Post by: Manedwolf on December 05, 2007, 12:31:26 PM
I could be enjoying 4000sq/ft of the American Dream right now, with the Big Government standing ready to bail me out and tell the lender they can't make their profit!
Joke's on me! Damn me for being fiscally responsible! Why, I was acting like a traditional Republican, and they can't have that. Thanks, George!
Quote
Bush Mortgage Plan Will Freeze Certain Subprime Interest Rates for 5 Years
Wednesday, December 05, 2007
AP
WASHINGTON
The Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures, congressional aides said Wednesday.
These aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of as much as seven years and industry arguments that the freeze should only last one to two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.
Treasury also announced that there would be a technical briefing to explain more of the details of the proposal.
Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes as a way to make sure that the break is not granted to real estate speculators.
The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures that are feared as an estimated 2 million subprime mortgages reset from lower introductory rates to higher rates.
The higher rates in many cases will boost monthly payments by as much as 30 percent, making it extremely difficult for many people to keep current with their loans.
The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.
Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to Irvine, Calif-based RealtyTrac Inc. With home loan defaults still rising, the trend is expected to worsen next year.
The plan represents an about-face for Paulson, who until recently had insisted that the mortgage crisis could be handled on a case-by-case basis. However, he and other administration officials became convinced that the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.
Paulson and other federal regulators began holding talks with some of the country's biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.
Under the typical subprime loan, those offered to borrowers with spotty credit histories, the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.
For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.
The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.
The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.
The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.
With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.
The housing crisis has become an issue in the presidential race with Democrats Hillary Rodham Clinton and John Edwards putting forward their own proposals this week that would go further than the administration.
Mark Zandi, chief economist for Moody's Economy.com, said while the administration plan is a good first step, eventually the government will have to go further because of the size of the problem and the threat to the economy.
"This is the most serious housing downturn we have seen in the post World War II period," he said. "It is a threat to the broader economy. The risks of a recession are very high."
Wednesday, December 05, 2007
AP
WASHINGTON
The Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures, congressional aides said Wednesday.
These aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of as much as seven years and industry arguments that the freeze should only last one to two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.
Treasury also announced that there would be a technical briefing to explain more of the details of the proposal.
Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes as a way to make sure that the break is not granted to real estate speculators.
The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures that are feared as an estimated 2 million subprime mortgages reset from lower introductory rates to higher rates.
The higher rates in many cases will boost monthly payments by as much as 30 percent, making it extremely difficult for many people to keep current with their loans.
The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.
Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to Irvine, Calif-based RealtyTrac Inc. With home loan defaults still rising, the trend is expected to worsen next year.
The plan represents an about-face for Paulson, who until recently had insisted that the mortgage crisis could be handled on a case-by-case basis. However, he and other administration officials became convinced that the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.
Paulson and other federal regulators began holding talks with some of the country's biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.
Under the typical subprime loan, those offered to borrowers with spotty credit histories, the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.
For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.
The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.
The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.
The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.
With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.
The housing crisis has become an issue in the presidential race with Democrats Hillary Rodham Clinton and John Edwards putting forward their own proposals this week that would go further than the administration.
Mark Zandi, chief economist for Moody's Economy.com, said while the administration plan is a good first step, eventually the government will have to go further because of the size of the problem and the threat to the economy.
"This is the most serious housing downturn we have seen in the post World War II period," he said. "It is a threat to the broader economy. The risks of a recession are very high."
http://www.foxnews.com/printer_friendly_story/0,3566,315332,00.html
Post by: Paddy on December 05, 2007, 01:24:29 PM
Quote
I could be enjoying 4000sq/ft of the American Dream right now, with the Big Government standing ready to bail me out and tell the lender they can't make their obscene, usurious profit!
Fixed it for you.
Quote
Joke's on me! Damn me for being fiscally responsible! Why, I was acting like a traditional Republican, and they can't have that.
'Acting like a traditional Republican' means borrow, spend, borrow, spend, borrow, spend and see how big a national debt you can accumulate. Seems to me these 'irresponsible homebuyers' were the ones acting like 'traditional Republicans'.
'Bout time George did something good for working Americans.
Post by: Waitone on December 05, 2007, 02:30:01 PM
?
Post by: Nitrogen on December 05, 2007, 03:45:00 PM
Post by: Sergeant Bob on December 05, 2007, 03:47:48 PM
I think it is probably a good thing for the economy and the housing market not to have millions of people defaulting on their home loans. Yeah, the people should have been more responsible, but its better for the country.
Oh, and Reilly, we get it, You Now Hate Bush.
Post by: Headless Thompson Gunner on December 05, 2007, 04:18:12 PM
Foreclosing now (and raising ARM rates on folks who wouldn't be able to pay) will cost the lenders big bucks, so basically they've chosen not to do it. In this depressed housing market they can't expect to sell foreclosed homes at a high enough price to make back their principal. Smarter for them to forgo some extra interest payments for the time being. Hopefully in 5 years the loans' outstanding principal will be lower while the value of the collateral will be higher.
Those of you who think you shoulda bought the bigger house and relied on Big Brother to bail you out are shortsighted. Most of the houses that avoided foreclosure now are going to be foreclosed on in 5 years after the "bail out" expires, when the bank has a higher expectation of getting all of their principal back out.
I'm not sure why the FedGov was part of the agreement. They needn't have been. I suppose it does fill in the vacuum for government action. Like it or not, these days the electorate expects a government response to problems like this, so this gives it to 'em without actually having the gov do anything the private sector couldn't/wouldn't have done anyway.
Post by: sumpnz on December 05, 2007, 06:45:01 PM
The irony of all of this is that the very same politicians that were flopping on the floor and moaning about all the people who've been priced out of the house market due to rising prices are also the ones supporting these measure that will keep housing prices from dropping.
Personally, I think the banks that made these bad loans, and the idiots that signed up for them should take a nap in the bed they've made. If I knew an individual that was in one of these loans and facing the possibility of foreclosure I'd do whatever I could to help them find a way to either refi to a reasonable loan, or sell the house that they really can't afford. But I really wish the .gov would keep their mitts out of the housing market.
Also, I'd really like to see some areas (cough, Seattle, cough) experience a serious drop in prices. I might actually be able to justify buying a house again in the short term if that happened rather than waiting for another 5-8 years for my invested savings to grow big enough to provide enough of a down payment.
Post by: K Frame on December 05, 2007, 07:59:20 PM
Please fix your headline and your screed, Manedwolf.
"'Acting like a traditional Republican' means borrow, spend, borrow, spend, borrow, spend and see how big a national debt you can accumulate. Seems to me these 'irresponsible homebuyers' were the ones acting like 'traditional Republicans'."
That's funny, given that the Democrats invented that very concept, you'd think that all the liberal types would be applauding...
Post by: Waitone on December 06, 2007, 02:37:07 AM
Once again our buds in the banking system walk off leaving someone else holding the bag.
Post by: HankB on December 06, 2007, 05:15:34 AM
Quote
"Acting like a traditional Republican' means borrow, spend, borrow, spend, borrow, spend and see how big a national debt you can accumulate. Seems to me these 'irresponsible homebuyers' were the ones acting like 'traditional Republicans."
No, it doesn't. It means being fiscally responsible.The Republican House and Senate that Bush enjoyed during most of his tenure abandoned traditional Republican values, instead spending money like drunken sailors in a bordello after two years at sea.
Notice that they lost control of both the House and Senate - and deserved to.
Post by: ilbob on December 06, 2007, 06:07:52 AM
just a deal between the players most affected to try and limit the financial impact of the sub-prime debacle. i suspect the feds have to be involved or it would be considered collusion and probably illegal.
hopefully the feds will have learned their lessons and make sure that people have to put down a reasonable down payment and only take on loans they can actually afford. but I am not betting on it.
a big part of the problem is many of these loans were upside down when they were granted. just plain stupid.
Post by: El Tejon on December 06, 2007, 07:36:53 AM
I know what you mean and the McMansion owners make me sick, however it has hit everywhere. This summer my neighborhood association had a couple move out in the middle of the night, back down to Virginia they scurried (we have a lot of transplants here), never to return. The home sat vacant until October. A neighbor (this one from Texas) cut the grass and tore down the 4th of July decorations.
I'm with ilbob, I just don't understand why these mortgages where granted in the first place. I have heard that the banks were under pressure to extend loans to more and more individuals (I got my mortgage in '97 and had to undergo an anal probe just for my moderate loan). Can anyone confirm this?
Government creates the problem, and then government "fixes" the problem. Old story, different date.
Post by: K Frame on December 06, 2007, 07:50:26 AM
What, confirm your mortgage lender anal probed you?
Did he kiss you when you left the office? That would be more than enough confirmation!
Post by: MechAg94 on December 06, 2007, 08:13:52 AM
I agree that people need to learn to live with problems of their own creation.
Post by: Glock Glockler on December 06, 2007, 08:42:17 AM
During the refi boom all looked rosy and everyone thought that values would keep skyrocketing, so with the risk mitigated there was something of an arms race between lenders to offer more creative and generous programs. There were even programs where, for a higher rate, one could get a mortgage with 0 income/asset/employment documentation. While this is rather incredible the real question is whether or not you scheduled another appointment with the doc
Post by: Brad Johnson on December 06, 2007, 08:47:03 AM
1) People with no concept of money management getting in over their heads because they were too friggin stupid to put pen to paper. Hey, it's all about the monthly payment.
2) Shady lender officers/offices who preyed on people with no concept of money management and who were too friggin stupid to put pen to paper. Hey, it's all about the monthly payment.
3) Underwriters offering increasingly strange non-traditional mortgage products and using poorly defined and disturbingly vague underwriting criteria that is wide open to abuse.
I put the least amount of fault on the national underwiters (though they are still much to blame). The lending guidelines they developed were based on statistical probabilities. Unfortunately, not being as regulated by the fed as more conventional product lenders, they used guidelines that were a bit, um, stupid. They also forgot (or ignored that fact that) there are people out there who can and will take advantage of every opportunity, even making a few opportunities where none is supposed to exist. Thats where a bunch of independent brokers, along with some larger national b-paper lenders, figured out a way to monkey the system and get people in on loans that shouldn't have been made in the first place. The underwriters knew but didn't make any changes, figuring it would all "come out in the wash."
I have personally observed a lending officer telling a borrower not to worry about saving money for their insurance and property taxes. "Nah, don't worry about that. You can pay it with your income tax refund." They figure the loan on an ARM, finagle an opt-out on the payment for taxes and insurance, then push all kinds of shady strangeness to get "income" that shouldn't be figured into the D-to-I ratios. They also figure in a HUGE fee and point structure (can you say "commission"?). They apply to the underwriter with these skewed and artificially inflated numbers. The underwriter, who set themselves up with their loose and poorly defined lending guidelines, accepts the application at face value.
The borrowers don't give a shrimp what's going on. All they know is this guy (their "friend") is getting them a $500 payment and no out-of-pocket closing expenses on a $100,000 house when everyone else was telling them it was going to be 5% down plus $3000 closing and an $1100 payment. Chances are they've always lived paycheck-to-paycheck, and probably always will. Their only concern is what's going out on the first of each month and trying to get their deposit to the bank before the check bounces. Taxes and insurance are things that happen some other time. Seller is paying my closing costs? Great! Where do I sign? These people tend to have selective hearing in the extreme. You can go on all day warning them about every possible pitfall, advising them on financial strategies, and setting expectations. In the end all they hear "No cost to move in.." and "Monthly payment is $$.." Everything else is wasted breath.
So you have dodgy underwriters offering strange products using vague guidelines, idiot borrowers who's only concern is their monthly payment, and shady local brokers who would shaft their own mother for a paycheck. The result, as expected, is what we see today.
Brad
Post by: Headless Thompson Gunner on December 06, 2007, 08:48:31 AM
I guess I have a 700+ credit score and not much debt so I didn't get the 1st degree when getting a loan.
I agree that people need to learn to live with problems of their own creation.
That's just it, the people are living with the problems they created.I agree that people need to learn to live with problems of their own creation.
The banks screwed up big time when they made all of their subprime loans. They are now faced with a situation where they have to choose between giving up much of their expected interest or foreclosing on some of their loans at a time when foreclosure is a really bad idea. They smartly chose the option that minimizes the financial impact on themselves, upon the homeowners who took out the loans, and upon the economy at large.
I really don't understand what all the bellyaching is about. Y'all do realize that this deal doesn't cost the taxpayer a dime, right? The only people who suffer under this deal are the banks who made foolish loans, and the people who bought those loans as an investment stupidly thinking there wasn't any risk involved.
Post by: Paddy on December 06, 2007, 11:43:05 AM
Quote
I'm with ilbob, I just don't understand why these mortgages where granted in the first place.
That's easy. Greed. Quick and easy brokerage fees, commissions, discount points and junk fees paid with borrowed money from the loan proceeds.
Post by: Brad Johnson on December 06, 2007, 11:52:50 AM
Quote
I'm with ilbob, I just don't understand why these mortgages where granted in the first place.
That's easy. Greed. Quick and easy brokerage fees, commissions, discount points and junk fees paid with borrowed money from the loan proceeds.
Along with borrowers too dang stupid to use a calculator.
Brad
Post by: Paddy on December 06, 2007, 12:11:26 PM
Quote
Along with borrowers too dang stupid to use a calculator.
The lenders are the 'professionals'. The borrowers are the consumers. The borrowers are required to sign a unilateral 'agreement' prepared by the lender. Those agreements contain purposefully complicated legal language in fine print for the purpose of obfuscating the terms of the loan. So the borrowers rely on the 'assurances' of the friendly loan officer who's about to ripoff part of their loan in the form of fees.
Don't blame the victim for the crime.
Post by: Brad Johnson on December 06, 2007, 12:44:01 PM
Quote
Along with borrowers too dang stupid to use a calculator.
The lenders are the 'professionals'. The borrowers are the consumers. The borrowers are required to sign a unilateral 'agreement' prepared by the lender. Those agreements contain purposefully complicated legal language in fine print for the purpose of obfuscating the terms of the loan. So the borrowers rely on the 'assurances' of the friendly loan officer who's about to ripoff part of their loan in the form of fees.
Don't blame the victim for the crime.
They ain't a victim if they undermine themselves by actively not listening (selective hearing). They ain't a victim if they don't track their finances at the basic level of "income must equal or exceed outgo". They ain't a victim if they take the advice of the guy down at the sewage treatment plan over the advice of someone who deals in real estate for a living. And they dang sure ain't a victim if they know that taxes and insurance will be due at the end of the year and don't put anything back for it.
Nope. They ain't a victim. They are stupid with a capital "S" and I have no sympathy.
Those that really were vitimized are indeed worthy of concern and care. But I've been on the other side of the mirror. I had a front-row seat watching people people get into this mess. More than that I have a firsthand knowledge of Why, and it's not because they were railroaded. It's because they were (and often still are) Professional-Grade dumbasses. Trust me, there's far more of them than there are people who truly were taken to the cleaners.
Brad
Post by: Paddy on December 06, 2007, 12:48:52 PM
This is exactly why we need government regulated consumer protection laws.
Post by: Glock Glockler on December 06, 2007, 12:55:12 PM
Don't blame the victim for the crime
All borrowers are required to sign a "Good Faith Estimate" which has all the fees listed, it also has the monthly payment listed broken down into principal & interest, taxes, and insurance. If the mortgage is adjustable there are other documents they must sign explaining the adjustments.
It's all there in black and white, if the borrower signs it's their own responsibility.
Post by: Stetson on December 06, 2007, 01:07:12 PM
Quote
Along with borrowers too dang stupid to use a calculator.
The lenders are the 'professionals'. The borrowers are the consumers. The borrowers are required to sign a unilateral 'agreement' prepared by the lender. Those agreements contain purposefully complicated legal language in fine print for the purpose of obfuscating the terms of the loan. So the borrowers rely on the 'assurances' of the friendly loan officer who's about to ripoff part of their loan in the form of fees.
Don't blame the victim for the crime.
Horsehockey! I just boought a house in February, there was legal jargon I didn't fully understand so I took it to a lawyer and he explained it. Victim? Not even....Idiot maybe but not victim
Post by: Brad Johnson on December 06, 2007, 01:08:12 PM
Many of these people are your customers, Brad. I'm surprised you have so much contempt for them. They're paying a so-called 'professional', in good faith, to represent their interests. They deserve fair and ethical treatment, no matter how 'dumb' they are.
This is exactly why we need government regulated consumer protection laws.
This is exactly why we need government regulated consumer protection laws.
The contempt comes from seeing someone (several someones, actually) actively choosing to ignore straightforward advice and counsel given in good faith. If someone jumps off a cliff after being directly warned it's a bad idea, that's their problem, not mine. I patently refuse to accept any professional or personal responsibility in that situation. I also refuse to sympathize with their plight. It's their mess, let them clean it up. Maybe they'll learn something.
As for my conduct, it will always be fair and ethical. Regardless of their choices during the transaction my professional counsel, and the reason for it, will not change. They will still get the best advice I can give based on the best information I have available. But "fair and ethical" doesn't include bailing out some dipstick after the fact for mistakes they chose to make. Mistakes that directly conflicted not only with my advice but also with common financial sense.
So, no. No sympathy unless they were truly and deliberately mislead (which, in the majority of cases I'm personally aware of, was simply not the case).
Quote
All borrowers are required to sign a "Good Faith Estimate" which has all the fees listed, it also has the monthly payment listed broken down into principal & interest, taxes, and insurance. If the mortgage is adjustable there are other documents they must sign explaining the adjustments.
It's all there in black and white, if the borrower signs it's their own responsibility.
It's all there in black and white, if the borrower signs it's their own responsibility.
You want to know something really amazing? Most conventional borrowers, especially those who've bought and sold a home before, will grab the GFE right off the bat and hang on to it for dear life. Most b-paper borrowers could care less. One glance and it's trashcanned. The only thing they care about, or care to hear any way, is what the monthly payment will be. And by "don't care" I mean exactly that. They will beat you to death over the monthly payment to the exclusion of all else.
I try, I really do, to get these folks to understand what they are getting into. But when you've explained something for the umpteenth time only to have it fall on deaf ears you become a bit jaded. At some point you lose faith in their desire to fully (or even partiall, for that matter) realize their situation. You're still going through the motions - explaining, providing contrast and perspective - but you can tell by their eyes they simply don't care. All they want to do is to show up at the title company, sign some stuff, get their keys, and leave. Personally I'd like to slap them back into consciousness and grill them until I'm satisfied they grasp some level of their obligation. Unfortunately I can't do that. All I can do is fulfill my duties and fully and professionally as I can, then walk away.
Brad
Post by: Paddy on December 06, 2007, 01:30:03 PM
I have no doubt your ethics are the highest, Brad. I've read enough of your posts to respect your professionalism. Unfortunately, many in the real estate/mortgage industry have no such standards.
Stetson:
Quote
I just boought a house in February, there was legal jargon I didn't fully understand so I took it to a lawyer and he explained it.
There ya go. Contracts written in language that requires a lawyer to translate. The borrower(s) relied on the salesman/loan agent's verbal interpretation. Who knows what the hell he/she said?
Post by: Headless Thompson Gunner on December 06, 2007, 01:42:16 PM
There ya go. Contracts written in language that requires a lawyer to translate. The borrower(s) relied on the salesman/loan agent's verbal interpretation. Who knows what the hell he/she said?
Post by: Brad Johnson on December 06, 2007, 01:43:00 PM
Quote
You're saying that hundreds of thousands, pehaps millions of people who received 'advice and counsel given in good faith' simply chose to ignore same and make self destructive choices.
Yes.
Ever heard the "free refills for life + $9.95 S&H" commercials and laughed at the blatant line of BS? Well, someone is buying the line or they wouldn't keep advertising that crap.
Make that millions of someones, many of whom also have a pretty new home and a handy-dandy adjustable-rate or b-paper mortgage.
Brad
Post by: Paddy on December 06, 2007, 01:47:36 PM
Quote
You're saying that hundreds of thousands, pehaps millions of people who received 'advice and counsel given in good faith' simply chose to ignore same and make self destructive choices.
Yes.
Brad
That completes the argument for more government oversight, regulation, and enforcement of consumer protection laws.
Post by: Brad Johnson on December 06, 2007, 01:53:10 PM
Quote
That completes the argument for more government oversight, regulation, and enforcement of consumer protection laws.
Translation: People are so friggin' stupid it takes government oversight to protect them from themselves.
Brad
Post by: Stetson on December 06, 2007, 03:17:55 PM
That completes the argument for more government oversight, regulation, and enforcement of consumer protection laws.
No. It creates more bloated govt crap we don't need. We really do not need the government protecting stupid people from being stupid.
My wife and I were approved for $250,000.00 for a house loan. We bought a brand new 1505sf house for $130,000.00(it was just appraised, by our appraiser, for $155k) . Just because we were approved for something doesn't mean we could afford the payments. We could, provided nothing ever happened to one of us, job wise. The way we did it, we can afford the payments.
It is not my fault, your fault, Brads fault or anyone BUT the buyers of too much house, fault. Do your beliefs also run to protecting people who run up too much credit card debt? Do we need to bail them out too?
Post by: Paddy on December 06, 2007, 04:43:58 PM
No, it is not your fault, my fault, Brad's fault or anybody's fault but the lenders fault. They are the professionals, and they knew damn well that real estate values and economic cycles could converge to cause massive defaults. Nonetheless, they were more interested in short term profits than sound long term financial decisions. They are the ones who need supervision, not the consumer, who (rightfully) has an expectation of honest and fair dealing.
Post by: De Selby on December 06, 2007, 11:55:08 PM
In a bad loan there were two irresponsible parties-the lender and the borrower. In these cases, I think it makes sense to apply the principle that he who is in the best position to avoid the harm should be responsible for losses due to poor decision making.
The mortgage mess could easily have been avoided had these financial geniuses in the lending firms simply done their homework-they are the ones with all the expertise and who are actually paid to make sure that the banks don't lend out money in situations where the borrower is not likely to pay it back.
So because the lenders didn't do their jobs, everyone wants to come down like a ton of bricks on the consumers who bought into the lenders' bad loans? That makes no sense.
The lenders should be held accountable for not doing their jobs and being irresponsible, so that the next time around, they simply will not loan money to people who can't pay it back. They should have known better (and were in every position to know better), so I have no sympathy for their bad business practices. When they go to court looking to collect on their bad debts, my feeling is "Hey, you loaned money to this guy when you knew or clearly should have known he wasn't going to be able to pay it back--you got what you bargained for, so what do you want me to do now?"
Post by: Stetson on December 07, 2007, 02:58:06 AM
Congratulations, Stetson. I hope you are able to meet all your mortgage payments as agreed, and that unemployment, illness, recession, depression or economic 'downturn' do not threaten your home.
No, it is not your fault, my fault, Brad's fault or anybody's fault but the lenders fault. They are the professionals, and they knew damn well that real estate values and economic cycles could converge to cause massive defaults. Nonetheless, they were more interested in short term profits than sound long term financial decisions. They are the ones who need supervision, not the consumer, who (rightfully) has an expectation of honest and fair dealing.
No, it is not your fault, my fault, Brad's fault or anybody's fault but the lenders fault. They are the professionals, and they knew damn well that real estate values and economic cycles could converge to cause massive defaults. Nonetheless, they were more interested in short term profits than sound long term financial decisions. They are the ones who need supervision, not the consumer, who (rightfully) has an expectation of honest and fair dealing.
I can make my mortgage payments if there is job loss or illness or whatever. That's one reason we bought the 130k home. I agree that the lenders are partly to blame. However, so are the buyers. People making $15/hr with 4 kids know they cannot afford a $300k house, but they did it anyway. If you are buying a house and you get an ARM loan, you had better know that the rates wil go up as that is what an ARM does. Consumer stupidity is not an excuse. We do not need the govt bailing all these people out.
I did read the whole plan. It doesn't get these people out of houses they cannot afford, it just defers the burden for another 5 yrs. Then what?
Post by: Headless Thompson Gunner on December 07, 2007, 05:06:26 AM
I did read the whole plan. It doesn't get these people out of houses they cannot afford, it just defers the burden for another 5 yrs. Then what?
If not, then two things happen. First, the outstanding principal on the loan is lower because the borrower has been paying it down over the last 5 years. Second, hopefully the housing market is out of the slump and homes will sell for higher values. Both combine to make it more feasible for the bank to get their money back through foreclosure.
Post by: Brad Johnson on December 07, 2007, 06:40:45 AM
Quote
The lenders should be held accountable for not doing their jobs and being irresponsible, so that the next time around, they simply will not loan money to people who can't pay it back.
Just because the media is focusing on the lenders still doesn't excuse those borrowers who bought more house than they could afford. The media is picking the biggest target. They aren't about to look at the borrower side of the story lest they bruise some poor soul's delicate sensibilities. Besides, it doesn't sell as much air time.
Are there lenders out there that needed their hand spanked? Yes. You will be happy to know that most of these have already gone under.
*EDIT TO ADD* I don't think some people realize what "lender" means. Most people see their local bank or mortage office as a "lender". Chances are they aren't. They are a mortgage broker. They are originating a mortgage under the guidelines of a larger national underwriter (the actual "deep pockets" of the transaction). The broker takes the borrower's criteria and compares it against the guidelines for several underwriters' mortgage products. Once matched, the broker gets everything taken care of for the buyer and "sells" the loan to the national underwriter. As a buyer, 90% of the documentation you sign at closing has to deal with the mortgage, including the transfer to some larger entity. In other words, XYZ Morgage in Prolapsed Rectum, Idaho may be physically doing the paperwork, but GMAC or ABN-AMRO is the national underwriter buying and funding the loan.
Also...
Until recently a shady broker could get away with anything they could provide documentation for, provided the documentation satisfied the underwriter's requirments and was deemed acceptable by the underwriter's loan processor. Once the loan closed and they got their check, that was it. If the borrower defaulted later it was no skin off their back. The underwriter abosorbed the hit. Now, many underwriters include a time-sensitive reversion clause for the broker (and I think FHA-insured loans require it - carebear, clarify here). For a certain number of years after the loan closes a default by the borrower goes straight back to the broker. Now the broker has a direct stake in seeing that the borrower successfully services their mortgage loan. Most brokers who worked the system like this have already gone bye-bye, along with the underwriters who allowed it to happen ("New Century" should ring a bell here..).
Brad
Post by: seeker_two on December 07, 2007, 07:51:44 AM
...and why doesn't he do something about high gas prices, too?
Post by: K Frame on December 07, 2007, 08:05:02 AM
WHAT money?
Nothing I've seen so far requires any payments from the government to anyone.
The only money the government is putting into it is a boost of $170 million to government sponsored credit counseling programs, and those programs aren't specifically targeted at those people who are already in trouble.
Post by: Headless Thompson Gunner on December 07, 2007, 08:13:05 AM
So, my question is.....why is it that our military is scraping for funds while fighting a two-front war, but Bush can find the cash to push this through?.....
...and why doesn't he do something about high gas prices, too?
...and why doesn't he do something about high gas prices, too?
Everyone say this out loud with me:
"THE GOVERNMENT ISN'T PAYING ANYONE. THERE IS NO BAIL OUT. NOBODY IS MAKING ANY MONEY FROM THIS DEAL."
Got it? The banks (which, as Brad correctly points out, aren't really the true lenders ehre, but "bank" is a convenient shorthand so I use it) have worked out a system which they hope will cost them the least amount of losses. They realize that if they demand full interest payments and foreclose if they don't get it, it will likely cost them MORE than if they allow their borrowers to slide on some of their interest payments. This is an option that lenders consider all the time. The only real difference here is that they've institutionalized the decision.
The government isn't really involved. Bush and FedGov are doing the "me-too" tagalong, hoping the country will believe that they're doing something positive about the problem.
Post by: Glock Glockler on December 07, 2007, 09:59:50 AM
Hmmm, what is written on the paper they sign? Regardless of what the salesman said what is written on paper is the responsibility of the customer to read and understand.
There were no verbal assurances that real estate would continue to appreciate at the then current rate?
And theyd believe the salesman because&? Thats like getting angry at the politician because he didnt fix everything like he promised
That completes the argument for more government oversight, regulation, and enforcement of consumer protection laws
Ok, so instead of these are the fees, this is your rate, this is your payment, etc. Do you understand ? well just have 5 pages of duplication, maybe by the 5th time it will make sense?
shootinstudent
Ill try to put this in simple terms for you:
The lender gives the borrower money, and the collateral is the asset purchased. The contract states if you dont pay we reclaim our asset.
Therefore, if the lender wants to foreclose due to non-payment, you, as the hypothetical judge, would simply do nothing and allow the proceedings to occur. Now, many of these foreclosures are occurring on houses that are worth less than the note is for, THAT is the lenders problem because they chose to lend the money on that collateral, but they are fully within their rights to take the house back.
Post by: Sergeant Bob on December 07, 2007, 01:59:50 PM
So, my question is.....why is it that our military is scraping for funds while fighting a two-front war, but Bush can find the cash to push this through?.....
...and why doesn't he do something about high gas prices, too?
...and why doesn't he do something about high gas prices, too?
Everyone say this out loud with me:
"THE GOVERNMENT ISN'T PAYING ANYONE. THERE IS NO BAIL OUT. NOBODY IS MAKING ANY MONEY FROM THIS DEAL."
The government isn't really involved. Bush and FedGov are doing the "me-too" tagalong, hoping the country will believe that they're doing something positive about the problem.
YOU DON'T HAVE TO YELL! No, wait, yes you do.
In the future, please refrain from suggesting someone might benefit from actually READING THE ARTICLE!!!!Aw crap. See? You got me doing it now too!
Post by: Waitone on December 07, 2007, 02:12:05 PM
http://www.nypost.com/seven/12072007/postopinion/opedcolumnists/ws_disastrous_mortgage_fix_767611.htm
First, the plan as generally reported by our crack(ed) media
<snip>
Quote
The centerpiece of Bush's plan is to encourage lenders, investors and their agents to freeze interest rates for up to five years on tens of thousands, and perhaps hundreds of thousands, of mortgages issued during the last three years at below-market "teaser" interest rates.
Second, here is a statement of the obvious.
Quote
Yet this plan, bad as it is, has little chance of helping most of the people who face the possibility of foreclosure - after all, 1.5 million Americans will see their mortgage rates "reset" to higher rates next year.
Third, and now we hear the rest of the story.
Quote
So Treasury Secretary Hank Paulson will propose to Congress to let cities and states issue tax-exempt debt to bail out even more borrowers.
Cities and states would borrow billions and lend the money to "homeowners" (in fact, these borrowers don't actually "own" their homes; they only own the mortgage). The "homeowners," in turn, would use the money to pay off the mortgages they can't afford - and take out new, more affordable mortgages with their city or state government. (Not all tax-exempt debt is guaranteed by the city or state that issues it, but this debt would have to be - no private investor will touch this risk right now for an interest rate that would be "affordable" to these borrowers.)
Cities and states would borrow billions and lend the money to "homeowners" (in fact, these borrowers don't actually "own" their homes; they only own the mortgage). The "homeowners," in turn, would use the money to pay off the mortgages they can't afford - and take out new, more affordable mortgages with their city or state government. (Not all tax-exempt debt is guaranteed by the city or state that issues it, but this debt would have to be - no private investor will touch this risk right now for an interest rate that would be "affordable" to these borrowers.)
<snip>
Classic Washington sleight of hand. Play up what the voter wants to believe. Spend a few days saturating the coverage with what appears to be the proposal. Then later on finish the proposal preferably on a Friday when attentions turn to the weekend. That way when legislative efforts start no one can say they were deceived.
Absolutely disgusting. Consistent but disgusting.
Post by: The Rabbi on December 15, 2007, 06:11:10 PM
Now let's focus on a solution. I have a novel one:
Nothing.
Right, the gov't should do nothing in this situation. The mortgage industry is already one of the most highly regulated in the country. I do not know another one where the seller has to disclose how much money he is making to the buyer.
Will people get foreclosed on? Yes.
Will they lose their homes? Yes.
Is that bad? Yes.
So what? bad things happen to people all the time, usually as a result of their own stupidity and short-sightedness.
Doing nothing will reduce home prices and keep the idea of a binding contract in force. It will avoid moral hazard. It will make a buying opportunity for anyone smart enough to have cash and credit. And it wont cost taxpayers any money.
That sounds like a win-win situation to me.
Let's see which politician, when asked for his plan, has the guts to say "that's a bad thing, but it isn't our responsibility to help and we'll end up making things worse." That man has my vote.
Post by: doczinn on December 16, 2007, 06:29:52 AM
Post by: Headless Thompson Gunner on December 16, 2007, 12:16:32 PM
Lenders can and often do lower rates for people who can't afford the loan they signed up for. They can decline to foreclose on a mortgaged home even though the borrower is in default. They do these sorts of things all the time, whenever they feel that's the best way for them to get their funds back out of a bad loan. They do this without government. That's all they're doing now, except that this time it's more institutionalized, and it gives the talking heads in Washington a chance to take credit for "doing something".
Y'all do realize that the plan is entirely voluntary, right? That it gives lenders a choice to do something they've always had the choice to do anyway?
Really, the whole thing is much ado about nothing. It's a photo op, a back-patting exercise, nothing more.
Post by: The Rabbi on December 16, 2007, 12:46:47 PM
The current proposal I have seen mandates keeping teaser rates where they are for 5-7years. That would untold violence to the idea of contracts. Of course this is certainly precedented in the insurance mess following Katrina.
Post by: Headless Thompson Gunner on December 16, 2007, 02:31:05 PM
Post by: Brad Johnson on December 17, 2007, 08:26:27 AM
Quote from: Rabbi
The only danger is if one of these clowns actually takes it seriously and tries to institute it.
Bingo.
Brad
Post by: Paddy on December 18, 2007, 04:45:54 PM
U.S. Fed proposes rules to protect would-be homeowners
By Edmund L. Andrews and David Stout
Published: December 18, 2007
WASHINGTON: The Federal Reserve moved Tuesday to impose tough new restrictions meant to curb unfair and deceptive home-lending practices and prevent a recurrence of the meltdown in subprime mortgages this year.
By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans - whether from banks, mortgage companies or other lenders - than under current regulations.
The proposed rules underscore the more assertive role the Fed is now prepared to take in regulating lending, a big shift from the central bank's approach in the past. In general, the rules are meant to deter unscrupulous lenders from persuading people that they can afford loans that ought to be out of their reach. By extension, the rules are also intended to keep would-be buyers from deceiving themselves about the debt burdens they can shoulder.
"Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy," said the Fed chairman, Ben Bernanke.
"We want consumers to make decisions about home mortgage options confidently, with assurances that unscrupulous home mortgage practices will not be tolerated."
The plan includes provisions that would require more extensive disclosures, restrict advertising and make it harder to lend to borrowers with little or no documentation and a questionable ability to repay.
It would also allow borrowers, in some circumstances, to sue lenders who violated the rules.
The Fed acted under provisions of the Truth in Lending Act and the Home Ownership Equity Protection Act of 1994. In the past, it had been quite cautious about using its authority to clamp down, and the rules were last revised in 2001.
Details of the proposed rules, which could take effect next year after a period for public comment and possible revisions, can be read on the Fed's Web site, www.federalreserve.gov.
In "four key protections," the Fed listed these:
Creditors would be barred from lending without documenting a borrower's ability to repay the loan.
Creditors would have to verify a borrower's income and assets.
Prepayment penalties would be restricted.
Creditors would have to establish escrow accounts for taxes and insurance.
"Unfair and deceptive practices have harmed consumers and the integrity of the home mortgage market," said a Fed governor, Randall Kroszner. "We have listened closely and developed a response to abuses that we believe will facilitate responsible lending."
The action puts the Fed a step ahead of the Congress, which is considering its own steps to tighten restrictions on the home loan industry. A bill put forward by Representative Barney Frank, a Massachusetts Democrat and chairman of the Financial Services Committee of the House of Representatives, would expose mortgage brokers and lenders to legal liability if borrowers are unable to repay.
The Fed did not go as far as proposals by some consumer groups, which sought, for example, an outright ban on prepayment penalties.
What the Fed has been hearing in recent months is a complex blend of personal hardship and dire news for the country as a whole, as waves of foreclosures have swamped the housing market and threatened to mire the economy in a recession.
The housing boom of the first several years seems almost as distant as the boom in technology stocks, but economists have warned that the fallout from the housing slump could be much worse than that from the dot-com bubble.
Many homebuyers whose little slice of the American dream has turned into a nightmare were undone by "teaser rates" dangled in front of "balloon mortgages." When the tempting original rates were supplanted by much higher rates built into the loan, many homeowners could not make the monthly payments.
Those personal misfortunes - whether the result of individual misjudgment, excessive optimism, shady lending or all of those - have mushroomed into a national problem.
The situation is further complicated by the subsequent packaging and reselling of subprime mortgages in ways that are so arcane that even some bankers acknowledge they are befuddled by them.
http://www.iht.com/articles/2007/12/18/business/subprime.php
Post by: Sergeant Bob on December 18, 2007, 05:47:50 PM
Post by: Paddy on December 18, 2007, 06:16:08 PM
So, the adults have to step in an make some rules. That's where government regulation comes from.
Post by: Waitone on December 18, 2007, 06:35:52 PM
Shift to today with the marvels on collateralized mortgage instruments. Brokers broke, bankers agree, money centers gather and collateralize groups of loans then sell said loans on the open market to investors who count on higher rates of return because said loans are "risky". Brokers cash their checks, banks get their commissions and fees. Everyone in the delivery of loans gets paid but no one has to pay the cost of failure. Collateralized mortgage instruments were marketed as reduced risk. Over time as the enthusiasm built because of a bubble mentality reduced changed to no risk. The cost of failure was spread out.
Not all regulation is a bad thang. The market imposed its own regulation when the cost of failure was born by those who made the decisions. The nature of the market has changed (for good or ill is not the issue at this point) and effectively eliminated the cost of failure from the equation. I think it entire appropriate for government to step in impose a regulation which would hinder the felons amongst us.
Post by: The Rabbi on December 18, 2007, 06:38:33 PM
The lenders were every bit as 'irresponsible' as the homebuyers, so there's plenty of ignorance to go around. In fact, the burden for properly qualifying these buyers is and was on the lenders. But they were more interested in a fast buck than on long term solvency, and as a result, have to deal with massive foreclosures and defaulted loans.
So, the adults have to step in an make some rules. That's where government regulation comes from.
So, the adults have to step in an make some rules. That's where government regulation comes from.
Calling gov't regulation "adult supervision" is a sad joke. It will not help. It will make it worse.
The lenders took risks and they have lost. Let them lose money. Borrowers took risk and they lost. Let them lose money too.
I don't see any need for gov't supervision or regulation. I don't see any problem at all. This is part of business and part of capitalism, that you have winners and losers. If you take away the losers then you will take away the winners as well. And do that, and you take away any incentive to work.