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TPIRman
March 26, 2007 7:55 PM
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\"Regulators can turn this crisis into an opportunity by reigning in rogue practices in the subprime mortgage lending industry.\"

Either AFFIL wants regulators to become the undisputed leaders in rogue lending practices, or the AFFIL publicist needs to consult a dictionary.

I hate to be that asshole who corrects spelling, but come on. Don't put out a press release that says the complete opposite of what you mean.

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VA_White
March 26, 2007 8:09 PM
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I know a lot of these lenders pushed customers into loans they couldn't afford but where is the personal responsibility of the people who borrowed all the money? Do they get a free pass?

How can any reasonable person believe that an income of $50k a year is enough to afford a house that costs $350k no matter how creative the financing is?

I don't believe any marketing practice absolves borrowers from the obligation to look at the numbers and conclude, \"No, I just can't afford a house that costs so much.\"

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Angiol
March 26, 2007 8:19 PM
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\"reign in rogue practices\"? I thought we all agreed that they're the kings of unethical behavior; they need to rein them in.

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synergy
March 26, 2007 9:01 PM
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\"reign in rogue practices.\"

Who wrote this?? Ugh. It's \"rein\" as in what you pull on to stop a horse! Not \"reign\" as in, monarchy. >:-|

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Saeculorum
March 26, 2007 9:08 PM
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I think the solution to the apparent \"predatory lending\" problem is quite simple - don't borrow money you can't afford to pay back. There is no need for an organization to champion the issue and definitely no need for regulation. If such sub-prime lending really is an unsustainable business model, then it will die by it's own problems.

Why is this even an issue?

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j.a.s.o.n
March 26, 2007 9:18 PM
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\"Because the entire economy is suffering as a result of the subprime lending crisis, not just those involved.\"

It is?

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formergr
March 26, 2007 9:25 PM
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It will when there is a glut of foreclosed properties on the market and people who need to sell for legitimate reasons get a much lower sale price on their own property as a result.

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VA_White
March 26, 2007 10:20 PM
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@Saeculorum: Exactly. The nanny state shouldn't come to the rescue when you are too stupid to handle your own finances responsibly.

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Gumpesq
March 26, 2007 11:11 PM
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So lets look at how the process works:

1) Lenders lend people money at high interest rates.

2) People can't afford mortgage, get foreclosed on.

3) Lenders who made foolish loans all go out of business.

4) People demand more regulations and bigger government in the face of what is a clear example of the market correcting itself.

5) Wait, what? Yeah, now I have to pay more taxes because three groups of stupid people all decide that this is my problem too.

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tadowguy
March 27, 2007 12:07 AM
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Can someone clue me in on what it means to be predatory? Is it the lenders' job to tell people what they can and cannot afford? Or to explain what ARM stands for? If you are spending 3-5x your income on something, you may want to buy a book, take a class, or hire a real estate lawyer. That's basic common sense.

When I bought my house, I took my calculator into meetings with the real estate agent and mortgage broker, I was very familiar with

A = pe^rt

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Elvisisdead
March 27, 2007 1:47 AM
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Predatory, in terms of these discussions, means selling a loan to someone that they know is too stupid to comprehend the terms or they know can't afford to pay it back.

The unfortunate part of all of this is that no consequence has been brought to bear on the originators of the loans. Most of the people who make these loans do it, and then sell them off for servicing after they collect origination fees/commission. They could give a damn if anyone can pay them.

What can stop this whole thing is to eliminate the business of mortgage brokering. Only allow loans to be originated by the institutions that carry/service the note. Don't let generic operations sell a note that they have no intention of keeping. They've got no ownership in the note and no incentive to make a good loan - only to make a loan someone can pay for a month or two until they can sell it to Wells Fargo or Citimortgage.

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nequam
March 27, 2007 2:45 AM
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@VA_White: I agree!

Besides, the crisis is not a problem for everyone. If you are a smart prospective purchaser, you've waited until you've been able to save a reasonable down payment, and you've resisted the temptation to buy a no-down-payment, creative-adjustable-rate or (yikes!) interest-only mortgage, the expected housing glut is a good thing.

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tadowguy
March 27, 2007 3:07 AM
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@Elvisisdead:

The problem with your solution is that you would then have to apply at 10-20 places in order to find the best rate (with each application running your credit report and maybe charging an app fee). My broker charged me $300, but got me a better rate than I had from my initial contacts with several banks.

The other issue with your solution is that there is nobody keeping the big banks from selling the loans, which means that you cannot really outlaw brokers, unless you outlaw selling loans (which may be what you are advocating).

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jendomme
March 27, 2007 3:11 AM
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Hey Johnny, you're not an asshole - just an idiot. The spelling is fine. They spelled reign correctly. It is the improper use of the term. Their diction needs work, not their spelling.

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mac-phisto
March 27, 2007 4:06 AM
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i cringe whenever i see the word \"regulators\". translation: more paperwork. now, your conventional mortgage closing goes from 100+ sheets to 500+ sheets (in triplicate).

whew! a lot of people on high horses out there tonite. how's the weather up there? it's respectable that there are ppl who have the ability to afford 20% down on a home these days...especially when saving that 20% could mean paying twice as much for a house...read on.

i live in a (recently) very competitive housing market b/c of the rural area, (relatively) low taxes & proximity to nyc. in the five years i have been here, homes have tripled in value. i have a co-worker who bought a home for $124,000, only to sell it 18 mos. later for $288,000. no joke. & despite a \"slow\" housing market, values continue to rise here (& houses continue to sell). NO ONE (@ least no working person) can save 20% when the market grows this fast. & those that have waited are kicking themselves. new homes can't go up fast enough & most houses are still on the market

& i know what many of you are thinking...\"so, just rent\". ahhh, but the landlords are keen to the shortage of affordable housing & decided they are not to bear the burden. a 1-br apartment goes for $1,000/mo. or more. a 3-br is in the $2000 - $2400 range. want to rent a house? hope you have $3000/mo. at that rate, you can understand why young professionals & starting families are looking for homes...even w/o a down-payment.

ARM doesn't mean predatory, nor does balloon necessarily. there are many people who are capable of getting fixed 30's that take an ARM or a balloon for a lower payment & lower interest rate & they still end up ahead of the game. when fixed 30's were 6.5% range, you could get a balloon in the 4-5% range & then refi into a fixed 30 when fixed rates dropped. plus, housing was climbing exponentially in value, so it was a win-win. you gained equity & paid less in interest. meanwhile, those of you in a fixed 30 were literally flushing thousands of dollars away at 6.5%. if you know what you're doing, you can play the market.

these reverse-amortizations @ 125% financing...now that's predatory. i get these offers all the time & they're offering me double my houses' value for half my current payment. imho, that is a mortgage designed to fail. & the fault lies with both the borrowers & the lenders. borrowers should not be so quick to sign, but lenders should be looking out for their interests. a subprime industry on the verge of collapse (real or imagined) is not indicative of a group of investors that did their job. it tells me that a good number of them dropped the ball.

one final point that has been bugging me a bit. have you ever noticed that appraisers almost always appraise a home's value slightly above what the contract states? how come no one's on their asses about fueling part of this. that house i told you about earlier? it was a 2-br, 1000-sq ft ranch w/ a 1-car garage. is that really a $300,000 house these days?

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Mr. Gunn
March 27, 2007 2:35 PM
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The subprime loans are starting to hurt the house-flippers, and people who bought WAY more than they could afford, but not so much the average person, yet. I'm gonna stay out of the market until we hit the full-on depression and they're just desperate to give me that condo.

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LTS!
March 27, 2007 2:36 PM
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The house is only worth what someone is willing to pay for it other than that it's an approximation based on sales of similar homes in the area. So if people are willing to pay $300k then yes.. it's worth $300k regardless of whether you believe it is or not.

I suppose we could complain about the \"predatory\" lenders but then we should realize that they sell these loans off quick to established financial organizations. Why not complain when Citicorp buys out the \"predatory\" loan. If they wouldn't buy it then the initial lending company probably wouldn't be so quick to give people loans.

Frankly if people want put themselves into financial ruin because they are stupid then it is their right to do so. By catering to their stupidity we only increase the amount of bureaucratic overhead that has caused massive bloat in the federal government. Of course the counter-argument would be that these people will then become welfare types who also increase the bloat of the government and the natural response to that is... stop welfare. Of course then crime goes up because if people aren't given money they will steal to obtain it and then you have a bloated criminal syst... err wait we already have that.

So creative thinking is necessary to solve the problem I suppose but we can't expect the government to be everyone's financial advisor.

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TPIRman
March 27, 2007 3:22 PM
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@jendomme: They didn't spell \"reign\" correctly; they spelled \"rein\" incorrectly. Just because a misspelling ends up with a homophone of the whirred you wanted doesn't mean your spelling is correct.

It's not really a matter of diction because the word they intended to use was appropriate to the context. Their word choice was fine. Plus, \"diction\" typically involves more subtle, high-level choices. For instance, you chose to call me an \"idiot\" rather than a \"moron.\" That's dick shin.

As for the matter at hand, I sent a (polite) note to the AFFIL folks yesterday letting them know about the misspelling. It's a shame because it makes an important release look unprofessional. I'm a little surprised they haven't corrected it by now, but considering they're working with a two-person staff, I imagine they're pretty busy.

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LearningForever
March 27, 2007 4:50 PM
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I do not understand about the subprime loans. It is funny that everyone is always wanting a nice place but nobody wants to do homework to obtain good mortgage.

A recent conversation bought me into the knowledge of a ACORN loan. It is almost like VA and FHA loans except without the 9 years recapture bond or the income tax bond. To qualify, it is to be below a certain income and home price and also to go for some classes. This is a program started by a non-profit organization and the bank of america.

The benefit of this loan is that if you pay at least 3% down, you get a rate that is 0.75% lower than the prevailing rate for you - I do not know how the bank justify that prevailing rate. However, it is really a pretty good deal since there is
1. NO 2nd Mortgage
2. Fixed rate for 30 or 40 years
3. NO PMI.

Even though the ARM starts at a low teaser rate, the rates offered by the Acorn loan actually ended up to be very competitive. HOMEWORK!!!!!

http://www.acornhousing.org/index.php

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mac-phisto
March 27, 2007 4:54 PM
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@LTS!: i agree with your critique of the secondary lending market, but that is really why this is such an issue now. the big banks have gone on a subprime diet - restricting the amount of risk their willing to buy & closing their subprime departments, leaving smaller lending houses to hold the bag.

\"Frankly if people want put themselves into financial ruin because they are stupid then it is their right to do so.\" frankly, i think this is a very simple dismissal of a very complex problem. people end up in these loans for a variety of reasons. i already gave one example of how landlords are using the market to their advantage by hiking prices. landlords also sell property from under their tenants. imagine finding out that you have 90 days to find a new place & the cheapest place you can find is twice as expensive & way out of your price range (or you can get an interest-only mortgage for slightly more than you're currently paying). that's not stupidity, it's desperation.

then there's the \"bait & switch\" that some lenders love to pull. they pre-approve you for a fixed 30, but when you get to the day of closing, they find some excuse to withdraw their funding of the loan & replace it with something less desireable. it's still a good rate, but the devil's in the details. remember that you've spent months looking for the perfect house & years saving up & hours filling out applications & the seller isn't willing to extend...i wouldn't consider this person stupid either...this one's scared that the perfect opportunity is passing by.

it's easy to blame everything on the stupidity of the buyers. at most, i'll give you ignorance. they are unaware of the tricks & manipulation tactics that exist within the marketplace. they are naive in thinking that their broker, their realtor & their lawyers are serving their best interest (when many times they're not). & they lack the necessary information to make an educated decision - but many times predators use illusions of urgency & misinformation to cloud a person's judgement.

i don't want to see the government screw anything else up this year either. i would like to see a more reputable industry though. & blaming everything on the buyer is just ignoring the problem.

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nequam
March 27, 2007 5:08 PM
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@mac-phisto: you make a good point about down payments, but a bad estimate of the height of these horses.

Can't save a 20% down payment? Then how about 10%? If you cannot afford a 10% down payment then maybe you cannot afford the house -- at least a bell should go off. The problem is that a lot of potential buyers panic when they see a market skyrocketing and will do anything to buy, without regard to whether they can afford it.

One does not sit atop a high horse to suggest that people who buy more house than they can afford have primarily themselves to blame.

I believe the real problem is a lack of affordable housing, not lending practices.

Besides, saving money is easy. Sure, it takes commitment and time, but it requires less self-control and far less effort than, say, losing weight. It seems like the complaint about not being able to save a down payment has less to do with \"I can't do it,\" than \"I don't have it RIGHT NOW.\" Shouldn't our parents have taught us that you don't get everything immediately? That you have to work for it? That there are some things you might never be able to afford?

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mac-phisto
March 27, 2007 7:04 PM
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@nequam: hehe. i was a little cranky last nite. ;)

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Mary Marsala with Fries
March 27, 2007 7:07 PM
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Jack the estimated height of everybody's horses by at least a foot, because the article itself is on stilts.

I work in the offices of a lawyer / broker / counselor / etc. who are swamped to the eyeballs with people facing foreclosures (and credit-card debt, but ignoring that part for now).

Myth #1: This is happening primarily to poorer people. BZZZT! A recent article confirms with a solid study that almost 3/4 of people who got bad loans were middle- or upper-income Americans. So forget that \"it ain't gonna affect me\" crap right now, pal. It's already hitting the real estate market hard (but not as hard as it's going to in a year or two), which is dragging other sectors of the economy down like lead shoes.

Myth #2: People should have known better. Yes, and it's your fault if your doctor gives you medication that kills you, because you should have KNOWN that the addition of aspirin to anti-seizure medication can cause palpitations in people with rheumatoid arthritis. GIVE ME A BREAK. The loan industry has professionals on the front-end for a reason -- because it's hopelessly complicated, and while your average joe might be able to read up enough to navigate the intricacies of a regular loan if he's lucky, there's always the chance that something more complicated is going on, and those people are BEING PAID (handsomely!) to make sure that you qualify for, and can afford, the loan you're getting. (Banks and regulators are also responsible for reviewing the paperwork when loans change hands, which they've been conveniently forgetting to do, too.) Broker and banks are as innocent here as those Best Buy employees who convince your grandma that she needs a new GeForce card to fix her pop-up problem. Plus:

Myth #3: \"Predatory\" lending means taking advantage of stupid or greedy people. In the year I've worked here, I've seen one or two greedy people and about ten idiots and over 500 perfectly intelligent, careful family people who got LIED TO by brokers or banks, who convinced them to refinance or accept a loan on terms that sounded good if you didn't know the behind-the-scenes details. (Which you, if you're reading this and you're not a loan officer, don't know either, so maybe learn a lesson rather than making fun of the victims, eh?) The shady brokers/banks then walked away with their cut, turned around and sold the loan as soon as possible, and now could give a shit that they screwed the people on either end of the deal (the loanee, and the person who now can't collect on the loan). THAT's the gist of predatory lending, and it's probably way more common than you think. (I say that because my bosses are always telling me that it's more common than I think, and I seem to think it's more common than most people here...)

Okay, I'll shut up now. But this problem desperately needs some real light shed on it, and for people to stop playing La-la-la-not-my-problem-cuz-I'm-perfect-la-la-la about it and realize that these fuckers in the loan industry have ruined millions of families, and done serious damage (we don't even know how serious yet) to our ENTIRE economy. It's time to quit minimizing the problem and blaming the victims and DO something about it!

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nequam
March 27, 2007 7:09 PM
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@mac-phisto: you too? ha!

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mac-phisto
March 28, 2007 1:42 AM
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@Mary Marsala with Fries: you know, the real problem with shedding light on dark places is that you have to actually watch the bugs scurry around instead of just pretending they're not there. & then you have to kill them, which means getting goo all over your shoes. not fun!!

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