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Better Late than Never

post #1 of 7
2/22/09 at 10:39am
Thread Starter 
http://www.realclearmarkets.com/arti...andards_t.html

Quote:
Feds Re-Impose Loan Standards They Helped Undermine
By Steven Malanga
When President Obama announces Washington’s new plan to help troubled mortgage-holders today, the betting is that the program will include a loan-modification effort that reduces the size of a besieged homeowner’s debt. One goal would be to cut the size of loans and perhaps also their interest rate so that a mortgage holder’s monthly payment would equal no more than 31 percent of his pre-tax income. Fannie Mae and Freddie Mac have already been experimenting with an income-to-payment ratio of 38 percent in their loan modification efforts, but Washington wants to go further, indeed probably needs to go further, if it is to stem the tide of defaults.
Let's see if this materializes.
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post #2 of 7
2/22/09 at 11:27am
I find so much about a fix like this troubling.

Anyway, it's an interesting article. I did some mortgage lending at the bank in the past, and we had very strict debt to income, down payment requirements. Not everyone qualified. I guess that was the problem. Good thing they changed that, huh.

Quote:
There is a great irony that Washington will now lead the way in imposing new, stricter standards, including a tougher income-to-payment ratio, because it was Washington, prodded by affordable housing advocates, which pushed mortgage lenders to dilute their traditional underwriting values in the first place. Federal regulators attacked those established standards as being “unintentionally biased†against low and moderate income borrowers and used a variety of laws and regulatory bodies to push often resistant lenders into programs based on these lower standards. The government and those who backed its actions assured lenders these lower standards were safer than they thought, even though there was little research to support that contention.
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post #3 of 7
2/22/09 at 2:01pm
I never will understand how the banks filled their portfolios to the point of collapse with bad mortgage loans. It is one thing to have some risk on your portfolio, ie riskier mortgages, but another to have so many that you go bankrupt. That is just bad business practice. I don't blame Washington as much as I blame the heads of the financial institutions that made millions on these risky mortgages.
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post #4 of 7
2/22/09 at 2:59pm
I think Rick Santelli's Tea Party idea sounds good.
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post #5 of 7
2/22/09 at 3:20pm
Quote:
Originally Posted by neetanddave View Post
I think Rick Santelli's Tea Party idea sounds good.
I agree. I thought it was a great idea.
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post #6 of 7
2/23/09 at 4:17am
Quote:
Originally Posted by neetanddave View Post
I think Rick Santelli's Tea Party idea sounds good.
Intriguing. The man is suggesting a repeat of an act that was illegal at the time, put into action as much by the wealthy smugglers (criminals) as by public outcry. In fact, a large part of the public truly didn't care where their tea came from. The 3rd Tea Clipper wasn't in the harbor, it was aground, and it's tea was saved and the entire load sold in Boston. And to top it off, the precursor of the Tea party was attacks on warehouses, company stores, and even the homes of company officials using methods we would refer to as terrorism today.

So, other than polluting Lake Michigan, what does this fellow have in mind?

ETA: He also thinks the administration should put up a website to allow online voting on issues. Is this simply so that he can flip-flop and complain that Kenyans, Iranians and Syrians would be voting on the website that he wants to see created?
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post #7 of 7
2/23/09 at 8:17am
Quote:
Originally Posted by peachytoday View Post
I never will understand how the banks filled their portfolios to the point of collapse with bad mortgage loans. It is one thing to have some risk on your portfolio, ie riskier mortgages, but another to have so many that you go bankrupt. That is just bad business practice. I don't blame Washington as much as I blame the heads of the financial institutions that made millions on these risky mortgages.
Part of the problem was the greed of lenders, and the lending system. Part of the problem was the regulations that were set up by the government, as well as the Government backing of Freddie and Fannie which allowed and encouraged the "creative lending" practices to get the more at risk borrowers approved. Freddie and Fannie "guaranteed" those loans, with government money and with tidy profits to a LOT of those in power in Washington, so when the mortgages were failing at an alarming rate and Freddie and Fannie couldn't back them it really started the domino effect that has crippled the entire economy.
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