Bill Tightening Mortgage Rules Wins Some Support

Market Watch ^ | 24 October 2007 | Robert Schroeder & Greg Robb,

[Jacquerie]

WASHINGTON (MarketWatch) -- A bill that would require licensing mortgage originators and standards for subprime mortgages won support from two federal banking regulators Wednesday.

However, Federal Reserve Governor Randall Kroszner warned that any new legislation should not restrict responsible lending or securitization of mortgages. "Getting this balance right is particularly critical now, as many borrowers facing rate adjustments may need to refinance into more affordable loans," Kroszner said in testimony prepared for delivery. Kroszner said Congress should also not approve any measure that would have a "detrimental impact on the ability of lenders to securitize loans."

The House Democrats' legislation includes a measure that would let homeowners sue Wall Street firms for relief from mortgages that they could not afford. See earlier story.

Lawmakers are examining the bill Wednesday amid more bad news for the housing market.

Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years, further evidence that the credit squeeze in mortgage markets is hurting home sales, the National Association of Realtors reported Wednesday. See full story.

Frank, the committee's chairman, said at the outset of the hearing that the U.S. is experiencing its worst financial problems since the late 1990s.

"We are in a serious crisis," the Massachusetts Democrat said.

Spencer Bachus, the top Republican on the panel, echoed Kroszner by saying that credit should be protected as lawmakers try to fashion a solution to the housing problems.

"The competing values in this case are the availability of credit on one side and protecting borrowers from sharp practices and unethical conduct on the other," said Bachus.

[Jacquerie]

This bill will hurt the very people it claims to help.

[rhombus]

Only wealthy need apply. Which of course will create a great opportunity for the Democrats to create some more mortgage subsidy programs.

[Rutles4Ever]

Can I sue the government for paying taxes I can’t afford?

[Phantom Lord]

The House Democrats' legislation includes a measure that would let homeowners sue Wall Street firms for relief from mortgages that they could not afford.

The problem with this is that the Wall Street firms, like John Edwards former Hedgefund employer is that THEY DID NOT ORIGINATE THE LOAN, NOR PROVIDE THE FUNDS FOR THE LOAN!!!

All they did was buy the loans later in the form of mortgage backed securities.

[Wally_Kalbacken]

The originators were getting away with some of the most outrageous frauds in the last 2-3 years - just hoping that the loan would perform long enough to get out of the recourse period before failing. You should see some of the information in the bankruptcy filings of mortgage originators in the Atlanta area, they were making bunches of money, not setting aside reserves, and they just folded when a few lenders sought recourse.

[TheConservator]

Not breaking news.

[BlabItGrabIt]

This bill will hurt the very people it claims to help.

As the "subprime crisis" was pure horse [bleep] to begin with...

[kitkat]

***The problem with this is that the Wall Street firms, like John Edwards former Hedgefund employer is that THEY DID NOT ORIGINATE THE LOAN, NOR PROVIDE THE FUNDS FOR THE LOAN!!!

All they did was buy the loans later in the form of mortgage backed securities.***

You are absolutely right! This is just another Dems ploy to help smarmy lawyers such as Edwards. So now Edwards can sue his own employers.

[BlabItGrabIt]

(I refuse to let the DUers chase me off FR.)

Amen and AMEN from a catman...

[Notary Sojac]

Of course when fraud by appraisers, realtors and brokers was going wild, affordability was evaporating and billions were being loaned based on fairytale “equity”, there was of course no problem, no “crisis”.......

[businessprofessor]

This provision will make these securities toxic. I think that is the rat plan. The federal government will be forced to buy the loans and subsidize the borrowers. Maybe the federal government can lower the interest rates to 3.4% just like student loans will become under the new student loan bill.

[Leisler]

The government getting between actors in a free market. Allways a good thing.

/sarcasm.

[z3n]

"let homeowners sue Wall Street firms for relief from mortgages that they could not afford."

I remember about 5 years ago driving around with my girlfriend down some streets with houses that cost more than 3 times what mine did.
She marveled at how big they were, and now nice they were.
With envy in her voice, she asked "How can so many people afford such expensive houses?"
My reponse was to explain how I viewed several important realities. One of them was simply that, "Some people make more money than us".
Another reality that I described was how some people "buy way over their heads". They borrow far above their means. They use tricks to do it, and they end up working extra jobs and trying to find other ways to pay their loans.
Because she seemed so filled with envy, I felt I could lift her spirits a bit by explaining a notion I had in my head.
I said "If the economy tanks... or if they lose their jobs... or if interest rates climb and they have adjustable rate mortgages, they are SCREWED!"

As cruel as a through like that is (real people getting screwed), it seemed to take on the feel of poetic justic. Afterall, we weren't the ones trying to borrow beyond our means. We weren't the ones taking such risks. We weren't putting ourselves in that position.

But I should have known better.
I should have known that they would probably get bailed out someday.
I should have done what they did.

[RockinRight]

The House Democrats' legislation includes a measure that would let homeowners sue Wall Street firms for relief from mortgages that they could not afford.

Stupid, stupid idea.

While we all know some loans were given that shouldn't have been...how do you determine fault here? Sounds like something that could EASILY turn into another free-for-all lottery.

[RockinRight]

Good question...

[RockinRight]

It also effects those of us who are investors (Mom and Pop investors too) as well as those of us employed in the mortgage origination business.

I don’t do the really exotic stuff, never did...but the market as a whole still affects my income. So far I’m doing OK and staying above the fray, so to speak, but it’s getting harder when the MSM and Congress seem bound and determined to take a situation which has already begun to correct itself on its own, and turn it into Great Depression II.

[MrB]

Hey, you know that the basis of liberalism is to use government to force those who make responsible decisions such as yourself

pay for the consequences of those that make irresponsible decisions.

[dakine]

“...when fraud by appraisers, realtors and brokers was going wild”

Wow! A lot of folks in cahoots, please document your expose. Will be great reading....

[lOKKI]

Don’t forget that all this will put lenders in a double-whammy situation.
The reason that the sub-primes were encouraged is to get voter support for the Dems. They set up laws that forced lenders to give subprimes or face discrimination charges.

Now they won’t be able to give the loans, but won’t be able to not give the loans.... I’d get out of the business altogether.

[NVDave]

You’re right — no one will touch sub-prime debt. Not that investors were eager to do so in the first place — after all, wasn’t that why they sub-prime ABS’s were rolled into CDO’s with higher-grade debt in the first place?

Now with the death of synthetic debt, pile this on, and what I said on other thread will come to pass: borrowers will need to have gold-plated credit ratings to get a mortgage at all.