Home Loan Industry ‘Furious’ On ‘Misguided’ Crackdowns
A pair of reports on the mortgage industry. “A crackdown by regulators of the Federal Home Loan Banks threatens to shrink a subsidy long enjoyed by thousands of lenders, including giants such as Washington Mutual Inc. and Citigroup Inc. The Federal Housing Finance Board proposed rules this month that would require the banks to retain more of their earnings as capital to build up a bigger cushion against potential losses.”
“The proposed rule probably will force most of the home-loan banks to slash their dividends, a big source of income for many of the more than 8,100 commercial banks, thrifts, credit unions and insurers that own the banks. The proposal may discourage the home-loan banks from purchasing mortgage loans made by their members.”
“In effect, the congressional charter that created the home-loan banks is a federal subsidy for banking, though one that doesn’t involve government spending. Because investors assume that Uncle Sam would feel obliged to bail them out in a crisis, at the expense of U.S. taxpayers, they can borrow cheaply in the international bond markets.”
“Many bankers are furious. Diane Casey-Landry, CEO of a trade group, calls the proposed rule ‘misguided’ and says it would damage a system that supports housing. Regulators have been clamping tighter constraints on the home-loan banks for the past several years. ‘What is their ultimate goal?’ Ms. Casey-Landry asks.”
“The home-loan banks’ rapid expansion in recent years has been fueled by intense global demand for bonds issued by U.S. government-related entities. The bulk of the home-loan banks’ assets are advances to their members. But the banks also invest in mortgage loans made by their members as well as in mortgage-backed securities and money-market instruments. Some critics deride the investments in securities and money-market instruments as mere ‘arbitrage’ trading activities that have little to do with the banks’ housing mission.”
And from the LA Times. “A little-known reward for brokers who arrange home loans at high interest rates is drawing scrutiny from law enforcement authorities. Lenders pay the bonuses to independent brokers who sign up borrowers for mortgages at higher interest rates than they qualify for. With these brokers now writing an estimated 60% of home loans in the U.S., regulators are concerned that many people are being steered into higher-rate loans.”
“‘With the growing role of mortgage brokers, my office and attorneys general around the country have focused increased attention on these lending arrangements,’ California Atty. Gen. Bill Lockyer said.”
“The bonus, typically worth thousands of dollars, is included in most loans written by independent brokers, some industry experts say, and may be especially prevalent in costlier mortgages that brokers arrange for borrowers with weak credit. The payments to brokers are known in the industry as yield spread premiums. The terms vary by company but generally work the same way.”
“Brokers fiercely defend the incentives. The National Assn. of Mortgage Brokers contends that brokers should not have to disclose the payment at all in part because lenders who don’t use brokers are not required to do so. Mortgage bankers who make loans without brokers often sell them for a profit in the financial markets, earning larger premiums for loans with higher interest rates. HUD, however, lacks the authority to regulate those transactions.”
“‘There are people who say, ‘I only charged the guy 1 point.’ But no you didn’t. You’re getting 2 points more through the yield spread premium,’ said (mortgage broker) Randy Johnson.” “Consumer advocates have long challenged the payment as an illegal kickback. ‘I never met a consumer who knew what it is,’ said Ira Rheingold, general counsel with the National Assn. of Consumer Advocates. ‘I never had a client who knew they were paying a higher interest rate because of that charge.’”
Thanks to the readers who sent in these links.
bout time.
Too late - regulation now, as usual, is long after the horses have left the barn.
Tight money market coming . Killer to housing market .
“In effect, the congressional charter that created the home-loan banks is a federal subsidy for banking, though one that doesn’t involve government spending. Because investors assume that Uncle Sam would feel obliged to bail them out in a crisis, at the expense of U.S. taxpayers, they can borrow cheaply in the international bond markets.”
Another wonderful real-life example of how more government “solves problems” in the marketplace. No moral hazards here, move along people…
“Many bankers are furious. Diane Casey-Landry, CEO of a trade group, calls the proposed rule ‘misguided’ and says it would damage a system that supports housing. Regulators have been clamping tighter constraints on the home-loan banks for the past several years. ‘What is their ultimate goal?’ Ms. Casey-Landry asks.”
Ummm… let me guess –preventing bank failures maybe?
THE FED’S PLAN TO SAVE THE DOLLAR AND US TREASURIES
They will deflate by having the overseas investors taken down while sparing the T-bill market with the “NewBank”. In a flight to safety investors will jump on treasuries strengthen the dollar and crashing gold. Searching NewBank, check out
http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG030706.html
Very funny.
The first US bank to go down will be JP Morgan. Over 800 US banks hold derivatives.
Most of the $570 trillion in derivatives are held by overseas investors. These will collapse from the housing bust causing defaults. The default follow like dominos to mortgage backed securities, then collaterized debt obligations and lastly to derivatives.
Controlled deflation will be the Fed’s goal so that the dollar will rise. This will help the US government as investor, institutions and countries buy Treasuries as a safe haven. US Treasuries held as reserves will not be sold off avoiding a dollar devaluation. Win -Win for the Feds. Lose-lose for derivatives, MBS (which are explicitly not backed by the US).
Controlled deflation is the Fed best choice among bad choices.
I doubt the deflation can be controlled by lowering Fed rates to zero, but the Fed will try to “mop up”.
“The first US bank to go down will be JP Morgan.”
how ironic considering he saved us in 1907.
This will be the best possible solution.
so Bernanke thinks he can stick it to the foreigners, and they will all simply eat their losses and say ‘thank you, Ben!’ ?
most foreign governments (like in the EU, or all the Asian dictators) probably do not care, but their citizens do. The big losses will end up with the pension funds and the banks (or probably I should say the clients of the banks; I don’t think for a moment that the banks themselves will loose money).
The US already has a pretty bad reputation over here, if they rob the foreigners I think it’s the definitive end for the Great American Empire.
holy conspiracy theories come true.
Holy Plunge Protection Team! What is next: News that the long-bond yield is tightly managed by the Fed?
that wouldn’t be news to me …
Our PBS has been showing “Exploring Space: The Quest for Life” the past few nights and the whole show is really amazing. One fact scientists have identified is that almost all the richest precious metal and diamond mines used to be craters millions or billions of years ago. What it means is the earth relies on meteorites to bring in precious metals that the earth actually doesn’t have much of them. Meteorites also bring left-handed amino acids that are the building blocks of all the lives on earth.
So next time you get yourself a piece of gold or diamond, chances are it’s really from outer space light years away.
Let the fingerpointing begin!
Can we start over?
“In effect, the congressional charter that created the home-loan banks is a federal subsidy for banking, though one that doesn’t involve government spending. Because investors assume that Uncle Sam would feel obliged to bail them out in a crisis, at the expense of U.S. taxpayers, they can borrow cheaply in the international bond markets.”
It’s comforting to the taxpayer to realize that the GSEs are not the only tax-subsidized ARM of the lending industry…
“A little-known reward for brokers who arrange home loans at high interest rates is drawing scrutiny from law enforcement authorities. Lenders pay the bonuses to independent brokers who sign up borrowers for mortgages at higher interest rates than they qualify for. With these brokers now writing an estimated 60% of home loans in the U.S., regulators are concerned that many people are being steered into higher-rate loans.”
Does this mean the authorities will soon start enforcing the usury laws again?
Probably not, all this is IMO is a witch hunt a search for the bag holder. The writing is on the wall. The blood is starting to flow and this is let’s find someone to screw with time. YSP’s have been here since time. What they didn’t mention which I found interesting is that Fannie/Freddie pay some of the biggest premiums, used too anyway.
Usury laws generally exempt mortgage lending and business lending. They are aimed almost exclusively at unsecured local “loan sharks” rather than any institutionalized lenders.
Gee, and we all know that loansters never tell applicants they only qualify for “B” tier when they are truly “A” tier, etc. They never sell them credit life insurance, or sell them a first and second mortgage at 4pts higher to get around PMI.
I’m not even going to bring up the no doc stuff. Pure fairytale loans of 1 million to waitresses and bartenders.
Here’s a question why would a waitresses or bartender sign up for a million dollar or close to a million dollar loan. Are waitresses and bartenders so ignorant that they can’t figure out that 5 dollars a hour and tips is not going to pay a $4,0000.00 or more loan. Can a “loanster” really sell that to someone who is being financially responsible. That sounds more like someone coming in the door asking for that. Supply and demand in it’s crudest form.
The PMI avoidance is simple why pay that money to insure a bank when those few dollars can be applied to building equity. PMI insures the bank against losses it does absolutely nothing for the borrower.
The selling of B paper to A credit, consumer not taking the time to learn his status. That would never happen to a informed individual.
Credit life insurance well only the consumer knows if he has a need for that. No is part of the english language.
in the Netherlands there has been a lot of debate about this issue; that’s especially because many brokers force their clients into expensive additional plans on top of the mortgage itself (like life insurance, stock investment schemes). Because of this, a broker can make around 25.000 euro on one ’standard’ mortgage. Most of the customers do not understand anything about what is going on (and well, it’s free money anyway so why worry).
After lots of complaints a new law was made last year that will force the brokers to disclose their fees starting in 2009 (so that’s probably when authorities think the bubble will end …). I’m pretty sure the law will get some big loopholes within the four years before it springs into action.
I used to work with drug addicts in a rehab center…
they too, would get “furious” when they got busted.
They just skip over the denial part of the 5 stages of grief and go straight to majorly pissed off.
Catherine what a great anaolgy. I’ve been thinking for some time our financial system has the same m.o. as an addict: short-term satisfaction above all else, even if we destroy ourselves and others along the way to our temporary fix. Here’s the book title for any business writer lurkers: Junkie Nation
Yup. There’s so much…wrong…in all the scenarios/stories that add up to this fine financial mess of a economy. Unabated greed, willful ignorance, selfishness, entitlement, and many other disheartening traits that remind me of some Sunday school Bible stories that scared me silly as a kid.
Seriously, and probably off topic…the fundamentals that lay beneath all the financial talk and analysis are what really frightens me as an adult. The backlash and consequences that can and probably will happen will make our mild-mannered discussions here on this blog seem positively sanguine.
I’m not religious myself, but I think that the Bible has it dead on when it says in Proverbs 22:7:
I think that there is a need for more disclosure with the Mortgage Broker . How many borrowers paying the higher interest rates would of paid them if they knew the broker was getting paid that kind of a commission on the deal . Sales people can sell people on anything , but people should know what the sales person is getting paid to sell one loan verses another .
It’s totally disgusting. What you don’t know won’t hurt you. This should be a crime!!!
In the rush to grab the “ever-increasing-in-value” asset (RE), who cares about a couple of points in interest? It’s meaningless noise in comparison with 30% YoY gains!
When the NAR finally comes out and confirms (AFTER THE SUCKERS ALL LOADED UP ON OVERVALUED RE AND EXPENSIVE LOANS), the authorities will step in and rewrite some new rules that can once again get ignored….
Caveat emptor!
There is a news show that I’ve been watching lately and it’s informative news. Not like the local news that mention who screwed who and stupid stuff. It’s the Lou Dobbs News on CNN. He supports the middle class (me) and talks about issues that matter. I wish I had discovered him earlier.
Im still surprised that the Mortgage Brokers didn’t have more disclosure requirements. Different states have different laws ,but come on …truth in lending ….60% of the loans made in 2005 were the high risk stuff .
I’d like to hear SoCal’s insight on this. I wonder how he is doing with his ‘Plan B’.
Yah gotta love Lou!
The only mainstream journalist with courage, a conscious, and a true sense of professional responsibility. I don’t think much of CNN but give them credit for allowing Lou to get very PO’d night after night. I don’t know where he gets the stamina.
Go Lou!
Yea Lou Dobb’s is definitely a show to watch I often wonder why more people don’t watch him. He definitely has his finger on the pulse. And he cuts very little slack
People don’t watch him because they want happy news: a booming economy and Iraqi soldiers rescuing kittens from trees.
Go to the ‘Drudge Report.com. It’s better than cnn.
Melody, Lou Dobbs is awesome! He addresses the issues that matter to people who actually **care** about what is going on in this country. He asks the hard questions, and allows guests to really go through an argument (unlike other news shows which only allocate 3 minutes for someone to explain a rather complex theory).
Glad you found him!
I LOVE Lou Dobbs but couldn’t help notice that my blood pressure shot way up shortly after his show started and soon I’d be snapping at everyone in the house. Now I call him Lou “Blood Pressure” Dobbs just to make my h laugh!
Usually, the true mortgage broker does have to disclose back points/YSP. It’s correspondent or “direct” lenders who close in their own name who don’t have to disclose. The last company I worked for was a “direct” lender who closed in their own name but sold 99% of their production (meaning the servicing rights, which make up the majority of the YSP). They didn’t have to disclose how much they made on the back end. This is important since I was a commission based loan officer and the amount I charged determined how much I made. At least as a broker, I have to disclose everything. If I were in charge and assigned to come up with a formula for full disclosure for mortgage lenders, I would break up lenders into two types: Those who sell their servicing rights and those who don’t. Those who do sell the servicing rights, disclose everything (junk fees + overrage). Those who don’t sell the servicing rights, assign an arbitrary value to the servicing rights, and disclose everything else (junk fees and overrage). For example, a 30 year fixed mortgage at 6.00% might pay me 2 back points as a mortgage broker. As a mortgage seller/servicer, the same product on paper would show me making .50 back points, but I keep the servicing rights, which if I sold separately might make me an additional 1.50 points. Under my scenario, let’s say the servicing rights make up 1.25 points for a 30 year fixed rate, which in turn would be disclosed to the borrower as the lender making 1.75% back points. At least you would be able to compare apples to apples and this way would give the borrower full disclosure about what the lenders are truly making.
Let the finger pointing in D.C. begin. I am reminded of the story of Nero.
No the finger pointing should be the consumers pointing at themselves in the mirror. A large portion of the mortgage broker/banker’s business comes from people who have been irresponsible with their finances and can not walk into a bank and get a loan to further themselves along with their financial destruction. I can’t tell you how many times I have went to escrow to hold a borrower’s hand for a loan doc signing and the borrower hasn’t or doesn’t even bother to read the paperwork. A lot of times the ysp is disclosed right on the GFE. All the borrower cares about is the cash he’s getting and the payments.This beating the drum and screaming burn the brokers at the stake is way off base.
Take care of your financials, do your research, save your money and walk into a bank and get a loan. While your doing it sit down for a few hr’s and read what your signing. That would solve a lot of problems.
It’s called being responsible for self.
Your right , many folks were just to trusting in the real estate
industry to have their best interest at heart .
This beating the drum and screaming burn the brokers at the stake is way off base.
Oh, so give them license to fleece the ignorant…BS.
These mortgage people are the lowest of the low with their gutter level ethics and morality.
Not what I was saying, I’m saying if your going to be on the hook for a few hundred thousand wouldn’t it be reasonable on your part to have the common sense to read the friggin paperwork associated with it. Especially knowing that if you don’t make good particularly now that it could effect you purchasing a skateboard on credit never mind another house or something equally of importance.
If you took the time to do that in a large percentage of the cases it would eliminate this so called “fleecing” of the ignorant. Because you actually took the time to become informed. Hell even if you had to ask 5 questions for every 10 lines. It would be better than just going in and blindly signing the docs
MIS,
This can’t be emphasized enough.
From the time I bought my first home at the age of 24, almost 18 years ago, I have always read any document (sometimes twice) before signing.
I have had people become agitated and impatient while I peruse over the paper work. They try to hurry me along by attempting explain the document.
Guess what? Back off. I am the one who will be on the line for this agreement. I don’t need their interpretation of what it says, just the knowledge that it is what it’s supposed to be.
I have seen far to many good (but careless) people signing their life away without really knowing the content.
I just don’t’ get it.
Iknowso-
I’ve had people become agitated and impatient with me asking that they read or for me trying to explain it.
Makes absolutely no sense to me.
You can take that premise and apply it to every SALESPERSON you ever deal with then no?
Would you hold the same opinion for the salesman at the auto-dealer (they don’t have to tell you exactly what their kickback is)? The checkout person at the grocery store (have you ever asked them exactly how much the supermarket chain pays for that pound of apples you just bought?) . Ever ask your physician what his kickback is for the medicine he just prescribed you? Believe it or not, he gets a nice sum of cash from his pharmaceutical rep…. have you ever seen a disclosure?
By all means single my kind out but you’re really kidding yourself if you believe it’s only the lending industry that has some sort of kickback scheme embedded into its’ system.
It’s called SELLING….. plain and simple.
Apologies for misdirection of response….. it was supposed to be in reference tohd74man’s comment.
“Ever ask your physician what his kickback is for the medicine he just prescribed you?”
$0
“Believe it or not, he gets a nice sum of cash from his pharmaceutical rep….”
Wrong (and believe me, I would know).
But, I get the gist of your argument that kickbacks are not confined to the lending industry.
it’s not way off base…a lot of people are steered to an independent mortgage broker even with fine financials and reasonable ability to read a document. My realtor, for instance, considered herself a good RE citizen for giving me a list of people she likes to do business with. Two banks were listed, one mortgage banker, and one mortgage broker. She never made any distinctions except to reveal that the broker will have more options available, many more different kinds of loans. Which one do you think most of her clients would go with given those words of guidance?! And even when people try as they might, even with decent vocabularies and IQs, to read the fine print, it’s hard to do when the realm is new and you’re dealing with an emotionally charged situation. I’ve sat with a banker filling out mortgage paperwork and I’ve liked and respected her and to all the fine print stuff she sometimes said oh yes, take your time and read all that and sometimes (when we were all busy or on a lunchbreak from work? maybe, maybe not…) just said, this means X, that’s normal. How many brokers do you think might have done that regarding their little schemes to bleed a little extra from their clients?! I’d guess it’s not at all “off-base” to assume “waay” many.
cheers!
Getting caught with your hand in the cookie jar is a bitch.
Read about HOUSING MARKET DECLINING RAPIDLY.
“Once again, the declining numbers are even more extreme in the West, especially in California. Existing home sales dropped 15.5% from the same period 1 year ago. The inventory of unsold Existing Homes in Calfornia is now 6.7 months’ worth, compared to 3.2 months’ worth a year ago (from the Orange County Register.) In Orange County, California, there are currently 10.4 months’ worth of unsold inventory of Existing Homes, compared to 5.7 months’ worth a year ago. The median price of existing homes in California declined 2.9% from January 2006.”
Where is this information in print. Where did he get his numbers from. Especially the California numbers. I haven’t seen that data and really surprised that no one here picked it up.
Read about UPDATE 1-Calif. Feb. home supply at 8-yr high as sales drop.
Here’s a different link to support it.
Thanks
Read about FBI arrests former Pavilion developer.
Here’s another detailed link to support it. Wow, he bought horses
Ahhh ponzi scheme. I see now. Thanks for the link
The slowdown in Orange County CA is starting to show.
Yesterday’s Sunday LA Times now has a couple of Realtory listings of properties going into foreclosure.
Also found a new home development that dropped their prices by 100K in Brea (north OC). I will post the link later tonite (dont have it with me).
Q: Do you know how the Months of Sales backlog is determined? Do they use trailing year of sales? Current month and then seanoally adjusted going forward 1 year? 3 Months back seasonally adjusted? How?
This makes a big difference when considering volatility since it’s very sensitive to the Sales number, especially in a weak month. I’m not saying it wouldn’t be useful but it would be nice to know from a standpoint of how dynamic/current the number is or if it’s a lagging indicator.
The feds should have done much more earlier to properly regulate the lending industry. It is too little too late. The irresponsibility of the lending industry is amazing. Speculative episodes leave ugly hangovers. It won’t be pretty.
David
Bubble Meter Blogspot
They had no right to make the loans they did : but how were they able to sell them in the secondary market . Just because the loan has a high yield doesnt mean it isn’t high risk crap . Usually private investors buy high risk crap , but never at high loan to value ratios. Alot of those investors actually go out and look at the property .
Back that up, How do you figure that
You sure want backup there buddy…lol
Because many of the people did not qualify, they ignored
proper income ratios , a higher income or credit risk requires more money down , not less . They made loans based on appreciation factor which you can never do in lending . I could go on and on . They didn’t check appraisals
and they accepted to quick of movement in prices in a years time . When you have low inventory prices can be false …..They apparently did not check the borrowers status with other loans or if the dwelling was going to be owner used or not which increases the loan risk …..on and on and on .
It’s all over but the crying…
Read about Scary movies are multiplying faster than ever, and getting increasingly sadistic. Why are audiences so hungry for blood? Pull up a chair. Just be careful which one.
.
I know this seems off topic but this is exactly what was predicted to happen right before the depression. It’s the psychology that Mr. Prechter talks before doom and gloom.
It’s all unfolding and interesting to watch.
You’re right, Prechter watches social mood closely. Remember the ‘hem line’ and stock price correlation? It makes sense that as the publics’ collective mood darkens, stocks, RE and even pop music will follow. Have you noticed the number of TV shows that have incorporated torture?
Yes Ben. Prechter might have been a little early, but it’s all falling into place. Now where’s my gold!!
is another remake of Cape Fear in the works? i remember in the early 90s it seems you couldn’t go to the movies unless you wanted something ugly and disturbing: silence of the lambs, misery, etc
oh for the good old days, titanic, boogie nights, something about mary…and KINGPIN!!!
Funny, designers have lots of goth-type fashions (Victorian layers, head-to-toe black) lined up for fall.
When will the madness end?
That is hilarious. Hopefully he also worked at the Lusk Center for RE Studies. The center is a thinly veiled RE industry mouthpiece not an independent academic center.
There’s got to be more to that story than that. That really just does not make any sense.
Read about Former Myrtle Beach Pavilion Developer Arrested .
Here’s a different link to support it.
Read about FBI arrests former Pavilion developer.
Here’s a detailed link to support it. I screwed up and put this where it didn’t belong before.
Please forgive me….lol
Any idea of his true credentials and whether they were ever checked?
No I meant that there has to be far more sopistication to the scam that’s being disclosed in either article.
“I think that there is a need for more disclosure with the Mortgage Broker”
To what purpose. We label cigarette packages and it doesn’t stop people from buying them, smoking them, and while dying, hiring some slick attorney to sue for millions. You just can’t fight the obvious fuel for the fire…’How much’a month is a it gonna cost me?’ People cloaked in this mold are as plentiful as maggots on a corpse.
A voice of reason in the fog
I can’t defend the stupidity of sheople . . . wouldn’t even try, but I don’t think that everyone understands the adversarial nature of the broker in the role they play. I think that they represent themselves as benevolent and neutral advisors/advocates for buyers. Of course, this isn’t true, and they have no duty other than some disclosure duties . . . but they will perceived (fairly or unfairly) and the 2nd coming of the used car dealers, and hopefully people will take more time and care in selecting and utilizing their services.
“‘With the growing role of mortgage brokers, my office and attorneys general around the country have focused increased attention on these lending arrangements,’ California Atty. Gen. Bill Lockyer said.”
Aha, first legislative salvo fired for the SD and OC housingfest.
If I were a mortgage broker who had in the past a habit of creative writing on loan applications I believe I would be puckered up tighter than a snare drum right about now. Thud! What was that, you ask? Why that was the other shoe hitting the upstairs floor, that’s all. It will take the lawyers over a decade to sort this mess out.
Lockyer must have aspirations for higher office, he’s certainly not doing his current job. If he’s only now “aware” of misdeeds in the mortgage business it’s onlyb because now he thinks he can make political hay. He may have enough stupid voters to impress, but he’s turned a blind eye for way too long to be legitimate.
Totally agree!!!
Okay, I think the bubble is really here. It’s confirmed. I’ve seen 3 spam emails talking about the upcoming housing market crash.
We saw the mortgage refi spam mails before the housing bubble.
Too bad so many people have spam filters these days. Lots of emails like the one I received today in the inbox would do wonders:
“Subject: Fwd: US RealEstate Market Will COllapse lmga
Newsletter Subscriber,
As we all know the real estate market is about to crash.
In Feb 2006 there were 117,259 foreclosures alone(68% higher
than 2005 and rates are going higher everyday). Many investors
are now playing the stock market which is expected to explode
25 to 50% over the next 3 years. Now is the time to get in the
game and we will show you step by step so you can profit very
-snip-”
Bring it on!
But do we need another stock bubble?
it’s already happening in Europe - many EU stockmarkets are up more than 100% over the last three years - so maybe this is what follows in the US as well when the housing bubble stops growing quickly.
“It’s confirmed. I’ve seen 3 spam emails talking about the upcoming housing market crash.”
Boy, that really confirms it. I was having my doubts on the basis of the steady stream of articles that Mr. Jones has shared with us for the past year, but now that your spam e-mail signal is screaming “Sell Now”, I think the housing market is toast.
I got that one in work email today. I think it probably says more about the bottom-feeding nature of spammers than it does about the housing market, but I got a good chuckle out of it.
Can anyone explain how LEND can be at a 52 week high in light of recent events?
Jim Cramer has been touting LEND lately. His advice can move a stock a lot. Also, end of quarter window dressing by institutional money managers is likely distorting the market as the quarter draws to an end. Watch out next week. I hold put options on LEND and think it’s just a matter of weeks or days before it starts heading down. But then again…anything can happen in the stock market..at least in the short term.
I was listening to him last Friday and he was encouraging sub prime lendors. Why? Won’t they be in bad shape? Aren’t they holding lots of debt?
My thoughts exactly - hence the “conundrum.”
Just had a fleeting thought to help the Feds out of this nightmare down in Florida. Pray for lots of hurricanes to do maximum damage and you won’t have to face the music on ‘Questionable Lending Practices’. Consult all the psychics you can, hire Indian rain dancers, and by all means ask G.Dubya to get involved ahead of time.
H.A.R.P. can arrange that.
I can see how some people say that greedy buyers didn’t do their homework on loans and such, but these people are vultures. I don’t care about buyer beware, these people are vultures. every time you spend money you have to trust that the other person is a professional(like getting your car fixed or getting a mortgage). this isn’t right.
How can you reasonably take buyer beware and buyer’s greed out of the equation. How can you not care or eliminate those things when analyzing the whole picture reasonably. It’s what has feuled this bubble. Comparing proffessionals in getting your car fixed and getting a mortage is like comparing earth to mars.
Vultures ?? Being in the industry for some years I would beg to differ. I would even venture to say that the vultures are often sitting on the other end of the table.
how about the whole ameriquest deal? vultures, yes! how many none greedy people sat at their desk and got screwed. when you’re getting something from ANYONE, whether it’s a mechanic or a mortgage person, you have to accept that their is some professionalism on the other side. everyone can’t can’t be a loan expert and you can’t be a car expert.
but whatever, this is the same country duped by bush into Iraq.
I guess that many people who are taking a loan are too stupid to understand the details, but they are clever enough to get the maximum amount of easy money available while passing all the risk to the taxpayers. I know plenty of examples from my own neighborhood.
It’s just like with the stock market around 2000: if you made big money you were clever, if you lost big you were cheated by the stock brokers etc.
Amen. There are people out there who simply do not have the intelligence to understand the loan documents. And things can be presented and phrased in a way that is completely misleading if not fraudulent. I just talked to a co-worker today, a psychologisit, who discovered that her HELOC has a variable interest rate. She was told that it was 6% fixed. Yeah, fixed for 3 months!
In most situations it is better to be intelligent and informed, but people lead busy lives and cannot be experts in every area. It used to be that the lending institutions had a stake in making sure you were credit worthy before they loaned you money. Alas, that is no longer true, and the sharks are out for themselves.
For a very interesting take on this phenomena, see
Okay, let me try giving the link again:
And just in case the link button doesn’t work (or I’m too stupid to use it properly:
http://www.itulips.com/frankensteineconomy.htm
Are you kidding me?? This is the same type of “Whoa is me” thought process that gets people in trouble. A highly educated psychologist who has probably read, digested, and understood material that would probably put most people to sleep with the table of contents and she doesn’t understand loan docs. Oh please spare me.
And the comment about busy lives and lenders making sure your credit worthy. Is like letting a serial killer raise your child from birth and not understanding why your child is killing pets in the backyard.
This is exactly the same reason regulation and big government comes in. No one can be an expert in all things.
1)People expect things to be as they are told. No one reads the whole documents. If the ad says something, people believe it.
2)When a lot of people have been duped - and they have been duped when you consider what’s in the ad - they revolt. And new laws get enacted.
In reality, the greed of big business is what generates new laws and bigger government.
You can all shout “caveat emptor”. That however is not a practical position. I buy a c rating tire for my car, I am depending on a regulation that defines what the c rating is.
I dont have to read 20 different contracts from 20 different tire makers when I want a tire to decide what is the best tire for my car. Why should I? I dont want to be an expert in tires.
So why cant a private agency give out ratings? Cant the same rating be driven by private enterprise?
Sure. But then if “Joe Dick Tire rating company” gives Blowout Tire a C rating, and I trust it and by the tire, it can blow up and injure me, if Joe Dick is a fraud, or Blowout is a fraud. The private eneterprise answer is as follows
- If Joe Dick is honest he pulls rating of Blowout Tire Co
- If Joe Dick is a fraud, I wont trust his rating anymore.
In either case, the fraudster will ultimately fail. But notice that I am toast.
So the big government, regulation tyranny system is a natural outcome of simple people getting fed up of big business lying. Most of the people want the plain truth in a simple fashion. And if they dont see it from the people they do business with, they will regulate.
Yes, there are frivolous lawsuits, and lawyers. Thats a minority. Should smokers sue the tobacco companies? Yes. Because tobacco company execs stood in front of Congress, took an oath and said smoking is not injurious, **when they knew otherwise**. Saying to smokers that “Sorry, you should not have trusted the tobacco execs” fails the simple test.
That fast food coffee burning case - has anybody ever read it, before disparaging the lawsuit? http://www.osmond-riba.org/lis/essay_mcdonalds.htm or any one of a bunch of websites where you can read the **facts** of the case established by the court, rather than hyperbole about frivolous lawsuits.
I support free markets, the problem I have with so called free market supporters is that most of them are not really free market believers who believe in its good, but crooks who want to perpetrate scams in a free market.
If you dont believe me, you have to tell me why there is only one Buffet, and thousands of mutual funds who act to the detriment of their investors and allow execs to loot the companies the mutual funds have significant control over.
interesting analogy…to compare people “trusting” mortgage brokers to people letting serial killers near their kids….you might have something there
Regarding “Yield Spread Premiums”, another thing people do no know is that they can be charged higher rates by Banks. I am with a bank that publishes one rate for everyone. However, at many banks here in Calif, including the largest ones, the loan officer can charge the borrower a higher rate and earn a higher commission. They do not have to disclose this to you. Another practice is that the loan officer can “bank” the higher rate with one borrower and give another borrower an off-setting lower rate. At my bank, none of this is allowed, and I inform my customers of our policy and the situation at other banks.
Wowie… glad to see some banks have morals.
.
I have never made a late payment in my life; not even one over 30-days in 450+ months of credit history. I would go to a bank that gives me a better rate than a flake would receive, but at your bank we’re all the same, right?