crux of the matter, ability to pay is not always indicitive of willingness to pay. The former is a matter of mathematical calculation. The latter is a matter of personal character and integrity. I've seen enough in my short 36.5 years on this ball of mud to come to the conclusion that there are people lacking character in every socio-economic strata of society. I'd hate to be a lender making that judgement call.

 

That was my point in crafting this topic, that one cannot judge integrity by the amount of money that someone has. It was also about how lenders manage that risk, or failed to in the past. There were many erroneous comments made that it was "the poor who were defaulting on loans," which was largely disproven. That was not the case, since it cuts across all income levels. I think we agree, LKD?

 

Yep, no agenda at all.

Edit: By the way, you aren't doing yourself any credit by continually quoting NOG out of context, especially after both he and another poster further clarified what he meant.

 

Chandos,

I'd like to raise a few points here, and I think all on the boards here would agree that I'm no "conservative".

To summarize the main point of the article: It was trying to show that someone's level of income is not a good indicator as to whether or not they are a good credit risk. Is that a fair assessment?

If so, then I think that they picked a rather odd metric to make that point. They basically classified people who owned homes with mortgages in excess of $1,000,000 as wealthy. While that is probably true, it implies that everyone who does not have a mortgage over $1,000,000 is not wealthy - which is almost certainly not true. Some wealthy people do not purchase homes worth over $1,000,000, some do but don't take out a mortgage, and some do take out mortgages but have been in their homes long enough that the current remaining debt on their mortgage is now less than $1,00,000.

Let's set aside for a moment that the number of homes today valued at over $1,000,000 make up a fraction of one percent of all homes currently out there, and that such a tiny percentage of all homes may not be a representative sample of all the wealthy people in the nation to judge whether or not they tend to be good or bad credit risks.

Let's instead focus on some much more basic information. Why was $1,000,000 selected as the cutoff? It seems to me that even someone who is capable of getting a loan for $500,000 must be pretty well off. I'm in the market to buy a house right now, and I would not get approved for a $500,000 loan, even though I consider myself to be at least middle class, if not upper-middle class.

Or take my brother as an example - he recently got a mortgage on a $600,000 home. He was able to do so because he's a doctor and has an annual income in excess of a quarter of a million dollars per year. According to the article, he's classified as "not wealthy", even though in the eyes of nearly every American he is very well off, with an income exceeding 98% of the rest of the population.

And yet, the doctors, lawyers, and wall street bankers with mortgages on $750,000 homes are lumped in together with the nurses, paralegals, and bank tellers who have mortgages under $200,000. These people are treated as if they were all equivalent by the article, which, by almost any measure, they are not.

I also think that the point LKD, Snook, and NOG bring up are valid. If this data represents a point in time snapshot, then it indeed may not be indicative of how things have been going since the start of the housing crisis. I think it is reasonable to assume that people with mortgages in excess of $1,000,000 probably have other investments beyond their house. They may well be capable of sticking with a home that is underwater even if they have other unexpected expenses, and even if they lose part of their income.

For the average person though, unexpected expenses or loss of income may instantly place them in a position where they cannot afford that mortgage. If you're living paycheck to paycheck, and you require an extended hospital stay or if your employer cuts your hours, you're in for a heap of trouble. A lot of these people may have already lost their homes, and thus aren't included in the statistic.

But as I said initially, my problem with the article isn't even about this. It's that they classify everyone in the nation as either "wealthy" or "not wealthy" using the very odd metric of whether or not you currently hold a mortgage of $1,000,000 or more. So we have less than 1% of the population in the former group, and over 99% of the population in the latter group. Then they treat everyone in that 99% as the same. That's a very poor way to set up the groups IMO. So much so that it greatly diminishes the value of what you can conclude from those statistics.

 

Yep, the conservative chorus line is in full swing with the chant. And you have done yourself "no favors" on this end either. But I'm sure you care about as much as I do.

Yes, because we agree that income is not an indicator of repayment. The lender will have access to income levels as I mentioned in another post. Btw, the logic you are using can apply to ANY price level of a home. So, if cheaper homes are foreclosed on, then it could just as easily have been a rich person in a cheaper house.

But the "housing crisis" is not the topic, which if you read the posts from the beginning clearly illustrate that the topic is NOT about the housing crisis but that people "generally assume" that because people are rich they are a good credit risk -- that is the topic -- NOT THE HOUSING CRISIS. So why would that point matter? Please explain, Aldeth.

BTW, are saying now that only the "poor" will have cheaper homes? Also, I know the numbers from the beginning of the "housing crisis" (by income level) because I took the time to look it up. Even though it is not the topic. I would like you to consider income level is not an indicator of risk, so why would NOG's point matter? Did you want to use the price of the home/second home/investment home or income level to assess risk, given your earlier remarks?

CoreLogic assesses risk for lenders. They were not really interested in the social/political side of who was really wealthy, since everyone has a different opinion of that. The media such as MSNBC, FOX and the rest have more of an interest in that than Core does. Notice that Core considered high value "investment" porpety in their numbers, and those who own expensive second homes. I consider someone who does not have to work for a living to be truly rich, much like the historical standard used in early America. A true, well-off, gentleman, did not work for a living. Doctors, lawyers, whatever have income that varies widely, so category of job has little to do with it. Some lawyers and doctors are very wealthy and could stop working toworrow if they needed to, while others can barely pay their bills.

 

True - but my point was that setting a price level of $1,000,000 seemed rather arbitrary. It would would have been far more informative if they were trying to show how level of wealth was not an indicator of credit risk if they provided a range of data. Say mortgages in excess of $1,000,000; mortgages of $750,000-$1,000,000; mortgages of $500,000-$750,000; morgages of $250,000-$500,000; and mortgages under $250,000 for example. The simple-minded, sophomoric analysis presented by the author left so many unanswered questions in my mind that it tainted his central point.

When analyzing which groups tend to make good on their debts and which do not it is helpful to look at historical data, and not a point in time. I would like to see trends of home foreclosures over time, which could be easily shown in a line graph. I would like to think the author did his research, but when I see the data (or more appropriately, the lack thereof) presented, and his simplistic analysis of that data, I have my doubts.

Finally, I must ask you to clarify your point. Do you completely agree with the author? What are you thoughts as to why wealthy people may be greater credit risks than middle class people? Is the "why" more interesting that the "what" in this story?

 

The group that did the research only compiled the data for lenders to use in managing risk, they didn't seem to care about historical trends because a lender will look at current market trends to best determine risk. For instance, using the data shows that those with expensive homes/second homes/investment homes are "walking away" from them at large rates. What does that tell you about risk? If you were about to give out a cool million on a second home for an individual, would you go back and look at the subprime market in 2006 to access an individual's risk, or would you more likely look at current market trends?

My point was that people "generally assume" that the rich will pay their bills - for whatever their own particular bias. I can't change numbers so it's not a question of agreeing. The numbers are what they are. Also, people made comments that "the poor" defaulted on loans (historically), so they were to blame because they are "bad risks." NOG fell into that trap quite convenietly -- too bad for him, since it was not my intention to trap anyone, since I kept pointing out that it was not about "class warfare." I even commentd that the "rich" were not to blame for the meltdown, just to be certain that we didn't need to revisist the subprime market problems (which the poor had little to do with anyway).

 

I'm going to take one last stab at this as I may be finally seeing Chandos's point. I also will attempt to explain why I (and possibly others) are having a problem with article and this thread.

1 out of 7 mortgages over $1,000,000 are in trouble. That is a surprising statistic as I would have assumed people who had mortgages that high would have had the income and assets to support them and therefore it shows that the "rich" may not be as credit worthy as people assume.

If the article had been that one paragraph I just typed I think it would have been accurate and nobody would have had a problem with it.

Where the problems arose is that the article then went on and tried to make a comparison between these "rich" people and everyone else. The 1 in 7 statistic is troubling. However, it doesn't go on to say what the historical ratio is. If it has historically been 1 in 7 then clearly the lenders are idiots and quite possibly the "rich" are as ruthless as the writer wants to paint them to be.

It then goes on to discuss the "others" and quotes a 1 in 12 number. This is supposed to somehow show that that the others are more noble and concerned with paying their mortgage as clearly 1 in 7 is worse then 1 in 12.
As I mentioned before without knowing what this 1 in 12 actually means it is a useless statistic. 12 months ago the 1 in 12 may have been 1 in 4 and using the same logic it would make it seem like the "rich" are better at paying their bills. The only difference would be that many of the 1 in 4 have already lost their homes and that is why it is now 1 in 12.

The above paragraph really made me question what the author of the article was trying to say. I doubt Corelogic was thrilled that their data was used to make this type of a conclusion. I think the same can be said for the Fox article you quoted about only the middle class paying their bills.

 

It tells you that loans on investment properties are always going to carry a higher risk than loans on properties in which the borrower intends to live. This is as unsurprising as it is uncontroversial. At issue here is the world of difference between a mortgage on yet. another. investment property and mortgage on a home in which a borrower intends to live. While a wealthy investor may indeed be more likely to bail on his mortgage than an impoverished or middle class homeowner, it does not logically follow he will be more likely to bail on the property in which he lives.

 

Snook - Yes, there was some of editorializing at work in the actual pieces on this issue that I have read, (and that's ok, I suppose), but that was not really my point in crafting the topic for the thread. I commented that it was not my intention to "attack the rich, or elevate the poor," since that would make it 'class warfare," which I believe is a diversion from the real issues.

Here's more from different sources:

http://www.nytimes.com/2010/07/09/business/economy/09rich.html?pagewanted=all

Here's a graph:

http://www.nytimes.com/imagepages/2010/07/09/business/09rich_graphic.html?ref=economy

Note that this view was NOT from those who compiled the data, but commented on the social and more political points:

 

Now we're getting somewhere. Please expand. Do you think that the current 1 in 7 represents a historical average, or something that has recently come about. That's why I want to see data over time as well. It is true that the current market should be the foremost consideration in this, but certainly bankers use both the current time and the historic data to measure one's risk. As Snook mentioned, if the default rate on $1,000,000 loans is historically 1 in 7, then the bankers who make such loans are foolish.