Posted on 08/25/2015 9:09:44 AM PDT by Kaslin
Last month I bought a house in Potomac, Md., a trade-up on my current home, and was shocked to learn in the ensuing weeks that I couldn't get a mortgage loan. First, I went to PNC bank. Then Wells Fargo. Then another. Denied. Denied. Denied.
No, I don't feel entitled to a loan, and the banks have every right not to lend me money. But my tale of woe tells a broader tale of what is going on in the lending industry these days.
All the bankers told me the same thing: "Steve, if you'd walked in our bank eight years ago with this mortgage application, we would have rubber-stamped it in five minutes, and you would have walked out with a bag of money."
Those were the go-go days of the real estate frenzy when people who worked at McDonald's could walk into a Countrywide and get a $600,000 mortgage. Back then, underwriting standards were tossed out the window.
Now, thanks, in part, to new federal regulations, like Dodd-Frank with its rules against predatory lending, the pendulum has swung to the other extreme, and underwriting standards (for those without federal insurance) are absurdly tight. Here we are with the lowest interest rates in 50 years but many businesses and aspiring homeowners can't qualify. Water, water everywhere and not a drop to drink.
My situation was doubly frustrating because I'm making a 25 percent down payment on the house. Researchers have examined huge samples of the portfolio of defaulted loans during the 2007-2009 housing crisis. Virtually all the defaulted loans had low down payments, with many having less than 5 percent down, thanks to government "affordable housing" mandates.
Almost no loans with 25 percent down payment went into default because of simple economics: If you've paid for 25 percent of the house, and you suddenly can't make your mortgage payment, you sell the house or refinance the loan. You don't walk away from your equity stake. Duh.
The main reason I was denied a loan was because of a below-average credit score. This was infuriating on several levels. First, I have had two previous mortgages, and in 25 years I've never missed a payment. How can I be a high-risk borrower? The answer is that, twice in 30 years, I was 30 days late paying my credit card bill -- and paid the hefty late fee -- and, even more ridiculous, I, Steve Moore, have $300 of unpaid parking tickets.
The horror. How does that data point provide any useful information to a bank of whether I'm going to pay my mortgage?
This prompts another obvious question: Why in the world does any financial institution put any credence in credit rating agencies today? They were the most derelict institutions of all during the housing meltdown. These were the buffoons who were giving AAA credit ratings to mortgage-backed securities only weeks before the whole house of cards collapsed. They were the ones who ignored every warning of the subprime lending overload. They were the ones who gave Enron, Countrywide, Bear Stearns and others a clean bill of health right before these institutions famously crashed. But banks still listen to their advice on which homeowners are likely to pay off their loans?
But here is why I really want to pull my hair out. While I'm making a 25 percent down payment, the government insurance underwriters -- the Federal Housing Administration, Fannie Mae and Freddie Mac -- are backing with taxpayer dollars hundreds of thousands of loans made with as little as 3 percent down. These are the loans that will likely default. And taxpayers are on the hook for hundreds of billions of dollars.
Uncle Sam is repeating every mistake made just eight years ago. A record number of new mortgages are backed by the feds. Almost two-thirds have direct federal backing, and about 90 percent have some form of federal insurance. This is the definition of insanity.
Edward Pinto, a housing expert at the American Enterprise Institute, notes in a new study that, through Fannie, Freddie and FHA, government is relying on "looser and looser mortgage lending standards in a misguided effort to promote broader homeownership and accomplish wealth accumulation, particularly for low-income households." He shows that, in 2013, "low-income households (those in the 20th to 40th percentile of income distribution) had a median net worth of only $22,400 in 2013."
These are the people the government is forcing banks to make loans to.
So, while my tax dollars are backing thousands and thousands of loans likely to fail, my loan with close-to-zero probability of default can't get financed -- because I'm upper middle class. This is considered fairness. Only in America.
Now it's the other way around. Since it's almost impossible to discharge student loans and credit card debt in bankruptcy, and since a foreclosure process is costly and time-consuming for a lender, it's easier to default on a mortgage than any other kind of debt without facing any serious consequences. If you're in financial distress now, just pick up the phone and call the bank to let them know you won't be making any payments for a while. It will be months -- if not years -- before they ever get around to taking your home away from you.
Another problem is that a lot of loan officers or bank officers don’t know how to counsel with the client to get their scores up because they are not underwriters and they don’t talk to the credit bureau. I used to call the credit bureau on the phone when I was a mortgage broker and get them to coach me on how to get my client’s score up. Most of the time I would tell the client what to do and within 2-4 weeks I would get a re-score and they would qualify.
I'm calling horse hockey. Pay your parking tickets, fool. And don't try to snow us on two late cc payments over 30 years. Everyone has had late cc payments. Pay your cc off every month and you won't have a bad rating. If you're lying about this, then there are other debts you're lying about. You say you bought the house so you obviously got a loan somewhere. Be gone with you.
Then Steve Moore clearly thinks it's OK not to pay his bills on time (as long as he thinks he can get away with it).
Welcome to the networked world Stevie, where you can't get away with anything. I suggest he pay his bills on time.
Those shiny marble foyers are just begging for a looky loo to fall and file a law suit to get that house without having to make a loan application.
He should apply for an FHA loan. Maybe he can get one with 3% down.
Re: “There’s more to this than meets the eye.”
I agree.
If 90% of mortgages can qualify for some type of federal insurance, what, exactly, excludes the author?
My first guess - he’s trying to get a “jumbo” mortgage, which used to be anything over $600,000, and which Fannie and Freddie were not allowed to insure in the recent past.
Wanna bet the demographics of the 3% down crowd are seriously skewed to a particular segment of the population?
Want to bet the writer just doesn't fit (FICO or no FICO)?
“Almost no loans with 25 percent down payment went into default because of simple economics: If you’ve paid for 25 percent of the house, and you suddenly can’t make your mortgage payment, you sell the house or refinance the loan. You don’t walk away from your equity stake. Duh. “
Of course he’s wrong here. He’s guessing and his “simple economics” overlooks an important factor.
With their house down as much as 50% they couldn’t sell it for enough to even cover the loan. They couldn’t refinance the loan because the house was underwater. They wrote off their downpayment when housing prices collapsed. That was already gone and it wasn’t going to keep them in a house they could barely afford.
If the mortgage was one that they were having difficulty paying and it was eating up their income they walked and rented something else or sometimes bought another house at 50% of what prices had been. A large downpayment doesn’t tell you everything about behavior when a bubble collapses.
“Then the Community Reinvestment Act subjected banks to loans they never would have originated. The only way to deal with these loans was to sell them to willing buyers Fannie Mae and Freddie Mac. “
“Out of desperation Fannie and Freddie offloaded the toxic assets in the form of mortgage backed securities and derivatives which eventually collapsed because those people who previously would not have been eligible for mortgages stopped paying on them. “
That isn’t accurate no matter how often it gets repeated around here. The CRA applied only to deposit taking banks and it didn’t even mandate that the loans be mortgages. It did not apply to pure mortgage lenders, to investment banks, to hedge funds, or to any other part of the shadow banking system.
Shadow banks wrote the majority of mortgage paper during the bubble. They wrote all of the exotic high risk paper. They weren’t compelled to write any of it. They bundled and sold their CDOs and CMOs in direct competition to Fannie and Freddy. They took market share away from F&F during the bubble.
The No Doc, No Down, NINJA, Option ARM, 125% of value and other such high yield non-conforming toxic paper were the invention of shadow banks. They bundled their own mortgage securities and issued derivatives based upon these bundled mortgages. Derivatives were the invention of investment banks and hedge funds, and the insurance firm AIG. And these derivatives weren’t sold out of ‘desperation’ they were sold because they were immensely profitable for the issuer. This was high yield paper and it was in great demand.
Fanny and Freddy dealt in conforming loans, which was boring, low yield, and not ‘toxic’ even when issued to subprime borrowers. That’s the nature of conforming loans. Fanny and Freddy weren’t desperate to sell derivatives because they didn’t sell derivatives.
Other than that you understand the situation completely.
Holder cuts left in on $17 billion Bank of America settlement
Powerline ^ | 8-28-14 / fr Posted by afraidfortherepublic
Radical Democrat activist groups stand to collect millions from Attorney General Eric Holder’s record $17 billion deal to settle alleged mortgage abuse charges against Bank of America, Investors’ Business Daily reports:
Buried in the fine print of the deal, which includes $7 billion in soft-dollar consumer relief, are a raft of political payoffs to Obama constituency groups. In effect, the government has ordered the nation’s largest bank to create a massive slush fund for Democrat special interests.
The deal requires billions of dollars in debt forgiveness payments to delinquent borrowers. It also requires Bank of America to make billions in new loans and to build affordable low-income rental housing.
The remaining money will go to a slush fund for leftists:
If there are leftover funds in four years, the settlement stipulates the money will go to Interest on Lawyers’ Trust Account (IOLTA), which provides legal aid for the poor and supports left-wing causes, and NeighborWorks of America, which provides affordable housing and funds a national network of left-wing community organizers operating in the mold of Acorn.
NeighborWorks of America has been a major supporter of ACORN, the left’s most favored radicals. According to Investors’ Business Daily, in 2008 and 2009 NeighborWorks awarded a whopping $25 million to Acorn Housing.
Moreover, an Acorn Housing spinoff is directly eligible for BofA slush funds. It’s an outfit called Mutual Housing Association of New York. HUD lists its contact person as Ismene Speliotis, who previously served as New York director of Acorn Housing.
But Acorn isn’t the only left-wing beneficiary:
In 2011 alone, NeighborWorks shelled out $35 million in “affordable housing grants” to 115 such groups, according to its website. Recipients included the radical Affordable Housing Alliance, which pressures banks to make high-risk loans in low-income neighborhoods and which happens to be the former employer of HUD’s chief “fair housing” enforcer.
Bank of America gets “extra credit” if it makes at least $100 million in direct donations to IOLTA and housing activist groups approved by HUD. Who are these HUD-approved housing activist groups? Investors’ Business Daily identifies some of them:
• La Raza, which pressures banks to expand their credit box to qualify more low-income Latino immigrants for home loans;
• National Community Reinvestment Coalition, Washington’s most aggressive lobbyist for the disastrous Community Reinvestment Act;
• Neighborhood Assistance Corporation of America, whose director calls himself a “bank terrorist;”
• Operation Hope, a South Central Los Angeles group that’s pressuring banks to make “dignity mortgages” for deadbeats.
Coercing banks to provide “dignity mortgages” to people who are unlikely to pay them? That was a big part of how we found ourselves in the financial crisis.
Not only is Eric Holder not letting that crisis go to waste, he seems bent on generating a new one.
As Investors’ Business Daily concludes:
In effect, lenders are bankrolling the same parasites that bled them for the risky loans that caused the mortgage crisis. With new cash, they can ramp back up their shakedown campaign, repeating the cycle of dangerous political lending that wrecked the economy.
These settlements have little, if anything, to do with “justice” or restitution for innocent victims. In its 30-page “statement of facts,” Justice couldn’t provide a single shred of evidence of fraud against BofA. Nor could it ID a single “victim” by name.
The attorney general is actually perverting justice by extorting billions of dollars from the largest banks in the country and giving it away to the president’s political friends and favorite political causes.
We knew that, if elected, Barack Obama was going to spread the wealth around. We should have realized he would spread it to the left-wing “community organizing” world from which he sprang.
more below
The massive mortgage fraud ended in disaster for which no one has been held responsible. Taxpayers got saddled with billions of dollars in bailout bills.
These subprime activities were not simply the mortgage market at work. They were fueled by avarice, greed, stupidity--all enabled by Congressmen and other groups which leave a trail at the door of then-Cong Joe Baca (D-Cali). The subprime mortgage bank fraud network was spearheaded by then-Cong Joe Baca (D-Calif 43rd), in his powerful position as chairman of the Congressional Hispanic Caucus. Baca's district ranks No.5 among all US Congressional districts in percentage of home loans tailored to sub-prime borrowers.
Baca used tax resources, the legislative power of his office and his leadership position in the Congressional Hispanic Caucus to calculatedly launch a housing initiative called "HOGAR"-- Spanish for home. Then-Cong Baca calculatedly hyped the fact that the national Latino homeownership rate was 47%, compared with 68% for the overall population.
HOGAR was coached to call the figure "alarming," and to say "a concerted effort was required to ensure that by the end of the decade Latinos will share equally in the American Dream of home ownership." HOGAR and then-Cong Baca conned the public, failing to note that most of the "dreamers" were illegals, citizens of Third World countries who had violated US borders.
Predictably, HOGAR colluded w/ co-conspirators which included:
(a) shaky mortgage companies that ran into big trouble;
(b) Fannie Mae and Freddie Mac, both now under federal control after billions in taxpayer bailouts;
(c) Countrywide Financial Corp., sold to Bank of America Corp;
(d) Washington Mutual Inc., taken over by the US government and sold to J.P. Morgan Chase & Co.; and,
(e) New Century Financial Corp. and Ameriquest Mortgage Corp, both now defunct, killed by defaulted subprime Latino mortgages.
HOGAR's ties to Countrywide and the subprime mortgage industry were substantial. Bribery and self-dealing were rampant: Companies that donated $150,000 to then-Cong Baca got the right to have their own research fellow who would conduct fraudulent studies, which were cunningly used by industry lobbyists to pump fraudulent lending. Bribery and extortion in the form of $100,000 annual donations to then-Cong Baca, for which HOGAR provided phony news releases from then-Cong Baca's Hispanic Caucus promoting a lender's commercial products to the Latino market,
The most shocking example of bribery well-substantitated by Hogar's literature..... HOGAR announced it worked with Freddie Mac on a self-serving two-year examination of Latino homeownership in 63 congressional districts. The "study" found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting at the urging of Cong Baca's collusive coterie.
HOGAR conned lenders into even more lenient down-payment and underwriting standards. As the subprime debacle unfolded, HOGAR declined repeated requests for comment despite the economic havoc their activities precipitated. The fraudulent mortgage schemes demonstrated the criminal activities of border violators with multiple identities---perhaps violent, terrorist-connected foreigners---colluding and conspiring to defraud private companies and public entities. And mortgage racketeering enterprises which employed sub rosa finance and business practices to carry out deceptions and frauds.
The alleged ring of swindlers---a Congresman, individuals with multiple identities, banks, insurance companies, mortgage brokers--might be charged with cheating the US govt, taxpayers and bank share holders out of hundreds of millions of dollars via an elaborate web of mortgage and bank frauds. The mortgage "Dreamers" used multiple phony identities, fraudulent Social Security numbers (purchased from identity forgers) in order to obtain govt-subsidized benefits. L/E will find that individuals with multiple identities obtained fraudulent mortgages then flipped the houses at ever-higher prices to family member who then absconded to foreign countries, sticking banks (and taxpayers) with hundreds of millions in fraudulent mortgages.
BACKGROUND A Wall Street Journal investigative report related that, according to the Federal Financial Institutions Examination Council examination of the borrowing spree, uncovered financial schemes by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, all colluding in fraduent schemes to increase homeownership among Latinos with forged documents which enabled massive fraud.
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Then-Cong Joe Baca and the separatist tax-funded "Hispanic Congressional Caucus" has been close-mouthed about its role in financing, and, earmarking the blood-thirsty America-hating La Raza.
Race-pimping "La Raza" was given tax dollars...... and Congressional earmarks...... to finance its so-called "mortgage activities." La Raza's "strategic partnerships” with Wachovia and Bank of America forced the falsification of mortgage-applications. The dumbing down of mortgage requirements and documentation standards caused taxpayers to be socked w/ billions of dollars in bailouts...and decimated the US economy.
La Raza aided and abetted risky federal and private-home loans to latinos over the last decathanks to the lending industry’s version of “don’t ask, don’t tell.”
Plus----in addition to pocketing millions of federal tax dollars, La Raza also collected a $1 million Democratic earmark that funded “community-development” projects. Analysts report that much of it went to "mortgage counseling."
All of the official documents need to be scrutinized for fraud and falsification (a felony); as well, the Bank Secrecy Act needs to be mobilized to uncover the whereabouts of tax dollars and whether money laundering and tax-financed terrorism took place.
more below
Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10-20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bush’s Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, we’ve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle America’s toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to homeownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years. (End Raines excerpt.) (NOTE Raines is a Clinton appointee)
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NOTE: Raines was fired for being a crook---Raines cooked theF/M books to get bonuses. But he walked away a multi-millionaire---extorting millions from taxpayers for pensions, bonuses, lifetime healthcare, donations to his fave charites....etc, etc, and so on, and so forth, ad infinitum ad nauseaum.
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POLS READY TO CASH-IN BIGTIME: Last year, Obama said it’s time to ‘turn the page’ on Fannie and Freddie
MarketWatch | 7/24/13 | MarketWatch / FR Posted by illiac
Obama's speech on the US economy spelled out the beginning of the end for federally-controlled mortgage buyers Fannie Mae and Freddie Mac. “We’ll work with both parties to turn the page on Fannie and Freddie, and build a housing finance system that’s rock-solid for future generations,” Obama said, according to a copy of his prepared remarks
The House Financial Services Committee approved a bill on Tuesday that would get rid of the firms in five years, to be replaced by a National Mortgage Market Utility to help securitize mortgages.(Excerpt) Read more at blogs.marketwatch.com
ADDENDUM---what Obama left out of his remarks Wall Street Journal report on page A15---article entitled “Treasury’s Fannie Mae Heist“.
WSJ: The Federal government is seizing the substantial profits of the government-chartered mortgage firms, Fannie Mae and Freddie Mac, taking for itself the property and potential gains of private investors the government induced to help prop up these companies. This conduct is intolerable.” A scathing article follows--a must read.
Countrywide had been engaged in a lot of shady practices that BofA should have been able to discover if they hadn't been in a huge rush to become the largest mortgage lender in the country. BofA became liable for Countrywide's past practices when they bought the firm.
The deal that cost Bank of America $50 billion – and counting
True....and Countrywide’s CEO walked away w/ $150 million and not even a warning about shady practices.
Many people "cashed" out somewhere in between. It was a frenzy. Everyone was building more and more elaborate houses with every luxury you can imagine.
People cashed out with intent on rolling the "profit" into the new house at the wildly appreciated price. They soon figured out they didn't need to. They could put much less down and join the party of lavish vacations, second homes, entertainment systems, pool and spa packages, designer purses, etc. And, that's what they did.
I would bet those late payments were in the past couple of years. And the unpaid parking tickets are dinging your credit every month they remain unpaid. It is not the size of the debts but the fact you are not paying on them.
I remember reading accounts of Countrywide’s corporate culture as described by brokers who worked there. Something like Ashley Madison meets the Wolf of Wall Street.
Merely walking around the building and talking to the employees for a few days should have raised enough red flags to warn BofA off. But their CEO wanted to be #1 in mortgages.
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