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.
I guess Iowa isn’t necessarily their target market. Especially considering the housing market in Cali. That or they just stick to mailers here which they don’t waste their postage sending to me, I have very little credit history.
I bought my first house five years ago, planning to resell to move back to my original home state in 3-4 years. I put 5% down, mortgaged 80% of the cost with a 5 year ARM at 5.25%, and mortgaged the remaining 15% of the home with a second mortgage at 8%. Within a year I paid off the second mortgage, sold the house after four years and as a result was able to put down 35% on my current home (with a conventional 30-year fixed mortgage).
Without subprime lenders I never could have done that. It's wrong to demonize an entire industry simply because some people can't budget their individual income and spending.
The Originator originates the loan of course, but he in turn gets an approval from an Investor who dictates terms and yes even limits the amt of money one can make (at least in GA that Is), then that investor buys the loan subject to completion of terms dictated to the originator an then they in turn sale it again & then yet again. Basically it’s sold like stocks or Blocks of mortgages.
One thing to remember though is just because you’re an Originator does not make you a thief. I’m an Originator for loans but i’m also a Loan Officer in small town USA so if I screw someone everybody in town will know it the very next day. So I would have to say that you can’t throw a blanket definition of all Originators as being theives. But then again I know there are some sharks are out there waiting on the little fish to make a mistake and then the sharks chew them up.
The period I was talking about — back in the 80’s — most of the loans and mortgages were going to people with limited means and lousy credit histories. I remember all these politicians and so-called activists whining that certain classes were being “denied the American dream” and that these loan schemes were going to help make those dreams come true. Well, I guess they did all right until the borrowers defaulted, filed for bankruptcy or in some instances simply skipped town. This is where a number of mostly smaller institutions went under. Many of them could not collect on these debts and they wound up spending some major amounts of money trying to do so to no avail. There was even some pressure on some institutions to not try to collect these unpaid debts. These losses and the costs of trying to collect on these debts could only be passed on to other customers for so long. Eventually, with no money coming in, these smaller banks and S&Ls folded.
You had a careful, well thought out plan, and knew how to add and subtract. And people who were pros at flipping, etc, all knew how to mange things, until it all blew up.
But the mortgage originators knew you all were aware of what you were doing...Just as they had to have known and recognized perfectly well those who could never have handled the obligation. It was their JOB, after all. We assume they were professionals, and could not have been ignorant of what must happen.
OK, I concede perhaps I could be missing something obvious here, but the whole situation seems to contradict common sense. It seemed intuitively absurd to me to take my "friend's" Refi offer, even at a fixed rate, simply because it would have meant thirty years eating Kraft Dinner, and it did not take Rocket Science to see it.
I remember when I refi’d through Countrywide and got a call six months later asking if I was happy, did I need to take money out of my house? How about another REFI? Whaaaa? After six months? Then I realized. Fees, glorious fees. I don’t blame people for trying to generate business - but please - I remember when refi’ing your house was a pretty big thing - not an semi-annual event.
Plus, my neighbor, and I love him, he’s great - was refi’ing his house every year for the last four years, pulling out money out, upping the percentage financed, buying cars, etc. He was getting ready to refi this year and was told that he currently owes more on it than the anticipated appraised value.
[an Investor who dictates terms]
IMHO, the discovery, long after the transaction, that these terms were not being met is part of the underlying cause for the implosion of the sub-prime industry.
[I’m an Originator for loans but i’m also a Loan Officer in small town USA so if I screw someone everybody in town will know it the very next day. ]
My understanding is that a good number of the worker-bees at Ameriquest were foreign nationals.
[So I would have to say that you can’t throw a blanket definition of all Originators as being theives.]
True. That was not my intent. The predatory activities of Ameriquest are well documented.
Imagine you’ve got 30 or 40k in credit card debt. Maybe you got that because of a major medical incident.
The 20%+ vig is eating you alive.
All you need to fix it is e q u i t y...
good point.
But are'nt some of those consolidation companies owned by CC Companies?
I can certainly see the Medical Emergency Issue, but most of the troubles I am seeing locally are for extra SUV's and boats. And this is where the troubles starts, as in the empty house two doors down from me. It's the toys that do it around here. The banker was telling me about people with $30-40K on more than one credit card. Now, a few years ago, a mortgage originator would not touch these people with a ten foot pole. Last year, they were courting them.
[But are'nt some of those consolidation companies owned by CC Companies? ]
[I can certainly see the Medical Emergency Issue]
I recall reading where a mortgage broker followed a woman into the waiting room of the hospital where her husband was having heart surgery.
[most of the troubles I am seeing locally are for extra SUV's and boats.]
SUV's, Boats, Unnecessary new cars, jet skis...
What I've seen agrees with your observation. But but... the TV says we need this junk.
[Now, a few years ago, a mortgage originator would not touch these people with a ten foot pole. Last year, they were courting them.]
Seems to me that, as the predatory account execs chewed through their markets, they developed appetites of their own that demanded to be fed. The closer to the bottom of the barrel they got, the bigger the lies they had to tell to sell and fund. Not surprising. Greed is what it is.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
While researching the subject, what I find MOST interesting
is the number of illegal aliens who purchased homes.
When one was jailed, some people took up a collection to
pay his mortgage.
In another case, an illegal was deported and left his
home purchased about a year or so prior.
Sure wish there were a way to check on number of illegals
who purchased property across the country. Remember, in some
cases they have up to 50 or 60 or several families living in
one house.
Have a friend who is a mortgage broker and asked him the other
day about this very subject. All he said was, “you really
don’t want to know - more than you can imagine”.
Also, wasn’t it not long ago that all the banks were going
to issue illegals credit cards?
Gotta furnish the hacienda with toys from Bust Buy and fix it up with trips to Homie Despot.
FWIW, I’ve seen the conditions many of these folks are trying escape from in Marxist Central America. I can’t blame them for coming here where the tyranny imposed by basic appetites is less extreme. I’d do the same if I were in their shoes.
They have low levels of education and this makes them attractive targets for predators.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.