As near as I can tell, Dodd doesn’t hold borrowers responsible at all in this mess. He does, however, have this amazing generalization about brokers:
[2:42] If you go to their [sic] website of brokers, the very first thing they advise their brokers is to convince the borrower that you are their financial advisor- even though they are being paid by the lender or someone else, and so they go in, and lure people in by suggesting, I’m here to help you, I’m going to get you a better deal, and so forth. They get paid according to how high an interest rate they can get you to sign on to. Their compensation depends on their ability to sell you a higher rate of financial obligation, than would otherwise be the case.
Any of our brokers care to comment?
I have held a managing brokers license for more than 15 years and a salesmans license for more than 25 years. To suggest that this whole mess is the brokers problem is ludicrous. The real estate business is highly regulated with rememdys readily available to the consumer for inappropriate acts.
The real truth is that no one in America is responsible for their actions. Therefore, how could the buyer have ANY responsiblity for being an uneducated idiot? It simply can’t be the buyers fault.
In further truth, our federal government ushered in this rediculous housing market by lowering the Federal lending rate to 1% in June of 2003 to encourage a mania of borrowing that was working so well; that who cares that it was not sustainable. But then that would make Senator Dodd and company culpable, and that can’t be either. So what the heck, the tooth fairy did it.
Maybe that is why Congress has an 11% approval rating, they do such a comendable job of passing the buck!
I used to be a Democrat. If the Republicans are forced to run Britney Spears for President, I’m voting for her. At least while I’m going through another ridiculous administration, I’ll have something good looking to view. Have you read the Mortgage Debt Forgiveness Debt Relief Act? This things got wings and the Pres likes it. Its moving through the House faster than a dog with diarrhea. I got letters out to Paulson, the acting Director of the IRS and the Pres. Here is a link to my letter. Page 2 is the Act.
http://stevecohan.com/mortgage_debt/
stevec,
Excellent letter. I personally would go further and say that “debt relief for dummies” should be a book title, not federal legislation.
This whole retched mess is nothing more than whitewashing to chink the cracks in the dam of a failed system long enough to reach election; one more time.
It gets interesting when we have a Rebublican President that has an approval rating lower than a snakes belly in a wagon track, and a Democratic controlled congress that is even lower!! Both now have to try and pull out another skinny rabbit from the political magicians hat, as both parties are now seen culpable. Bet they didn’t count on this problem!
“I hear” that Chris Dodd clearly has no idea what he is talking about. Brokers already have to disclose their compensation, their arrangements and affiliations with other companies, and how they are being paid. The problem is two fold: 1. The enforcement of existing laws. If you want to have an impact on the lending industry put more energy in to enforcing existing laws. Has anyone in politics read the laws? They’re good laws, just woefully enforced. 2. It’s too complicated. The government-mandated disclosures are too difficult to read and understand. Broker’s didn’t make the forms tough to read, state and federal regulators did. Clean up the HUD-1, TIL, GFE and loan documents to make it easier to understand what you are signing.
Does anyone else believe that if the BK reform the democrats (& I am one, but rethinking that as we get more & more victim-like) want done (where a BK judge is able to change the terms of a mortgage to make the loan truly affordable for filers) passes, that we will go back to a pre-1987 mortgage business? Where only 20% or more down, & max 28-33% DTI, & 680+ FICO borrowers will be able to get loans?
& does anyone else think that this will be a really good thing (LT only, of course)? That maybe we would be able to force this country into a habit of savers, not spenders, & being proactive, not reactive, & owning our lives, not victims?
Ah, but at that point, they will be absolutely screwing those of us who waited and saved and did not buy someplace we could not afford during the bubble. They would be allowing those people who were the most irresponsible and reckless (and for many, committing outright fraud) to keep their ill-gotten homes and reap a huge windfall at the expense of the rest of us.
This would certainly show the rest of us what direction this country is taking – the American dream of freedom to thrive is dying, replaced by a combination of the worst elements of the European nanny-state and the puritanical totalitarianism of the Arab world.
ST, maybe it would screw us, the savers. Especially someone like me, who lives in a place that did not run-up & does not have a lot of investors or flippers.
but it wouldn’t really screw up someone like twist, who lives in an area where a lot of non-OO homes are the ones being FC upon.
What it would really do is force upon the whole nation a non-reliance of house inflation.
House bubbles would no longer form as they have since 1987. Specuvestors only infiltrate markets after an initial wave of OO start moving the house inflation UP. If house inflation is prevented from starting in the first place, then there would be no specuvestors.
The only time another house bubble would potentially start would be when the FED reduces the FFR to 1% again & keeps it there. Which, given the predictable “success” of the last time that happened, may not occur for another generation or two, if at all.
At any rate, even if they did, considering the lenders would be completely FU if the OO decided to BK, any OO wanting to qualify would be held to much higher standards still.
The only thing that will keep the heady days of fog-a-mirror loans from popping up again is for the real money holders (the Wall Street investors) to lose a ton of money now to those OO. & not be able to recoup it ever. & for guidelines to change, like BK, so that they would know beforehand that they’d be more likely to lose money than make it.
I think it would burn people like twist and I (I’m in L.A., bubble-central) because among other things, the banks would have to make up those unforeseen losses somehow, and the way they would make them up would be not to make it more difficult for the rest of us to borrow in the future (though this would certainly happen as well), but to charge higher rates. I don’t want to pay more interest on my next loan so that my neighbor who could not afford his place can stay in it.
Higher rates are coming anyway with the destruction of the dollar.
Besides, higher rates lead to lower home prices. &, in time, when rates went down again, one could easily refi to a lower rate.
Take the 1980’s. High prime rates in the 15-17% range. led to huge deflation in home prices. Yet, when the rates when back down in the 1990’s, house prices increased, as well.
But the people who already bought their homes were able to take advantage of the low purchase price & low refi rates.
Win-Win. ST pain for LT gain.
Unfortunately, even if that scenario happens, it will likely take many yeas to play out, and those of us in the responsible camp may be left unable to practically buy for a long, long time to come – if you’re in your child-bearing years as I am, this is sub-ideal to say the least.
Yes, that is too true.
I don’t have children now, but, if I did, I might not be so rational about it. I’d never be a FB (I’m an accountant; I just wouldn’t be able to work those #s.), but I would probably be willing to buy sooner than later.
With your LA town, hopefully the FC will speed up your process.
One thing hasn’t been mentioned yet.
Any mortgage lender care to reach back in the memory banks to describe what it was like to get a jumbo loan in the mid-80’s?
If you thought full-doc conforming was hard.. getting a jumbo loan will make the conforming process seem like VIP treatment. If a larger loan can be crammed down when a borrower is financially insolvent, the terms will be bordering on usurious. Then again.. it’s a loan, it should have high barriers to entry!
Money should be hard to get, not easy.
I’d hate to be selling a house in Cali after the cram-down bill passes tomorrow!