Posted on 07/28/2008 6:23:17 AM PDT by Graybeard58
The Federal Reserve is the latest agency to inject itself into the subprime-mortgage-industry meltdown with back-to-the-future rules intended to protect home buyers from "shady lending practices." They include prohibitions against loans to anyone who can't verify his income or repay. Lenders will have to hold in escrow cash from borrowers for taxes and insurance, and will be barred from issuing loans without disclosing data about rates, monthly payments, etc.
These rules used to be the norm until the industry relaxed them in response to claims from liberals in Congress and others that lenders were discriminating against — "redlining" — would-be home buyers with dark complexions, low incomes or bad credit ratings. So lenders, too many of them eagerly and deceitfully, resorted to reverse redlining. They wrote untold billions in adjustable-rate mortgages, including some for which monthly payments were optional, to unqualified borrowers. When housing values declined, default and foreclosure rates naturally soared. Thus the industry suffered gigantic losses and then withering criticism, mostly from liberals, that it exploited its consumers, whose dishonesty predictably has suffered almost no scrutiny.
But relief is on the way. Sen. Christopher Dodd's quid pro quo bailout bill is about to become law. In what might be the understatement of the year, its main proponent in the House, Barney Frank, D-Mass., said it "isn't a perfect solution by any means." It will allow lenders to offload $300 billion of their worst loans on taxpayers. The worst borrowers will get new mortgages they still can't afford for homes they no longer want; a third or more will default on their new loans, forcing the other 98-plus percent of U.S. households headed by responsible homeowners and mortgagees, and renters saving for their first home, to pay the tab. But the bill mainly is Sen. Dodd's reward to Countrywide Financial for saving him $75,000 on two mortgages it gave him in 2003 and to the financial industry for the millions it has contributed to his campaigns over the years.
The more prudent, albeit painful, approach would have been to let the markets correct themselves. Instead, Congress crafted a potentially disastrous scheme that tells private sector risk-takers that the government, in the spirit of Chrysler and Lockheed, the airlines, the steel industry, Big Ag, Bear Stearns, Fannie Mae and Freddie Mac, etc., will be there for them when they fall, to preserve their failed business models and assign their debts to taxpayers.
"This is the most important piece of housing legislation in a generation," Sen. Dodd said, speaking solely for himself, his banker buddies and campaign donors.
Ping to a Republican-American Editorial.
If you want on or off this list, let me know.
This was a failure of the dem congress. They are the ones who should be held responsible for this financial disaster.
Their brilliant idea of no income no job loans had the predicatble result.
Lots of blame to go around including Bush and his programs.
Main culprit is greedy bankers. IMO Dodd should be removed from chairmanship, booted from the Senate, never happen they are all crooks.
Forced excuse accounts are illegal in many states. Does the Fed override the states?
Its stupid to let the bank hold(and use) that money for a year interest free.
* escuse= escrow
Lenders are getting tough. You have to have a credit score,
a down payment,a job and a SSN.
Lenders should get tough but I don’t know how they override state laws on escrow accts.
This was a failure of the dem congress. They are the ones who should be held responsible for this financial disaster.
Their brilliant idea of no income no job loans had the predicatble result.”
Bill Clinton has a very big fingerprint on this whole mess.
He pushed for the loans to unqualified borrowers when he was in the Oval Office.
It was just another form of welfare from the Denocrats and the party that hates America and capitalism.
The title of the thread is a big no-brainer.
ALL socialist programs “reward failure”.
“Lenders will have to hold in escrow cash from borrowers for taxes and insurance,”
Forced excuse accounts are illegal in many states. Does the Fed override the states?
Impound accounts are normal wherever I have owned a house. I didn’t know any states had laws against them.
It certainly keeps a lender from finding out that the insurance on the house has lapsed or the taxes are not paid. Since some of my deposited money supports the loans for homes, why wouldn’t I be in favor of inpound accounts??
It’s called moral hazard and it encourages more risk
taking and more bad investing.
http://www.whitehouse.gov/infocus/homeownership/homeownership-policy-book-whole.pdf
Yes, they are normal everywhere but some states ( Michigan is one) have laws against forcing an escrow acct on a borrower.
I always have refused. I can put that money in an interest bearing acct and pay the taxes and ins when they come due.
Most lenders do require you to show proof that they are paid on time.
I don't understand why anyone would want to give their bank $thousands to hold for a year interest free.
The title says enough for me...
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