Toward Fair Lending

[celticlord]

Toward Fair Lending

The way to discourage irresponsible lending is to hold liable both the mortgage originators and the companies to which they sell their sometimes illegal loans. The risk of being hauled into court would make secondary investors more careful and build accountability into the securitization system.

While no lender should misrepresent the terms and condition of a loan to any borrower, I have to wonder when will Americans start to discourage irresponsible borrowing?

As sleazy as some mortgage vendors are, the brutal reality for anyone saddled with debt is that if they hadn't borrowed the money, they wouldn't have to worry about how to pay it back. If people were more reluctant to borrow debt and default would not cause for crisis.

 

[Voidwar]

Just as important, banks need to be more like pawnbrokers.

If you don't pay your pawnbroker, he makes money, because the thing you pawned, is worth more money than you were loaned.

Further, I am sick and tired of hearing that "the banks don't want to end up owning the house". If they are not ready to make money on owning a property, then they should not enter into contracts where one of the possible outcomes results in them owning a property. Any bank that doesn't employ a property management company and a real estate developer / flipper, has no business loaning on homes in today's marketplace.

 

[celticlord]

Further, I am sick and tired of hearing that "the banks don't want to end up owning the house". If they are not ready to make money on owning a property, then they should not enter into contracts where one of the possible outcomes results in them owning a property. Any bank that doesn't employ a property management company and a real estate developer / flipper, has no business loaning on homes in today's marketplace.

This underscores the flaw in today's real estate market. It is irrational in the extreme to either lend or borrow money for a term longer than the term the asset so purchased is intended to be held. Such lending and borrowing only works when asset prices are assured of rising, and as the housing bubble demonstrates, no asset price has that assurance.

People have been playing real estate roulette with their primary place of residence, putting it all on black only to come up red.

 

[Jessica]

This was a carefully contrieved occurrence so that the international bankers would emerge as rulers of us all.

 

[Khayembii Communique]

This was a carefully contrieved occurrence so that the international bankers would emerge as rulers of us all.

Yes, it was all deliberate. Do you ever stop with the conspiracy nonsense?:doh

 

[UtahBill]

This was a carefully contrieved occurrence so that the international bankers would emerge as rulers of us all.

carefully contrived? first, it was not carefully done or we wouldn't even know it happened. second, such a conspiracy would take far too many people, and loyalty to such a large group is impossible to maintain.
some of the lesser insiders would be writing books about it by now.

 

[PeteEU]

Hahah, transparency and accountability .... yea right!... next they gonna elect a black president in the US.

 

[Mach]

As sleazy as some mortgage vendors are, the brutal reality for anyone saddled with debt is that if they hadn't borrowed the money, they wouldn't have to worry about how to pay it back. If people were more reluctant to borrow debt and default would not cause for crisis.

What does this mean though? The brutal reality is that some portion of any population will at some points in their lives are irresponsible about [anything and everything].

The fact remains that they do it. It's like preaching abistence only...people are still screwing. Focusing on the fact that we "told them not to", seems silly, doesn't it in retrospect? I'm being serious, not contrary. Government creates markets, and sets the ground rules that are supposed to benefit the market as a whole. That's why you see fair lending, not because they are trying to give handouts to idiots. We ALL pay more for everything we do because of idiots...that is part of life.

Additionally, the frequency of "bad borrowing" is presumed, if not evidenced, to go up when lenders get aggressive, make it more complicated, and/or intentionally lie, coupled with huge amounts of money injected into the system (foreign investment). We can control all of that, fairly well, and fairly.

If your filter is so poor that it lets all the bad stuff through, BY DESIGN, it will fail. It's like desiging a poorly constructed home. A few years of no big storms...works great right? Big storm, everyone dies...not so good. That's why we have building code...

If our system only works when we have "all responsible people", and "all responsible businesses", and "all responsible investors", then it is specifically designed to fail. When bad things happen, it shows the weak spots, and you analyze it, and shore it up. Isn't this how it works in every problem, be it government or engineering, etc.?

Limitations on irresponsible business practice is analgous to building code.

 

[FlappyTheKinkajou]

This was a carefully contrieved occurrence so that the international bankers would emerge as rulers of us all.

Can you please prove this?

 

[Jessica]

carefully contrived? first, it was not carefully done or we wouldn't even know it happened. second, such a conspiracy would take far too many people, and loyalty to such a large group is impossible to maintain.
some of the lesser insiders would be writing books about it by now.

Um. Nope. Just a handful of bankers behind the federal reserve. Nothing more, nothing less.

And they have wrote books about it. Haven't read any, I see?

 

[UtahBill]

Um. Nope. Just a handful of bankers behind the federal reserve. Nothing more, nothing less.

And they have wrote books about it. Haven't read any, I see?

terrible grammar, read any grammar books lately?:2razz:

 

[Jessica]

terrible grammar, read any grammar books lately?:2razz:

Yes, but I forgive your grammar. I am not a grammar Nazi like you seem to be.
But you might want to learn to use CAPITAL letters when starting a sentence before correcting someone else on their use of grammar. It makes you look so petty and less intelligent to do so. Don't you think? No need to answer. It was a rhetorical question.

That's the best you've got? Honestly? Then I'll just put you on ignore. It's easier to filter rubbish and nonsense that way. Get a clue. Bye.

 

[UtahBill]

Yes, but I forgive your grammar. I am not a grammar Nazi like you seem to be.
But you might want to learn to use CAPITAL letters when starting a sentence before correcting someone else on their use of grammar. It makes you look so petty and less intelligent to do so. Don't you think? No need to answer. It was a rhetorical question.

That's the best you've got? Honestly? Then I'll just put you on ignore. It's easier to filter rubbish and nonsense that way. Get a clue. Bye.

I had to report that one, for obvious reasons.....are you angry about my challenge in the education section? I am still waiting for your educational credentials in the education section, where you complain about public education. You made Bodi list his, but won't list yours...

 

[Solidus]

"What does this mean though? The brutal reality is that some portion of any population will at some points in their lives are irresponsible about [anything and everything]."

It means that when those people are irresponsible they should suffer the consequences. I'd rather they learned beforehand but "learning from your mistakes" is a good teacher. Additionally, what's irresponsible to one might be fun to another (ie. skydiving).

"Government creates markets"

False. People create markets through their demand. Government can influence markets greatly, but it cannot create or destroy markets; consider the "war on drugs", prohibition, or food.

"Government ... sets the ground rules that are supposed to benefit the market as a whole."

Agreed with what was written. You and I probably have a drastically different definition of "ground rules" though. Determining when a lender can charge pre-payment penalties is not a "ground rule" in my opinion. Requiring full disclosure of extra fess or potential penalties is. Most of this bill strikes me as "there ought to be a law" sentiment rather than "will this improve the process" reasoning.

"Additionally, the frequency of "bad borrowing" is presumed, if not evidenced, to go up when lenders get aggressive, make it more complicated, and/or intentionally lie, coupled with huge amounts of money injected into the system (foreign investment). We can control all of that, fairly well, and fairly."

1) We can't control all of that, regardless of "well" or "fairly". If we could, why didn't we? Keep in mind that every major player involved on both private and government sides didn't see a problem (despite internal warnings on both sides). You presume here that government regulation is sufficiently forward thinking, yet later on you describe the process as "see where it's weak and shore it up". An examination of government response to this and other crisis' suggests it's reactionary. Again, consider the "war on drugs", drug pushers are aggressive, distribution is overly complicated, sellers intentionally lie about quality, and large amounts of foreign capital are deployed. Are we really controlling all of that, well and fairly?

2) Neither aggressive salesmen, complicated forms, or an abundance of lenders (foreign investment), absolve the "bad borrowing". The borrowers made a mistake. If all of the to-be-banned practices were bad, then the simple solution is become a lender without those practices; not convince someone to write a law with unforeseen consequences.

3) Intentionally lie is already covered under existing contract law and fraud protection. Diligent enforcement of basic "ground rules" is welcome; increasingly specific and detailed restrictions (and the ensuing exceptions) are not.

"If your filter is so poor that it lets all the bad stuff through, BY DESIGN, it will fail."

Agreed. Lenders that habitually made bad loans should fail, just like Countrywide and others did. Do you think lenders are in a hurry to offer the same loans again? Do you think anyone is buying up CDOs these days?

"It's like desiging a poorly constructed home. A few years of no big storms...works great right? Big storm, everyone dies...not so good. That's why we have building code..."

Partially agree. Doesn't the home buyer have a duty to examine the potential for storm damage? Where do you draw the line between expected and unexpected? Consider Hurricane Katrina versus Category 3 government levees. Why does the building code have to be enforced under penalty, why not establish a "government recommended best practice" and allow people to choose?

"If our system only works when we have "all responsible people", and "all responsible businesses", and "all responsible investors", then it is specifically designed to fail."

Our system does not assume all people, businesses or investors are responsible. It does (nominally) assume that irresponsible people, businesses or investors will bear the costs of their irresponsibility.

"Limitations on irresponsible business practice is analgous to building code."

Why don't we limit personal irresponsibility? Why not legislate how much people can borrow? Why not enforce by penalty the government recommended daily allowance of calories, vitamins, and minerals? Why not place limits on how much time children can spend unsupervised? Why not place limits on how much a family of a given size and income can spend per month? Afterall, if you believe that people are stupid and will make mistakes we should have "ground rules" that prevent them from being taken advantage of by aggressive pastry salesmen, complicated web-browsers that allow underage access to porn, and the deluge of credit card applications right? Again, I'm all for laws that counter asymmetrical information, but saying "you can't do X, because some people might be too stupid to consider the consequences" seems to be seeking out Moral Hazard.

J

 

[UtahBill]

I have 3 sets of shirt-tail relatives, by marriage, who have filed bankruptcy, one set has filed twice. All 3 sets PLANNED their bankruptcy knowing all the rules in advance. They incurred debt for new vehicles, got medical procedures done, maxed out credit cards, took vacations, etc. knowing full well that they would not be able to make all the payments.
What they engaged in was unfair borrowing....