Housing Crunch

Today, the Fed introduced new guidelines for the mortgage industry. In case you’ve been living under a rock for the past 6 months, a lot of banks, investors, and homeowners are in trouble cause they either underwrote or took out a loan that wasn’t really a good idea As usual, our faithful representatives in Washington DC (also known as “Black Hole Where Money Goes But You Never See A Benefit”) were right on top of this situation.

In order to help you figure out the role each group is playing, AAIS has created the following guide to help you sort it out:

Mortgage Company: Basic strategery – Get huge lists of phone numbers or contact information, then harass as many people as possible. Bonus points for a new hire in the company to harass all his friends and get them to sign a mortgage. These guys do anything possible to get someone signed who can’t afford to live in a home that’s worth fives times his/her annual salary.

Home Buyer: Wow! You’re kidding right? I make $34,000 per year and I can buy a home that costs $250,000? And I don’t have to pay a down-payment? What’s that, you don’t want to know how much I make? Ok, yeah, I read the contract that says my mortgage will “adjust” to the current market rate (whatever that means), but wow!!! When it does, I’ll just sell the house cause it’ll be worth more! And interest rates never go up, they only go down! I can’t lose!

Financial Firms: These guys have it all sorted out. They’ll create these investments called CDOs, which are basically a bunch of mortgages grouped together as a package. Then, they’ll sell it at a premium to an investor or a bank. Pocket the difference, everyone gets a bonus, lets go get drunk/stoned/shoot up/bang a hooker.

Ratings Agency: Man, last night with those financial firms was crazy. Those guys can party. Guess it’s time to tell everyone how risky those CDOs are. Yeah, maybe the rating we gave said they were too good, but those guys at the bar really did buy a lot of shots. Oh well, time for lunch.

Banks: Not to be outdone by the savvy financial firms, the banks figure they can make some money on this deal too. Why keep all these CDOs that might not pay out in the end, when you can sell them to a shell company called a SIV? Now, you do have to move all those great CDO investments you bought from the financial firm off your balance sheet, so you don’t get to claim you own them and get the income from all those homeowners paying their mortgage. But you’re smart too. You work out with the SIV to lend you money cheaply. Everybody wins.

SIV: No one knows what you do, but for a while you were everyone’s best friend. Somehow you get paid a lot of money. Next thing you know, you wake up in your own vomit next to a dead goat, pants around your ankles, and no one wants anything to do with you.

The Fed: OMG! What did the market say yesterday? Are we supposed to raise interest rates or lower them? We have to do what the market thinks we’ll do. Maybe we can do what they want, and say we won’t be pushed around next time? Yeah, that’ll work.

Democrats: It’s all the fault of these companies! Don’t you see that home-buyers are stupid? We have to make sure these companies can’t make any loans without standing on one toe, twirling a baton, making ice cream, and filling out 500 forms! We must regulate the industry!

Republicans: You know, maybe those people buying the homes should have really thought hard about if they can afford it. It’s not like the mortgage company didn’t say the interest rate would potentially go up. I think I’ll go take a bath in my money pool. It’s not really a bath, but I smell like money when I get out. dolla’ dolla’ bills y’all…..

You can thank me later.