The Observation Deck

It seems that our elected officials at many levels have decided that the reason we have so many foreclosures is that borrowers are shocked, shocked to find that a mortgage is actually a loan that has to be paid back. The new Democratic Governor of Massachusetts has the perfect liberal solution:

http://news.bostonherald.com/editorial/ ... id=1013391

It seems to be a complex issue Bill.

On the one hand, as the article states, the sub-prime loans appear to allow more borrowers to get into the home market. On the other hand, people with financial difficulties may have to pay so much more for their loans.

In our country, we try to reward personal achievement and that hard-to-define competitive edge. Still, at times, we may fail. When that happens, we all can end up in financial trouble.

Any number of writings have reported that any of us might just be a couple of paydays away from being homeless.

How can we mix the rights of those who succeed against the difficulties of those who do not?

Conservatives seem to like the "trickle-down" theory, Liberals may embrace "entitlement" programs. Compromise positions seem hard to find.

It would be so nice if we, as a nation, could stop pandering to the bases, and simply approach problems in a common-sense manner.

As you are no doubt aware, our country is almost evenly split in this liberal-conservative verbally virtual "civil war". I for one, am deeply concerned that, unless we all work together, very little will get done to help any of us.

The trouble is generally not with the fixed-rate mortgages, where you know from day 1 what your payments will be, it's the ARMs that get you in at a sexy low rate then get jacked up to an unpredictable level later. To a lesser extent, you have speculators who took a slightly-too-high payment on an interest-only mortgage in the hopes that they could turn it around for a profit in a couple of years. Surprise! - real estate doesn't ALWAYS appreciate in value (except in Lakewood, apparently).

It's a sucker's bet, and I don't have a world of sympathy for those who find themselves saddled with those types of loans, but it is conceivable that some of them could have been talked into believing they could afford the loan by a shady mortgage company who gets a commission on the loan then sells the debt to a bank the next day. As has been mentioned here before - sometimes it is better to stay a renter and debt-free than to take on more than you can handle. Treating those who default on mortgages as pure victims and not dealing with the issue of personal fiscal responsibility isn't a recipe for long-term financial health.

Gov. Patrick's moratorium on foreclosures isn't going to keep many families, if any, from eventually losing their homes. If the state wants to spend money to help, what might be most helpful is to create a subsidy on at-or-below-market fixed-rate loans and encourage lenders to re-negotiate the terms of the defaulted loans to somewhat better rates. I'm sure there are still a number of deadbeats out there, but there are a lot more good honest families who just needed a financial reality check.

Bill Call wrote:
http://news.bostonherald.com/editorial/ ... id=1013391

Is the editorial you linked to written by the same Michael Graham who described himself "loud, obnoxious and frequently fired" - Wikipedia.

Not sure that a Graham editorial is the best starting place for a discussion on predatory lending

http://www.hud.gov/offices/hsg/sfh/buying/loanfraud.cfm


EDIT - did a quick search and found this http://www.mortgagebankers.org/NewsandM ... /53627.htm (link to full report included in the MBA news story) which might be a little more objective than Graham's editorials

Bill

Then you must love what Dennis Kucinich is doing. Taking the banks and the Federal Reserve to task for even allowing such loans.

Best place to fix this is with the lenders hold them accountable.

.

Richard Cole wrote:Is the editorial you linked to written by the same Michael Graham who described himself "loud, obnoxious and frequently fired" - Wikipedia.

Not sure that a Graham editorial is the best starting place for a discussion on predatory lending

The editorial simply tried to expose a program that pretended that individual responsibility and culpability are not a factor in the foreclosure "crisis". I am speaking of lenders and borrowers.

Most people know exactly what they are doing when they sign a mortgage document based on "stated income". Most people know exactly what they are doing when they sign a loan document with variable rate. I have a feeling the lenders knew to.

It is not a function of the government to step in and start making mortgage payments when a borrower falls behind. Why not car payments? Why not student loan payments?

Hey, that's a great idea! Under the governors reasoning we can all insist that we didn't understand our student loan documents, that the college committed fraud and that no only should we not have to pay the money back the college should also have to pay for our graduated education and living expenses!!

The actual amount of "predatory lending" is quite small. The term is a convenient label used by politicians that allows them to ignore the lack of enforcement of proper underwriting standards.

So what should happen? The people in the loan industry who made uninsured loans that are in foreclosure should lose their money.
The people who bought houses with those loans who can't pay them back should lose their houses and go rent an apartment until they save enough to buy a house they can afford.

Anyway:

http://www.realestatejournal.com/buysel ... refresh=on

If you believe that predatory lending is insignificant and that a "crisis" is not happening, I guess there's no need for further discussion.

Richard Cole wrote:If you believe that predatory lending is insignificant and that a "crisis" is not happening, I guess there's no need for further discussion.

Richard

I cannot speak for the rest, but it is a major crisis.

Home sales down 28% the last 3 months, many people over extended, the Plain Dealer doing a story on how people with great credit are losing homes because of borrowing and reborrowing and ending up with the sharks.

There is about to be a major shift in money and property and it is not because of ethical ways.


FWIW


.

Then you must love what Dennis Kucinich is doing.

get the smelling salts ready Jim, actually, I think Kucinich is on the right track on this one. What the mortgage industry has done over the past couple of years is borderline criminal.

That said, I still think the bulk of the responsibility remains with the borrower.

Jim O'Bryan wrote:

Richard Cole wrote:If you believe that predatory lending is insignificant and that a "crisis" is not happening, I guess there's no need for further discussion.

Richard

I cannot speak for the rest, but it is a major crisis.

.

I totally agree - I was responding to Mr Call and my interpretation that his posts seem to indicate that predatory lending and foreclosure has not reached crisis proportions.

Richard Cole wrote:If you believe that predatory lending is insignificant and that a "crisis" is not happening, I guess there's no need for further discussion.

Predatory lending was insignificant and there is no crisis.

There is no constitutional right to ever increasing home values. The double digit increases in home values was and is unsustainable. The cruel reality for Cleveland: You can't lose 700,000 people and expect to have increasing property values.

Riddle: if I think my house has increased in value 50% over the last 10 years and I wake up tomorrow and find it has only increased 30%

1. How much money have I lost and

2. What should the government do about it?

We are heading for a 20% decline in housing values and there is nothing government can or should do to stop it. People who bought during the last five years are going to lose money when they sell a house. The people who buy are going to get a relative bargain. That's how the market works.

Bret: If you I want to borrow money and you want to lend it we both might be delusional about the chance of the money every being paid back but neither of us would be a criminal.

Flipping based on bogus appraisals is in percentage terms small potatoes.

Bill,

If I want to borrow and you want to lend, I agree, nothing criminal. However, if I want to borrow, and you want to talk me into borrowing well outside my means, using terms that dramatically benefit the lender and know you can get away with it because most of your clients either don't read or can't comprehend the contract, I'd suggest that you are not a good person.

And that's the reason that our loan is through your wife at First Federal of Lakewood, at a higher rate, than through a less reputable broker for a lower rate.

Like I said before, I'm not letting the borrower off the hook, I'm just saying that there are quite a few questionable mortgage companies out there that should be looked into.

Brian Pedaci wrote:The trouble is generally not with the fixed-rate mortgages, where you know from day 1 what your payments will be, it's the ARMs that get you in at a sexy low rate then get jacked up to an unpredictable level later. To a lesser extent, you have speculators who took a slightly-too-high payment on an interest-only mortgage in the hopes that they could turn it around for a profit in a couple of years. Surprise! - real estate doesn't ALWAYS appreciate in value (except in Lakewood, apparently).

It's a sucker's bet, and I don't have a world of sympathy for those who find themselves saddled with those types of loans,

I couldnt agree more. What happened to common sense and the idea that 'if it sounds too good to be true it probably is"? Why would you EVER do anything other than fixed-rate, unless you were an Army colonel or a Methodist minister?

Bret Callentine wrote:Like I said before, I'm not letting the borrower off the hook, I'm just saying that there are quite a few questionable mortgage companies out there that should be looked into.

I guess we can agree on that.

One of the problems a reputable company has is that when they offer reasonable underwriting standards to a potential buyer many buyers go elsewhere. Reputable institutions lose market share.

The buyer gets a slightly lower initial interest rate and buys trouble down the line. I have no problem with prosecutions and punishment of true fraud but true fraud is not the primary cause of this problem and a new government program is not the solution.

Have you ever heard of tulip mania?

http://www.stock-market-crash.net/tulip-mania.htm

Hey, these financial companies are out to make money, not to help people. It sounds contradictory, but they don't really care whether you can pay or not. They get a commission for the "sale" and move on to the next sucker.

Look at how the credit card companies are targeting college students with credit cards. They don't even have real jobs yet and they are literally shoving the credit cards at them! They WANT them to rack up the debt, as they know full well they will, and do.

You can blame the people that fall for these loans, credit cards, etc, but they're at a distinct disadvantage against these loan shark companies. The lenders assure them that they can afford the loan, ( or else they wouldn't approve it, right?) and remind them that in a few years when the rates rise, they'll likely be making more money! Sure.

Remember, this is about home mortgage lending. This really isn't about people being greedy and buying a flashy car and big screen TV's. These are people that want some autonomy and control over their lives; they want what every other American wants: a home of their own. Why are we making THEM out to be the bad guys here?