Posted on 09/10/2010 5:28:31 AM PDT by reaganaut1
“We are sitting on a time bomb,” the mortgage analyst said — a huge increase in unconventional home loans like balloon mortgages taken out by consumers who cannot qualify for regular mortgages. The high payments, he continued, “are just beginning to come due and a lot of people who were betting interest rates would come down by now risk losing their homes because they can’t pay the debt.”
He would have given great testimony at the current Senate hearings on subprime mortgage lending. The only problem is, he said it in 1981 — when soon after several of the alternative mortgage products like those with adjustable rates and balloons first became popular.
When Senator Christopher J. Dodd, Democrat of Connecticut, gave his opening statement last week at the hearings lambasting the rise of “risky exotic and subprime mortgages,” he was actually tapping into a very old vein of suspicion against innovations in the mortgage market.
Almost every new form of mortgage lending — from adjustable-rate mortgages to home equity lines of credit to no-money-down mortgages — has tended to expand the pool of people who qualify but has also been greeted by a large number of people saying that it harms consumers and will fool people into thinking they can afford homes that they cannot.
Congress is contemplating a serious tightening of regulations to make the new forms of lending more difficult. New research from some of the leading housing economists in the country, however, examines the long history of mortgage market innovations and suggests that regulators should be mindful of the potential downside in tightening too much.
(Excerpt) Read more at nytimes.com ...
Steve Sailer blogged about Goolsbee's ascension and his 2007 opinion piece.
bttt
The National Community Reinvestment Coalition (NCRC) found [1] that from 1997 to 2007, $4.7 trillion in home loans were made under this Act. In 2007, over 50% of home loans were made to people who would normally have not qualified for one. According to a Reuters’ story [2], “S&P now projects defaults on subprime loans issued in 2005, 2006 and 2007 at 11 percent, 30 percent and 49 percent, respectively.” These losses represent a good fraction of the $4.7 trillion lent under the CRA.
[1] NCRC, NCRC Documents Trillions of CRA Dollars in Communities since 1977; CRA Commitments: 1977-2005,
Link: http://www.communityinvestmentnetwork.org/nc/single-news-item-states/article/ncrc-documents-trillions-of-cra-dollars-in-communities-since-1977-cra-commitments-1977-2005
[2] Reuters, S&P raises loss expectations for risky US mortgages, July 6, 2009,
Link: http://www.reuters.com/article/idUSN0626699620090706
1.) Banks need a Dave Ramsey type of financial planning system for those who were underserved by the Public School Systems that left them financially illiterate
2.) The bad news is, with such a training system their is no instant revenue for the banks, unless they charge a stipend.
So many do not know how to save, not give into buying the latest crap, and how to be frugal or downright cheap :-). It is not hard to learn, and some might actually find it fun.
“The high payments, he continued, “are just beginning to come due and a lot of people who were betting interest rates would come down by now risk losing their homes because they can’t pay the debt.”
Gee, maybe we should bail out those people who lost a lot betting in casinos as well.
“a lot of people who were betting interest rates would come down by now risk losing their homes because they can’t pay the debt.”
A 30 year fixed mortgage here is below 4.5%
I would guess Dodd is clueless about real life
or this is codespeak for people who couldnt pay their mortgage if the rate was 0%
or don’t want to pay because the value of the house is half or less
True, but their are adults now that don’t have these skills. How and where do they learn them? Especially in the inner cities. Perhaps at church? Some place where rooms where folks can meet for sure.
There is no problem with holding a mortgage note with no money down. None.
It’s between the note holder, and the borrower. No different than a used car lot, or getting a fridge at Sears.
The problem is feel good socialism, and things like compassionate conservative RINO Bush like ‘Home Ownership’ programs. Their problem is thought government we are tied to any errors, scams, gaming of private parties, in this case borrowers, banks, and financial institutions. This wouldn’t happen in a free, non socialistic housing/loan market, which we have, have had, and will have. So, when these people, borrowers and lenders drown, we are chained, though government, to them.
Right now the socialists of the Democrat and Republican parties are telling us to swim harder, and take on more underwater borrowers and lenders.
Funny how urban ‘communities’ know when their checks are short, or how to cut up a kilo.
It’s like when I used to hire Spanish speaking workers. Their English abilities went way way up on paycheck day when we discussed hours worked.
Their answer to that would be that we need a “high-wage economy” for the “excluded” so that they will be in the position to repay their sub-prime mortgages (higher minimum wages that go up every year, high rates of unionization, etc.)
True, but their are adults now that don’t have these skills. How and where do they learn them? Especially in the inner cities. Perhaps at church?
There is a network of Black churches who are now running programs to teach people in the inner-cities how to handle their finances. They have come to realize that there is no escaping poverty without this (and the schools are doing an absolutely horrible job of teaching anything about finance or economics)
Evidently not.Wolves among the sheeple.
Someplace like:
Yep.
Well,he just referenced “capital gains cuts for small business” on Fox. That pretty much disqualifies him. Another academic who has never done a damned thing an has not the first clue about how the business world works.
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