With all of the hastily arranged government plans to resolve the credit crisis and/or solve the mortgage/housing debacle, there were bound to be some solutions offered that makes you wonder how somebody could actually have the guts to put some of the proposals in writing.
I was reminded of that when I read the story “Fed proposes mortgage rules to protect borrowers.” If this matter wouldn’t be so serious, it would qualify as the joke of the week. Here are some snippets from the article:
Lenders will have to confirm that a borrower can afford a mortgage before making a loan under protections proposed by the Federal Reserve on Tuesday, following defaults and losses on U.S. subprime mortgages this year.
The proposals are intended to replace loose lending standards that have put many Americans at risk of losing their homes because they took out mortgages they could not afford and may not have fully understood.
The proposed regulations would require that lenders confirm a borrower can afford a home loan by verifying his income and assets with tax records, payroll receipts, and other documentation.
The new rules are aimed at ending the recent practice of so-called “stated income” loans in which borrowers state their income without any evidence.
Wow, these are truly far reaching new ideas. How dare they? I will actually need to verify my income and thereby demonstrate that I can afford the mortgage? It’s just not fair. Isn’t that what they did in the last century? I thought we made some progress here by simply being able to write down our income and get a loan with no questions asked. What’s the world coming to?
OK, so just in case I mess up, here’s something that should help:
The new rules will not assist today’s struggling homeowners but would give consumers the right to sue mortgage lenders who act unfairly and deceptively in preparing loans in future.
Ah, that sounds good and makes me feel better! I am sure that I can find something that is not right with my new loan, just in case I fall on hard times and can’t make the payments again; I then simply sue the bastards. I love it when the government comes up with unique ideas, don’t you?
Comments 3
Well Ulli, the pint of that basic info is to make it law. Obviously if its not law, then someone will find a way to take advantage and make a buck off of some unsuspecting borrower or security investor that bought the bundled mortgages. Nothing wrong with it.
Sure, I understand that. Being qualified by a lender is the way I have purchased all of my real estate over the past 30 years. It’s been a standard all along until we entered this century.
However, I don’t agree with the unsuspecting borrower sob story. A borrower is an adult and must take responsiblity for his own actions. After all, we are living in the most advanced nation in the world and trying to pass the buck is too easy of a way out.
Ulli…
Agreed but a bit simplistic if not naive at least from my perspective. Most contracts are written in legalese by lawyers that require a reading level of 20 plus where a college grad is rated at 16. I distinctly remember when buying most recent auto the finance mgr was surprized (and somewhat dismayed) that I was going to read the entire contract including all the fine print. My title mgr also was taken aback that I was doing the same as it wud run into the next appointment where she assured me it contained exactly what she had summarized in our convo.
As yu may know many mortgage brokers never ever mentioned the ramifications of the sophisticated financial formulas when and how the rates “kick in” especially when only 1 of 4 still go to college.
The point being is we have laws in many mnay areas to protect citizens from unscrupulous biz practices. No one is absolving the borrower but on the other hand none of this cud have ever started if laws were in place for the brokers, much less the builders agreeing to even consider such prospective buyers (yu wud not consider one to sell yur house) if yu had to carry the mortgage nor those on wall street that package them as tripple A rated.
Teh borkers had their easy escape cause – right when the banks asked them to buy back the bad mortgages they simply closed their doors and of course the slick wall street firms shorted the very securities they bundled and sold around the world.
Hey the borrower has no beef, they got to live in a fine home for a year or 2 and cheaper then apartment rents and their gamble did not work out as the property did not appreciate so they cud sell at a profit or refinance into something reasonable.
Who did it hurt folks like me where there are 2 & 3 homes per block for sale/foreclosed while I have been here a dozen years and cud not move now which I wud like to do since yu cud not sell a house if yu tried. The builders destroyed their own planned growth too or maybe just those holding their security.
The point being is even when I was in college many years ago, it was evident that managed capitalism was the only efficient form with the operative word being managed by government to insure veracity on all sides. We are from from that model these days and abuse after abuse has been left in its wake where it is okay for the fed gov (we the people) to pick up the tab for biz abuse but heavens no for folks like myself that have a breeding ground for disease bearing critters in the back yard pools unattended, and vandalism in the vacant homes. Instead of helping borrowers how about the gov buying my home so I can move into a different community now.