WASHINGTON, Dec 1 (Reuters) - Mortgage industry executives worked on Saturday to hammer out details of a homeowner rescue plan that would freeze interest rates on some U.S. subprime mortgages for up to seven years, but questions remained over how to avoid investor lawsuits and other legal challenges.
If you have one of those ‘teaser’ rates, count your blessings!
Oh…good, this shouldn’t hurt the free-market at all…
[quote]LIFTICVSMAXIMVS wrote:
Oh…good, this shouldn’t hurt the free-market at all…[/quote]
A free market is NOT desired by most people. The majority of people are Socialists. They want government to ‘do something’.
I wish our Founding Fathers had banned all taxes and specifically stated that only gold or silver are lawful money and explicitly made fiat money/checkbook money illegal…would have saved a LOT of suffering.
I didn’t see this thread and started a similar one.
Anyways, this is an absolute joke that is just going to hurt the economy even more in the long run. Instead of people learning from their mistakes the government just bails them out. If left alone the market would have adjusted itself and housing would be affordable again, across the country. Freezing rates will help keep prices artificially high.
[quote]Headhunter wrote:
LIFTICVSMAXIMVS wrote:
Oh…good, this shouldn’t hurt the free-market at all…
A free market is NOT desired by most people. The majority of people are Socialists. They want government to ‘do something’.
I wish our Founding Fathers had banned all taxes and specifically stated that only gold or silver are lawful money and explicitly made fiat money/checkbook money illegal…would have saved a LOT of suffering.
[/quote]
Check book money is not the problem as long as it’s backed by 100% demand deposits. The problem, thanks to the fed, is that it doesn’t work that way. Hello, inflation!
As far as socialism is concerned, yes I agree most people do want the government to “do” something. This unfortunately, I think, has more to do with people’s misunderstanding of what government can actually do. Can we effectively educate people about this matter, I don’t know.
Every new technology brings an other idea for the government to regulate something . Ideally, we should be educating people about the theories of liberty and how individuals working and cooperating together can affect better change than the State. I am not ready to give in to its sucking power just yet.
I am still young enough to prosper from my own liberty.
The long term effect WILL be to make lenders more cautious concerning long-term contracts. If government will violate contracts to soothe the people, this discourages investment.
Suppose government decides to confiscate all dividends to feed the poor. Yeah, the poor will eat TODAY. What about tomorrow? Investors rarely like having their money used as a political football, subject to whichever con artist managed to convince idiots to vote for him/her.
Wow, now just imagine if all of those predatory pratices weren’t allowed to go on for the last several years. Of course, that would actually be like doing your job and taking care of the majority of the american public instead of just the top 1%. It also wouldn’t allow GWB to look like the great savior of the common man, would it?
It must be great when you can have the solution to problems that were created due to you and your cronies inaction. I guess they were too busy starting wars and keeping gays from getting married to actually do something that would directly benefit the american people.
[quote]ALDurr wrote:
Wow, now just imagine if all of those predatory pratices weren’t allowed to go on for the last several years. Of course, that would actually be like doing your job and taking care of the majority of the american public instead of just the top 1%. It also wouldn’t allow GWB to look like the great savior of the common man, would it?
It must be great when you can have the solution to problems that were created due to you and your cronies inaction. I guess they were too busy starting wars and keeping gays from getting married to actually do something that would directly benefit the american people.[/quote]
Both solutions, having the govt prevent these types of loans or freezing them, are bad. Both solutions give power to bureaucrats — you know, the ones who start wars, run the Post Office, build dikes in New Orleans, and so on.
Freedom is painful. Slavery is worse.
[quote]Headhunter wrote:
The long term effect WILL be to make lenders more cautious concerning long-term contracts. If government will violate contracts to soothe the people, this discourages investment.
[/quote]
Lenders are already being more cautious, and would continue to be cautious without the government intervening. Banks would much rather continue to take that check every month for the next 30 years than have to go through a foreclosure, where they stand a good chance of losing money in today’s market.
I agree on the investment thing still though. We hear all kinds of news about people losing homes, but rarely do we hear how the average Joe’s portfolio has been affected by this.
[quote]
Suppose government decides to confiscate all dividends to feed the poor. Yeah, the poor will eat TODAY. What about tomorrow? Investors rarely like having their money used as a political football, subject to whichever con artist managed to convince idiots to vote for him/her.[/quote]
Suppose? I wish this was something we were simply supposing.
[quote]ALDurr wrote:
Wow, now just imagine if all of those predatory pratices weren’t allowed to go on for the last several years. Of course, that would actually be like doing your job and taking care of the majority of the american public instead of just the top 1%. It also wouldn’t allow GWB to look like the great savior of the common man, would it?
It must be great when you can have the solution to problems that were created due to you and your cronies inaction. I guess they were too busy starting wars and keeping gays from getting married to actually do something that would directly benefit the american people.[/quote]
So now the entire mortgage mess is GW’s fault, too?
If you want to place blame on any besides the morons taking out loans they can’t afford, and the morons writing up these loans when they know the lendee is likely to default, blame Alan Greenspan. I’m not a big Greenspan fan, but I’ll still blame the former.
[quote]Headhunter wrote:
Freedom is painful. Slavery is worse.
[/quote]
My new slogan…except I would add a little more positive spin on it:
Freedom can be painful. Slavery is worse.
[quote]
ALDurr wrote:
Wow, now just imagine if all of those predatory pratices weren’t allowed to go on for the last several years. Of course, that would actually be like doing your job and taking care of the majority of the american public instead of just the top 1%. It also wouldn’t allow GWB to look like the great savior of the common man, would it?
It must be great when you can have the solution to problems that were created due to you and your cronies inaction. I guess they were too busy starting wars and keeping gays from getting married to actually do something that would directly benefit the american people.
tedro wrote:
So now the entire mortgage mess is GW’s fault, too?
If you want to place blame on any besides the morons taking out loans they can’t afford, and the morons writing up these loans when they know the lendee is likely to default, blame Alan Greenspan. I’m not a big Greenspan fan, but I’ll still blame the former.[/quote]
Success has many fathers but failure is an orphan…
In this case, there’s plenty of blame to go around.
For starters, you have the people who created CDO obligations. They based their calculation of risk on the historical levels of default prior to CDOs - and apparently didn’t adjust their formulas to account for what a loosening of loan standards would entail. Bankers have a lot of incentive to create and sell new products - they get paid huge bonuses based on driving such deals. And then when the problems become obvious, they can disappear, bonii still in pocket.
From a systemic point, you are always going to have problems when you have complex contracts of adhesion (in this case, mortgages) created by high IQ people, which are marketed to, and also by, low IQ people. The average mortgage broker probably had no idea how many of these products worked - but he knew he was compensated for placing people in those loans. The less scrupulous mortgage brokers made stuff up or gave assurances they did not know to be true.
The banks, who knew they were re-selling the mortgages via the CDOs, became much less interested in verifying repayment ability. Why should they care if the income claimed on the application was solid if the loans were being resold to be packaged as CDOs? Each individual loan was immaterial to the package - unfortunately, that disincentive to the banks to verify has proven very material to the package.
And then there were the individuals. I’ve no doubt that certain unsophisticated people - particularly elderly people whose economic education, such as it was, occurred far before the invention of ARMs - trusted unscrupulous loan officers/mortgage brokers and signed documents they did not understand, and also did not do market checks to see whether they were getting the best possible rate. However, for each of those people, it seems there were many speculators in the market signing up for loans while knowingly misrepresenting their incomes (which the banks would not verify), as well as people who were borrowing extra money on their homes solely for the purpose of living above their means (and many of whom also claimed higher incomes than they actually had).
The problem, from the perspective of “doing something,” is trying to figure out how to hold miscreant parties responsible while helping some of the less fortunate who were bilked. I don’t know that there is a good, broadly applicable solution on that end.
Going forward, perhaps mortgages should be regulated like securities, with a disclosure standard. I would require “plain English” summaries of the contractual terms which must not be materially misleading, either in statements or omissions. Unfortunately, I just don’t believe that the majority of people can read and understand a mortgage contract. I would also recommend a national certification of brokers, similar to the tests required of accountants or stockbrokers.
[quote]BostonBarrister wrote:
Going forward, perhaps mortgages should be regulated like securities, with a disclosure standard. I would require “plain English” summaries of the contractual terms which must not be materially misleading, either in statements or omissions. Unfortunately, I just don’t believe that the majority of people can read and understand a mortgage contract. I would also recommend a national certification of brokers, similar to the tests required of accountants or stockbrokers.[/quote]
We already have the Truth in Lending Act. If people would just use a little common sense and take some time to educate themselves, none of it would be necessary.
Here’s a pretty decent article I just read:
I’m not an expert on the economny, but I am a thinker, and I’m trying to learn. I just have to ask has Washington completely lost its mind? This plan just doesn’t make sense on any level. And when you think it can’t get any worse Hillary unveils her plan and tells us what really needs to be done.
[quote]
BostonBarrister wrote:
Going forward, perhaps mortgages should be regulated like securities, with a disclosure standard. I would require “plain English” summaries of the contractual terms which must not be materially misleading, either in statements or omissions. Unfortunately, I just don’t believe that the majority of people can read and understand a mortgage contract. I would also recommend a national certification of brokers, similar to the tests required of accountants or stockbrokers.
tedro wrote:
We already have the Truth in Lending Act. If people would just use a little common sense and take some time to educate themselves, none of it would be necessary.
Here’s a pretty decent article I just read:
I’m not an expert on the economny, but I am a thinker, and I’m trying to learn. I just have to ask has Washington completely lost its mind? This plan just doesn’t make sense on any level. And when you think it can’t get any worse Hillary unveils her plan and tells us what really needs to be done.
Truth in Lending Act is good, but the actual disclosures are written in dense legal-ese that the majority of people can’t decipher. It’s very accurate, and completely useless disclosure from the perspective of a high-school graduate or your average college graduate.
Add to that the fact you don’t get that disclosure until you’re at the closing, and it’s not a good system.
We need “plain English” summaries of material terms included in all promotional materials - this really is a good idea for all loans and credit cards as well. This should probably include some easily comprehensible tables illustrating payments under at least 3 interest-rate scenarios (best-case, worst-case and median-case). People should understand all the material terms at the outset when making a decision among loan products.
BTW, not saying I’m endorsing the GWB 5-year plan - though it is better than the alternatives being floated by Dem presidential candidates.
Bush’s Outline for Homeowner Aid
December 6, 2007
Fact Sheet: Helping American Families Keep Their Homes
President Bush Announces Private-Sector Plan to Help Struggling Homeowners, Calls on Congress to Join Administration in Acting
Today, President Bush outlined steps the Administration is taking to help American homeowners and called on Congress to join him in delivering relief to homeowners in need. In August, President Bush announced measures to help many struggling homeowners, including directing Treasury Secretary Henry Paulson and Housing and Urban Development (HUD) Secretary Alphonso Jackson to work with lenders, loan servicers, mortgage counselors, and investors on an initiative to help struggling homeowners. Secretaries Paulson and Jackson responded by assembling a private-sector group called the HOPE NOW Alliance. HOPE NOW is an example of government bringing together members of the private sector to voluntarily address a national challenge – without taxpayer subsidies or government mandates. Today, the President announced that these efforts have yielded a promising new source of relief for American homeowners.
�?� President Bush announced that representatives of HOPE NOW have developed a plan under which up to 1.2 million homeowners could be eligible for assistance. Many individual homeowners feeling financial stress have “adjustable rate mortgages,” which typically start with a lower interest rate and then reset to a higher rate after a few years. The HOPE NOW plan is designed to help subprime borrowers who can at least afford the current, starter rate on a subprime loan, but will not be able to make the higher payments once the interest rate goes up. HOPE NOW members have agreed on a set of new industry-wide standards to provide systematic relief to these borrowers in one of three ways:
�?� Refinancing an existing loan into a new private mortgage;
�?� Moving them into an FHASecure loan; or
�?� Freezing their current interest rates for five years.
Since The President’s Announcement in August of Targeted Actions to Assist Homeowners, the Administration Has Moved Forward With Three Key Steps
The President and his Administration have launched a new initiative at the Federal Housing Administration (FHA) called FHASecure. FHASecure expands the FHA’s ability to offer refinancing by giving it the flexibility to work with homeowners who have good credit histories but cannot afford their current payments. In just three months, the FHA has received over 120,000 refinancing applications and has already helped more than 35,000 people refinance. By the end of 2008, the FHA expects this program to help more than 300,000 families.
�?� The FHA is also on track to start charging mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards. Risk-based pricing will expand access and enable FHA to help even more low-to-moderate income families who could not otherwise qualify for prime-rate financing.
Secretaries Paulson and Jackson have assembled the private-sector HOPE NOW alliance. This morning, representatives of HOPE NOW briefed the President on the plan they have developed. In addition:
�?� HOPE NOW recently mailed hundreds of thousands of letters to borrowers falling behind on their payments. In the past, some lenders and mortgage servicers may not have contacted borrowers until after their loans were delinquent. The Alliance is trying to reach families early, before their mortgage problem becomes overwhelming.
�?� HOPE NOW has supported a toll-free hotline, 1-888-995-HOPE, which is available 24-hours a day to provide mortgage counseling in multiple languages.
If Members of Congress Are Serious About Responding to the Challenges in the Housing Market, They Can Start With Several Steps of Their Own
Congress needs to pass legislation to modernize the FHA. In April 2006, President Bush first sent Congress an FHA modernization bill that would increase access to FHA-insured loans by lowering downpayment requirements, allowing the FHA to insure bigger mortgages in high-cost states, and expanding FHA’s authority to price insurance fairly, with risk based premiums. The House passed the bill with more than 400 votes last year. This year, the House passed it again, yet the Senate has not acted.
�?� The liquidity and stability that FHA provides the market are needed now more than ever, and the President urges the Senate to move as quickly as possible. This bill could allow the FHA to help 250,000 additional families by the end of 2008.
Congress needs to temporarily reform the tax code to help homeowners refinance during this time of housing market stress. Under current law, if the value of your house declines and your bank forgives a portion of your mortgage, the tax code treats the amount forgiven as taxable income. The House recently passed this tax relief with bipartisan support, and the Senate should pass relief as soon as possible.
�?� The Administration has also proposed allowing cities and States to issue tax-exempt mortgage bonds to refinance existing loans, and the President calls on Congress to approve this temporary measure quickly. Under current law, cities and states can issue tax-exempt bonds to finance new mortgages for first-time homebuyers, and this measure would make it easier for State housing authorities to help troubled borrowers.
Congress needs to pass funding to support mortgage counseling. Non-profit groups like NeighborWorks provide an essential service by helping homeowners find affordable mortgage solutions and prevent foreclosures. The President’s FY 2008 Budget requests $120 million for NeighborWorks and another $50 million for HUD’s mortgage counseling program. Congress has had these requests since early February, and it needs to stop delaying and get this funding to the President’s desk.
Congress needs to pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae. GSEs provide liquidity to the mortgage market that benefits millions of homeowners, and it is vital that they operate safely and soundly. The President has called on Congress to pass legislation that strengthens independent regulation of the GSEs and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start, and the Senate needs to pass legislation soon.
Source: The White House
I heard Bush has been working on this for a long time and has decided that the best way to carry out this plan was to hire Dr Freeze to do it. Ahnuld has jumped at the chance to reprise his role.
[quote]tedro wrote:
ALDurr wrote:
Wow, now just imagine if all of those predatory pratices weren’t allowed to go on for the last several years. Of course, that would actually be like doing your job and taking care of the majority of the american public instead of just the top 1%. It also wouldn’t allow GWB to look like the great savior of the common man, would it?
It must be great when you can have the solution to problems that were created due to you and your cronies inaction. I guess they were too busy starting wars and keeping gays from getting married to actually do something that would directly benefit the american people.
So now the entire mortgage mess is GW’s fault, too?
[/quote]
I didn’t say that the entire mortgage mess was his fault. I said that he AND HIS CRONIES were too busy with their pet projects of helping themselves to do their job of helping the american people. Do you understand what the word INACTION means? It means that he AND HIS CRONIES ignored it because it didn’t affect them and by doing so, made it worse. Stop wearing your politics on your sleeve. It’s not a good look.
[quote]
If you want to place blame on any besides the morons taking out loans they can’t afford, and the morons writing up these loans when they know the lendee is likely to default, blame Alan Greenspan. I’m not a big Greenspan fan, but I’ll still blame the former.[/quote]
I will blame anyone who has the power and ability to help but decides to sit on their ass and do nothing because it doesn’t directly affect them. Or decides to wait until it is politically expedient to do so.
As far as the “morons” who took out these loans and the ones writing up these loans are concerned, BB addressed this better than I ever could. I will defer to his expertise.
[quote]Headhunter wrote:
Both solutions, having the govt prevent these types of loans or freezing them, are bad. Both solutions give power to bureaucrats — you know, the ones who start wars, run the Post Office, build dikes in New Orleans, and so on.
Freedom is painful. Slavery is worse.
[/quote]
But taking your stance and having them doing nothing is why we are in this situation to begin with.
[quote]ALDurr wrote:
Headhunter wrote:
Both solutions, having the govt prevent these types of loans or freezing them, are bad. Both solutions give power to bureaucrats — you know, the ones who start wars, run the Post Office, build dikes in New Orleans, and so on.
Freedom is painful. Slavery is worse.
But taking your stance and having them doing nothing is why we are in this situation to begin with.[/quote]
How could the government regulators have stopped this? Who knew what a CDO even was 5 years ago? Giving a bureaucrat power assumes that that person will know if something is good or bad in its effects. What if something would bring on a new golden age for humanity but a bureaucrat stops it?
At the other end, attempting to repair the damage also implies that bureaucrats can anticipate the long-term consequence of their actions.
Look at the FDIC and FSLIC. Providing insurance for savings deposits is a good thing, right? But then, since banks know they won’t be allowed to fail, they lend to everyone, with little regard for risk. Citicorp and National City, Chase, …they lend without risk. They know the Fed will bail them out. Is that a good thing?
I’m sick of govt bail out. This shit is just like gun control, the only ones who get fucked are the ones who do what they are supposed to do, will criminals obey gun laws?, fuck no, will dumbass that make 25,000 a year quit buying houses in Orange County, fuck no, will people on food stamps and wellfare quit having kids every 9 fucking months like breeder bulls, fuck no. But we sure as fuck keep rewarding dumbasses.