Posted on 10/03/2007 8:21:36 AM PDT by vadum
When a major subprime mortgage lender collapsed earlier this year liberal advocacy groups attacked. Claiming the subprime industry is “predatory” when it lends money to people who have low incomes or bad credit, critics demand a federal crackdown. Lenders reply that subprime loans help less creditworthy borrowers buy homes and cars and even necessities like groceries when a borrower can’t wait for the next paycheck. They say they must charge higher interest rates because they assume a greater financial risk. But these arguments fall on deaf ears...
Lawmakers are unleashing an avalanche of abusive rhetoric. Senator Barbara Mikulski calls subprime lenders “scum.” Washington politicians of all stripes see a chance to rescue themselves from the public’s low esteem. Public approval ratings for Congress hovered at just 18% in August, well below President Bush’s 33% rating...
Groups like the Center for Responsible Lending accuse subprime lenders of abusing their customers. They say they unfairly target people who never should have received mortgages.
Activists say subprime lenders deliberately victimize racial minorities, women, and the elderly, tricking them into accepting grossly unfavorable loan terms. For example, the National Council of La Raza, argues that subprime loans to racial minorities violate their civil rights. Earlier this year a coalition of racial preference groups demanded that subprime lenders slap a six-month moratorium on foreclosures, arguing that lenders should have known better than to lend money to people with bad credit, many of whom are minorities. The coalition said subprime mortgages are “reckless and unaffordable,” and they warned that lenders, realtors and investors who bought up subprime loans could be sued under a federal law that forbids housing discrimination...
La Raza chief Murguia failed to mention that without a subprime market many members of racial minority groups would have remained renters, unable to buy a home...
(Excerpt) Read more at capitalresearch.org ...
Tyranny of the Appetite.
So the answers simple, don’t lend to people with bad credit. But then these same people complaining & calling the lenders scum will be yelling discrimination for not lending them money to purchase these houses. From a Bankers perspective the only choice we have from now on is not lend them a damn nickel. Reap what you sow.
Over the years, I remember seeing lots of news stories about lenders “discriminating” against women, minorities and the poor by NOT giving them mortgages so they can “own” their own homes.
Can’t win with the Libs/MSM.
Gee, with all of the "redlining" suits in the past twenty years, a banker is put in a difficult position. If he doesn't lend money to minorities, he is accused of racism and violating their civil rights. If he does lend them money, he is accused of profiteering and violating their civil rights.
Do liberals actually realize how ridiculous they sound?
(It's a rhetorical question.)
Yes, people who signed some of these notes were truly idiots. But the people who wrote them KNEW there was no prayer the people would be able to pay.
I see no difference between the people who wrote page after 8-1/2X14 page in four point type, and CC companies with default rates around 30% for those times the "Mail is slow" wink wink.
They wanted their quick buck, even if the paper was worthless, and they got it.
Financially illiterate broke deadbeats should not get mortgages. Simple.
It’s a tough competition for most senators to call others “scum”.
Back in the 1980’s, there was pressure put on banks, to lend money to anyone. A friend’s brother, at that time a vice president with a local bank (now retired), was put in charge of the bank’s diversity loan program or whatever it was called, probably because he was of African-American descent. He said that at the time, he thought these giveaways would be a bad idea, but of course, he was overruled; so he did his job and probably too well. He says that even today, though the bank he worked for is still around, it is still recovering from those years of bad loans. Other banks were not so fortunate.
Actually companies such as Providian have been ridiculously successful at offering credit to those with sub credit while still helping them not get too far into debt. The problem with these other companies is that there analytical tools are not deep enough to truly minimize the risk involved with lending to the poor.
Sometimes in life people actually get what they ask for and if they’re to stupid to realize it, then they should not have asked for it. When you have a person who want’s to purchase a house and they make enough income even though their credit sucks (which by the way is their own fault) we lenders try to accomodate their requests because we are committed to CRA (Community Reinvestment Act)but in most cases they’re are given the opportunity to lock a rate at a higher fixed rate or an adjustable rate loan. To date I have never not once ever suggested an Arm but their have been people that decided to go with the lower Arm rate. Not my fault, totally their own decision.
I think there were some perverse incentives driving the market for sub-prime loans. The investors eventually holding the loans were far removed from the actual transactions. The rating agencies have not provided good information about the underlying risks. Political interests encouraged easy lending practices and oversold home ownership. This background fueled the actual players to engage in risky transactions: mortgage brokers, buyers, real estate agents, sellers, and original lenders. The rising market and low interest rates fueled the frenzy even more.
The market is adjusting although the results will be painful to many players. Hopefully, there will not be a bailout so that real estate prices and lending practices adjust.
I remember when I bought out my sisters’ shares of my parents house in 2000, I still had some credit history that was problematic. So I got a loan that reflected it - at a higher interest rate. After a few years, I was able to refinance, get a lower rate and take some money out for home improvement. Maybe I’m dense, but I cannot for the life of me think why people think that a $500,000 home can be bought with a $60,000/year salary or that their loan payments will only be $850 a month in perpetuity. It makes no economic sense.
The whole notion that banks would discriminate and not lend money to women or minorities or whomever flies in the face of good business practices and sound economic policy. Why would a banker not lend money to a female doctor, for example, who earns $300,000 per year and wants to borrow $400,000 in order to buy a $600,000 home on which she is making a down payment of $200,000?
It doesn’t seem as if sports and entertainment stars, or other wealthy minorities, have much trouble getting mortgage money to buy their houses. Here in northern New Jersey, the likes of Mike Tyson and Michael Strahan both bought mansions that would (almost) make John Edwards envious.
The issue here is not one of gender nor race, but of economics. If the requirements (income, assets, credit rating) for getting a loan are routinely not met by a particular “victim” group—such as single mothers or African Americans, the libs cry bloody murder that the banks are prejudiced, engaging in redlining, or have some other nefarious agenda. It is total nonsense, like virtually everything else that emerges from the left.
See in your case it made sense, even if you went with an ARM because you had a game plan to Refi once your credit was re-established. I don’t see any resentment in your post, it was simply the way it was. You got what you got & you improved it when it was possible. You are exactly the reason we give people with b-c credit the opportunity to buy. You helped yourself & you got what you wanted/needed. You are absolutely correct in what you said about the $500k loan, you cannot keep up with the payments when you don’t have the income. Stated loans(Liar Loans) are really what has hurt this industry along with people that made some bad decisions. Always go with the fixed if it’s available, always.
Why dont you let me know which lender is offering 500k at 850/month. I doubt you can.
Really? Fidelity Home Mortgage just sent me an offer of a $225,000 loan at $69 a month, so give them a call.
touche!
I don’t know if it’s true for other states, but I know in California there are TV ads for absolutely ridiculous monthly payments for what used to be called “JUMBO” loans. In fact we had one loan company in Sacramento that had a commercial start with a woman on the phone saying “I’m in foreclosure, I’ve had a bankruptcy, I can’t prove my income - can you help me?”
Next shows smiling mortgage guy with “SURE WE CAN! And then proceeds to tell her how, with Low, Low, monthly payments. I’m thinking “no way, no way, no how.”
What happened to basic math and common sense? Did everyone really believe every Walmart Cashier should have a mini-mansion?
What was the reason for Interest-only plans in the first place? What else could it be, but a fast bonus mill? I had a mortgage loan officer who was a FRIEND of mine, with who I had gone to school, tell me I was qualified for an utterly preposterous amount of money, if I were only to refinance my hovel.
Then, to pass this radioactive paper away to derivative markets where the originator did not have to look at it, so it could be kited further? This is insane, and will be corrected by the markets of course- But at what cost to Little Insignificant Joe Average's 401(k)?.
Yes, firstly, the people who signed should have wondered for a moment why they could never have afforded the house before this "opportunity", but as in buying Lottery Tickets, they need a fantasy for their beery little heads, and wanted to believe it.
But those who worked in the industry could not have not known better at some level.
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