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Mortgage reform bill picks up key backing
http://money.cnn.com/2007/11/05/real_estate/Frank_bailout_bill/index.htm?postversion=2007110514 ^ | 11-5-07

Posted on 11/06/2007 10:18:14 AM PST by Hydroshock

WASHINGTON (Dow Jones/AP) -- House Financial Services Committee Chairman Barney Frank, D-Mass., has secured two key Republican endorsements on his legislative plan to reform the mortgage industry, avoiding a potentially bruising political fight this week.

Rep. Spencer Bachus, R-Ala., the panel's top Republican, and Rep. Judy Biggert, R-Ill., another high-ranking member, have both signed on as co-sponsors to an amended bill that Frank plans to introduce before a committee vote on Tuesday.

"The most important fact about this compromise is that it has significant new safeguards to protect families from abusive lending," Bachus, who has long advocated for change in the mortgage industry, said in a press statement. "This is the culmination of discussions that began two years ago when I sent chairman Frank an outline for a subprime lending bill."

Among the changes, the bipartisan amendment includes the Federal Reserve among the regulators that would be responsible for implementing the new law. Also, the bill clarifies new secondary market liability.

"In addition to significant consumer protections, the bill also provides carefully crafted assurances that frivolous lawsuits will not disrupt the ability of capital markets to continue to provide the liquidity necessary to assist families to achieve the dream of owning a home," Bachus said

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: mortgageindustry; mortgages

1 posted on 11/06/2007 10:18:15 AM PST by Hydroshock
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To: Hydroshock; Calpernia; cbkaty; Nervous Tick; ex-Texan; RockinRight; NVDave; Neidermeyer; ...

Economy/Credit/Housing Issues Ping List

If you want on or off this list let me know.


2 posted on 11/06/2007 10:19:04 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: Hydroshock
You want to kill the mortgage market for years? - get the government involved...
3 posted on 11/06/2007 10:22:52 AM PST by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: Hydroshock

This would put over 100,000 loan officers/mortgage brokers out of business. And it would make it much more difficult for low income borrowers to buy homes. This must be stopped!


4 posted on 11/06/2007 10:26:23 AM PST by Samba
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To: Samba

And not to mention the effect of home values. If you thought your house value was down now just wait.


5 posted on 11/06/2007 10:28:13 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: Hydroshock
Pass the bill and all future mortgage loans will cease. There is nothing to compel the Mortgage Lenders to lend to anyone.


6 posted on 11/06/2007 10:30:22 AM PST by darkwing104 (Let's get dangerous)
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To: Hydroshock

From the way these financial companies have been run, the possession of an advanced business or finance degree from a prestigious university gives its possessor the same appreciation for long term consequences as that of a crack whore, but without the whore’s ethics and sense of self preservation.


7 posted on 11/06/2007 10:31:58 AM PST by JeeperFreeper
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To: darkwing104

I know. There needs to be some regulation and a return to sensible banking stanards but this is crazy.


8 posted on 11/06/2007 10:32:08 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: 2banana

“You want to kill the mortgage market for years? - get the government involved...”

NO!

You don’t want the government involved.

The government is CAUSING this problem.

A Sarbox for Housing

How to restrict lending to the poor for years to come.

Tuesday, November 6, 2007 12:01 a.m. EST

Throughout the 1980s and ‘90s, Congress prodded, even strong-armed, banks into making more mortgage loans to low-income and minority families. Washington enacted anti-discrimination and community lending laws with penalties against lenders for failing to issue riskier mortgages to homebuyers living in poor neighborhoods or with low down payments and subpar credit ratings. And so it was that the modern subprime mortgage market was born.

Now, and for a variety of reasons, some two million of those loans have gone sour, and the same politicians are searching for villains. Leading the charge is House Financial Services Chairman Barney Frank, who is accusing banks of “predatory lending”—by which he means making loans to the very group of borrowers that Mr. Frank and his colleagues urged banks to serve.

As early as today, Mr. Frank plans to hold a committee vote on his Mortgage Reform and Anti-Predatory Lending Act of 2007, which would impose new rules and financial penalties on subprime lenders, while providing new lawsuit opportunities for distressed borrowers. “People should not be lent money that’s beyond what they can be expected to pay back,” Mr. Frank says. Now, there’s an idea. Why didn’t the bankers think of that?

Mr. Frank’s proposal is a trial lawyer’s dream. It would forbid banks from signing up borrowers for “overly expensive loans”; require banks to make sure that the consumer has a “reasonable ability to repay the loan”; and insist that loans must be “solely in the best interest of the consumer.” This kind of murky language would invite litigation from every borrower who misses a payment. If it becomes law we can expect to see billboards reading: “Behind on your mortgage? For relief, call 1-800-Sue-Your-Banker.”

Also for the first time, banks that securitize mortgages would be made “explicitly liable for violations of lending laws.” This is a version of secondary liability that holds the bundlers and resellers of mortgages responsible for the sins of the original lenders. The reselling of mortgages has been a boon both to housing liquidity and risk diversification. So to the extent the Frank bill adds a new risk element to securitizing subprime loans—and it surely will—the main losers will be subprime borrowers who will pay higher rates if they can get a loan at all.

...

But for all the demonizing, about 80% of even subprime loans are being repaid on time and another 10% are only 30 days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank’s legislation will ensure that far fewer of these loans are issued in the future.

http://www.opinionjournal.com/editor...l?id=110010826


9 posted on 11/06/2007 10:32:56 AM PST by nmh (Intelligent people recognize Intelligent Design (God) .)
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To: JeeperFreeper

That is truly insulting, to the crack whore.


10 posted on 11/06/2007 10:34:40 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: darkwing104

“Pass the bill and all future mortgage loans will cease. There is nothing to compel the Mortgage Lenders to lend to anyone.”

That’s bunk!

We can’t have the government bailing our IRRESPONSIBLE people. Make mortgage companies learn the HARD way not to write BAD business. That’s the ONLY way to stop this crap.

A Sarbox for Housing


A Sarbox for Housing

How to restrict lending to the poor for years to come.

Tuesday, November 6, 2007 12:01 a.m. EST

Throughout the 1980s and ‘90s, Congress prodded, even strong-armed, banks into making more mortgage loans to low-income and minority families. Washington enacted anti-discrimination and community lending laws with penalties against lenders for failing to issue riskier mortgages to homebuyers living in poor neighborhoods or with low down payments and subpar credit ratings. And so it was that the modern subprime mortgage market was born.

Now, and for a variety of reasons, some two million of those loans have gone sour, and the same politicians are searching for villains. Leading the charge is House Financial Services Chairman Barney Frank, who is accusing banks of “predatory lending”—by which he means making loans to the very group of borrowers that Mr. Frank and his colleagues urged banks to serve.

As early as today, Mr. Frank plans to hold a committee vote on his Mortgage Reform and Anti-Predatory Lending Act of 2007, which would impose new rules and financial penalties on subprime lenders, while providing new lawsuit opportunities for distressed borrowers. “People should not be lent money that’s beyond what they can be expected to pay back,” Mr. Frank says. Now, there’s an idea. Why didn’t the bankers think of that?

Mr. Frank’s proposal is a trial lawyer’s dream. It would forbid banks from signing up borrowers for “overly expensive loans”; require banks to make sure that the consumer has a “reasonable ability to repay the loan”; and insist that loans must be “solely in the best interest of the consumer.” This kind of murky language would invite litigation from every borrower who misses a payment. If it becomes law we can expect to see billboards reading: “Behind on your mortgage? For relief, call 1-800-Sue-Your-Banker.”

Also for the first time, banks that securitize mortgages would be made “explicitly liable for violations of lending laws.” This is a version of secondary liability that holds the bundlers and resellers of mortgages responsible for the sins of the original lenders. The reselling of mortgages has been a boon both to housing liquidity and risk diversification. So to the extent the Frank bill adds a new risk element to securitizing subprime loans—and it surely will—the main losers will be subprime borrowers who will pay higher rates if they can get a loan at all.

...

But for all the demonizing, about 80% of even subprime loans are being repaid on time and another 10% are only 30 days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank’s legislation will ensure that far fewer of these loans are issued in the future.

http://www.opinionjournal.com/editor...l?id=110010826


11 posted on 11/06/2007 10:34:45 AM PST by nmh (Intelligent people recognize Intelligent Design (God) .)
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To: 2banana

“You want to kill the mortgage market for years? - get the government involved...”

Sorry, I mistook your reply.

It’s an election year ... and all the socialists will flock together to show they “care” and “feel your pain” and dumb people down MORE and more them MORE irresponsible. If need be, let both the mortgage company and the consumer LEARN THE HARD WAY to THINK and not FEEL and be GREEDY living beyond their means.


12 posted on 11/06/2007 10:37:00 AM PST by nmh (Intelligent people recognize Intelligent Design (God) .)
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To: 2banana

I second that. A major cause of the problems we are experiencing today is government.


13 posted on 11/06/2007 10:47:43 AM PST by caisson71
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To: nmh
Its a matter of leading a horse to water...

If the legit lenders has to be forced to cowtow to irresponsible people and risk heavy losses, wheres the incentive? Its much easier to stop all future mortgages. There is nothing to force a lending institutions to lend money beside profit from interests.


14 posted on 11/06/2007 10:57:56 AM PST by darkwing104 (Let's get dangerous)
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To: Hydroshock

Nothing beats causing a problem, and then angrily demanding solutions to the problems your past legislation caused.


15 posted on 11/06/2007 10:58:21 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Hydroshock

Too little . . . Too late . . . ‘Nuff said here on FR.


16 posted on 11/06/2007 11:23:29 AM PST by ex-Texan (Matthew 7: 1 - 6)
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To: Hydroshock
I just heard an interesting rant from a co-worker. It went something like this...

When these clowns get done our children will no longer be able to afford a home, they will be destined to become renters for life. I can't argue with the guy's statement.


17 posted on 11/06/2007 11:30:05 AM PST by darkwing104 (Let's get dangerous)
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To: 2banana
If this is the bill that I have heard of before; it’s truly a bad idea.
It will take large amounts financing out of the housing market, it will make an already bad problem worse.

The dirty little secret right now, is that subprime mortgage products are already gone.

There are some who wish to crash the housing market and our economy; that is a bad idea and will hurt everyone in the nation.

18 posted on 11/06/2007 11:32:45 AM PST by HereInTheHeartland (Sometimes the first duty of intelligent men is the restatement of the obvious. Orwell)
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To: 2banana

“You want to kill the mortgage market for years? - get the government involved...”

Well, the government has been involved for many years. That is what people must realize. Fannie Mae, Freddie Mac, the failure to release up-to-date financial statements for these GOVERNMENT SPONSORED ENTERPRISES, a Federal Reserve System that happily accomodates politicians’ wishes, pressure from government to loosen lending standards for borrowers who have a sketchy credit history, and the list of government involvement goes on and on...


19 posted on 11/06/2007 11:37:16 AM PST by TaxesR2High (Vote Ron Paul in 2008)
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To: Hydroshock
The most important fact about this compromise is that it has significant new safeguards to protect families from abusive lending

Just what I want, government rules to protect me from myself.

20 posted on 11/06/2007 11:59:25 AM PST by Fan of Fiat
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To: Hydroshock

bring back usery laws that somehow became vapor, reinstate bankruptcy protection, and get rid of credit reporting.


21 posted on 11/06/2007 12:16:06 PM PST by Dogbert41
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To: Hydroshock

I am glad to see that this bill, which, if passed, would bring devastation to the housing market, the general consumer, and to the economy, has finally made it out of the shadows and into the mainstream where the public can view it and judge it. And judge it they should.
This monstrous, badly written bill is a classic case of the road to hell being paved with good intentions. Barney Frank no doubt has glossed over the full spectrum of the bill’s tenets when he brought the Republican endorsements on board, as most of the politicos don’t have time to read or digest the stack of documents piled on their desk. What I am sure that Mr. Frank said to swing the endorsements his way is that this bill represents sweeping changes that are desperately needed in the industry, but did not disclose the full ramifications of ALL of the Titles of this bill. I wholeheartedly agree that the predators that have a tendecy to swim around this industry (or for any other industry, for that matter) need to be reined in and held accountable for misdeeds and bad practices. But to force loan officers, originators, and mortgage brokers to carry exorbitant bonds is tantamount to the government invoking a police state on an industry that comprises a great portion of the economic structure in the U.S. The bill and its vastly vague wording opens the door for loose interpretation of the law, thereby giving those same lenders who contributed to the current economic debacle free license to charge extortive rates and make it difficult for all but the priveleged to achieve homeownership. The mortgage brokers in this country have long been a buffer between bank high retail rates and what the customer can afford. Taking them out of the picture makes the consumer a fatted calf, ripe for the slaughter. And even should the broker manage to stay in operation with all of the overhead costs piled on him, he will ultimately find failure when he has his source of income sheered asunder.
Yield Spread Premium (YSP) is a misunderstood facet of mortgage lending. It represents the cost of doing a loan, contrary to popular beliefs held by uninformed people. Yes, YSP can generate big bucks for the unscrupulous, but when utilized by those with ethics and an interest in doing business for longer than a couple of months, it represents a cushion by which the homebuyer can survive the closing of a home loan. The profit generated through YSP often absorbs a hefty portion of closing costs, particularly for those people whose personal liquidity is in short or non-existent supply. Take away that facility, and you will find fewer and fewer homeowners (who have the credit, but not the money to do a loan), and you will find a much different, but equally explosive economic situation. Competition dies down, and prices/rates go up. The lenders who push inflated retail rates (and who do not have to disclose their SRP (Service Release Premium- the money paid to lenders when they sell a pool of mortgage loans on Wall Street), although the SRP is considerably more than any broker will ever see on a single loan) will go unchecked and the economy will see inflation on a biblical scale.
H.R. 3915 represents some good points, but in its current state is a powderkeg with a few that will burn down within the first eighteen to twenty-four months after the law goes into effect. But by that time, the country will be rocked to its very economic foundations, a situation for which we may not easily recover.
In summary, please urge your Congressmen and Congresswomen to vote NO on this bill, send it down for revision, and help safeguard the consumer, the housing market, and sveral hundred thousand jobs.


22 posted on 11/06/2007 12:17:29 PM PST by wesguptill (Bill 3915, H.R. 3915, mortgage reform, anti-predatory lending, YSP, loan originators, mortgage)
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To: wesguptill
Welcome to the Free Republic.


23 posted on 11/06/2007 12:28:31 PM PST by darkwing104 (Let's get dangerous)
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To: 2banana

So why does the American taxpayer, especially one(s) raising a family, buying a home now, is frugal, saves, and budgets need to foot the bill? Anyone thinking that those affected are entitled to a bail out the builders and the wages paid to the illegal construction workers with no Workman’s Comp bennies paid to the states by their employers (but free medical if hurt on the job), plus the salaries of the real estate agents, mortgage lenders, and dividends to the stock investors for nothing but a simple “GREED RUN”????


24 posted on 11/06/2007 1:06:04 PM PST by RSmithOpt (Liberalism: Highway to Hell)
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To: wesguptill

Your comments are some the best and most thoughtful I have seen written on this subject. I have beeen in the industry for 8 years as both a loan officer for large banks and now on my own as a broker. If this bill comes to pass the consumer who is looking to buy a home will get raked over the coals. In all my years, the most unscrupulous lenders I saw in the business were the big banks, not the small broker. Since they are not required to disclose YSP and SRP, no one knows the money they have collected hand over fist. I am not sure why more isn’t being said about the trillions in mortgage income Bank of America, Wells Fargo, Countrywide and others made off of sub prime and prime loans.


25 posted on 11/06/2007 1:22:56 PM PST by Georgia
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To: Hydroshock

Somebody should tell Barney the horses have already been stolen from the barn.


26 posted on 11/07/2007 12:01:00 AM PST by VxH (One if by Land, Two if by Sea, and Three if by Wire Transfer)
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To: 2banana
You’re right. The government forced lenders to improve the number of loans to minorities because they said the lending practices were discriminatory.
The lenders then lower their qualifying requirements, thus expanding the sub-prime market, to improve their numbers and we now have this mess.
Once again, here comes the government to screw things up even more. It’s a vicious cycle that leads us closer and closer to the promised and of a Socialist Utopia...
27 posted on 11/07/2007 12:27:25 AM PST by Kickass Conservative (Guns don't kill people, gun free zones kill people)
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To: Samba

The very first incling I got that this was going to be bad was several years ago when my wife was a real estate agent. At that time, to get a mortgage the total payment could not be more than around 30% of your DOCUMENTED take-home pay. It had been around that level for as long as I can remember.

Then the rule suddenly changed and it became 50% of your DOCUMENTED take-home pay. I said to her that the industry was pumping previously unqualified buyers into the market and it will increase prices.

When you look back on it, I should have bought all the homes I could as investments. Who knew that those days of 50% would seem downright stifling compared to the drunken sailors rush we digressed to. The writing was on the wall way back then. I just didn’t realize how silly the whole thing would get.

We will all suffer the consequences - some more than others.


28 posted on 11/07/2007 7:51:08 AM PST by RobRoy (Islam is a greater threat to the world today than Nazism was in 1938.)
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