I'm sure that was a rhetorical, but yes they still get TILs. Actually they get one when the loan is preliminary approved and also if any of the loan terms have changed and if the brokers fees change. With my company, the u/w was responsible for mailing out the TIL when we approved the loan.fsquid wrote:Do consumers no longer get a Truth-in-Lending document at closing? Consumer is at fault, not the big bad company.
OT: 2008 Elections
Moderators: Bill_Abner, ScoopBrady
XBL gamertag:BHOWARD1968
PSN: BHOWARD1968_
PSN: BHOWARD1968_
Just some info. about the policy environment which probably contributed to the current crisis.
Certainly the points about personal responsibility are valid. But for better or worse, we have had consumer protection laws in the past.
There are also stories about banking interests circumventing efforts to reduce some lending abuses at the state levels by lobbying at the federal level to get the feds to run interference and get state enforcers to back off.
Put aside the issue of which party's more at fault. Could a different regulatory regime have prevented the problem from at least reaching the level it did?
========================
PAGE ONE
Housing Bust Fuels Blame Game
Democrats Seize On
Opponents' Role;
Bipartisan Failures
By GREG IP, JAMES R. HAGERTY and JONATHAN KARP
February 27, 2008; Page A1
As the falling housing market shakes financial institutions and pummels Americans in an election year, the nation's economic woes have surged to the top of voters' minds. The timely question: To what extent are politicians and regulators at fault?
Democrats are quick to blame Republicans, who were in power during the housing bubble and subprime lending frenzy. For years, America's leaders failed to restrain the markets, companies, investors and consumers from the missteps that led to the most pervasive financial crisis in decades.
But in hindsight, the failure stretches across government and across party lines. At bottom are two strong currents. From the Republican president to urban Democratic congressmen, homeownership was pushed as an overriding and unquestioned goal. And many significant attempts at regulation were obstructed by the prevailing belief that the economy did best when financial markets operated as freely as possible.
The Bush administration coupled cheerleading for homeownership with pressure on government-sponsored mortgage lenders Fannie Mae and Freddie Mac to provide funding for riskier mortgages. Both Democrats and Republicans stood by as Fannie and Freddie invested heavily in securities backed by subprime loans. Democratic congressmen pushed a federal law to restrain lending practices later discredited, but Republicans with some Democratic allies blocked or countered with weaker versions.
And at the Federal Reserve, Chairman Alan Greenspan, revered by both parties for his economic management, resisted using the Fed's authority to more aggressively regulate lender behavior.
The blame spreads beyond Washington, to state capitals. In California, home to most of the country's subprime lenders, Democratic state lawmakers didn't support laws that would have imposed tougher regulations on a prized local industry. Politicians of all stripes cheered on the lower interest rates that sparked the boom in housing and excesses in credit.
FINDING FAULT
Now, as Washington scrambles to repair the damage, momentum appears to be swinging back toward a more significant role for government in the American economy. Congressional Democrats have proposed the federal government guarantee up to $400 billion in troubled mortgages if lenders first write down their value. The Bush White House, which opposes the use of public money to bail out borrowers and lenders, is signaling it is open to compromise.
It is impossible to know whether a different approach to housing and financial regulation would have produced a different outcome. As in the 1990s stock-market bubble, many victims began as willing participants seduced by ever-rising prices and easy credit.
One thing is clear. The nation gorged itself on home-buying, something once considered as American as apple pie. "Let's be honest with ourselves," Richard Syron, chief executive of Freddie Mac and a former Carter Treasury and Federal Reserve official, said in December. "We went crazy as a country with the goals...saying, 'Everybody's got to have a house.'"
Below, a look at what went wrong.
Pushing the Dream
As far back as the Civil War, owning a home has been associated with civic virtue and moral behavior. Democratic and Republican administrations alike sought to raise homeownership through subsidies, tax breaks and dedicated agencies.
When George W. Bush took office, that push became a pillar of his "ownership society" campaign. "We want everybody in America to own their own home," Mr. Bush said at a housing conference sponsored by the White House in October 2002. Earlier that year, he issued a "challenge" to lenders and others in the industry: Create 5.5 million new minority homeowners by the end of the decade. In 2003, he signed the American Dream Downpayment Act, creating a program that would offer money to the poor so they could secure a first mortgage.
These challenges came just as the lending industry was finding that subprime loans could be very profitable, at least in the short term. The administration's push also bolstered industry claims that such loans -- made to people with weak credit records -- were answering a vital social need.
Homeownership is "our mission," Angelo Mozilo, chief executive of Countrywide Financial Corp., a giant mortgage lender, said in a February 2003 speech. Citing Mr. Bush's drive, Mr. Mozilo said lenders needed to bring the rate of minority homeownership closer to that of whites. One answer, he said, was to stop requiring sizable down payments from people who couldn't afford them.
Countrywide and other lenders soon were promoting mortgages that allowed subprime borrowers to buy homes with little or no money down. The percentage of subprime borrowers who didn't fully document their income and assets grew from about 17% in early 2000 to 44% in 2006, according to data from First American CoreLogic, a research firm in San Francisco.
Subprime was initially aimed at people with weak credit. But by 2005 and 2006, lenders encouraged many types of better-off borrowers to take such loans, including people with large incomes who wanted to speculate on rental housing. Many subprime loans were made to refinance low-income people who already owned homes, often loading them up with more mortgage debt and creating the risk of foreclosure.
Government-sponsored companies that buy and guarantee mortgages also joined the subprime fray. In 2002, the Bush administration began criticizing the companies, Freddie Mac and Fannie Mae, saying they were "trailing" the rest of the mortgage market in terms of their financing of homes for low-income people and minorities.
To push Fannie and Freddie, the Department of Housing and Urban Development, or HUD, eventually required that a higher percentage of loans they fund go to low-income borrowers. The pair met HUD's requirements partly by buying the AAA-rated portions of mortgage securities created by Wall Street firms and backed by subprime home loans. After the initial low-payment period, many of those loans proved unaffordable to borrowers and are now going into foreclosure.
The homeownership rate, which rose from 65% in early 1996 to a record 69% in 2004, has since fallen below 68% and is almost certain to fall further as foreclosures rise and credit tightens for first-time buyers. Moody's Economy.com forecasts that three million home loans will go into default in the 30 months ending in mid-2009, with about two-thirds of them resulting in foreclosures.
HUD says minority homeownership has increased by about 3.1 million since mid-2002 -- more than two million shy of President Bush's goal. The Bush administration is "proud" of having pushed for more minority homeownership and never favored reckless lending, says Tony Fratto, a White House spokesman.
From the time subprime took off in the mid 1990s, legislators and regulators tried to balance two conflicting goals: increasing low-income families' access to credit and minimizing the potential for abuses by lenders. As home prices soared, tighter curbs usually lost out to a laissez-faire attitude in tune with the ruling Republicans. The result: Congress blocked legislation and the Fed was slow to regulate.
Congress Adrift
In 1999, Democrats, inspired by a groundbreaking antipredatory lending law in North Carolina, sought a federal equivalent. Predatory loans are typically described as those that involve excessive fees and high interest rates. Generally, such abuses occur in the market for subprime loans, those for people with weak credit records or high debt in relation to their income. Republicans, who controlled Congress, blocked the antipredatory legislation, arguing it would interfere with legitimate lending.
"Don't apologize when you make a loan above the prime rate to someone that has a marginal credit rating," Texas Republican Phil Gramm, then chairman of the Senate Banking Committee, told a group of bankers in 2000. "In the name of predatory lending, we could end up denying people with moderate income and limited credit ratings the opportunity to borrow money."
From 2000 on, Democrats continued to introduce bills aimed at safeguarding against alleged predatory lending. In 2005, Rep. Brad Miller of North Carolina and two other Democrats introduced one such bill. Alabama Republican Spencer Bachus, the Republican chairman of a House committee on mortgage lending, was interested in co-sponsoring the bill.
In spring 2006, Mr. Bachus abruptly toughened his stance, in effect killing negotiations, Mr. Miller says. Barney Frank, then a senior Democrat and a co-sponsor of the bill, says while Mr. Bachus was cooperative, the Republican house leadership didn't want any such bill reaching the floor.
Mr. Bachus disputes that the Republican leadership interfered with his efforts, adding: "I was very concerned about the subprime situation." He says Democrats were the ones who toughened their negotiating stance. Mr. Bachus notes that many of his provisions are contained in a bill that the House approved last year.
Fed's Light Touch
Even without congressional intervention, regulators had other tools to address potential abuse. But Alan Greenspan, chairman of the Federal Reserve until 2006, wanted to be sparing in their use.
In 2000, he rejected an informal proposal by then-Fed governor Edward Gramlich that Federal Reserve staffers examine the lending practices not just of banks but of their mortgage affiliates. In 2002, he rejected calls from Democrats to use the Fed's power under the Federal Trade Act to write rules on unfair and deceptive practices.
Mr. Greenspan, in an interview, said examining mortgage affiliates wouldn't have prevented fraud, and would have given shady operators the additional cover of claiming to be Fed-regulated. Regarding the calls from Democrats, he said he and the other governors were following the advice of the Fed's professional staff. More broadly, he said, Congress, not the Fed, was best suited to define "unfair and deceptive" practices and to create legislation to address such lending.
He says he erred in thinking that other investors and market participants would adequately monitor lending standards in the mortgage-backed securities market. "I turned out to be wrong, much to my surprise and chagrin," he said.
Mr. Greenspan and other bank regulators did take some steps to tighten oversight. In 2001, they barred banks from making "loans to borrowers who do not demonstrate the capacity to repay the loan." But that didn't explicitly apply to state-regulated finance companies and mortgage brokers, the entities that originated the majority of subprime loans. Many observers say the Fed also fueled the housing bubble by keeping short-term interest rates low in 2003 and 2004.
The pendulum is now swinging back toward intervention. Mr. Frank last November pushed an aggressive antipredatory lending bill through the House with the cooperation of Republicans. Among other things, the law would hold firms that package mortgages into securities responsible if those mortgages were predatory -- even if someone else, like a mortgage broker, originated them. The Senate has yet to take up the matter.
Rep. Scott Garrett, a New Jersey Republican who actively opposed many antipredatory-lending bills, says earlier action might not have mitigated the subprime crisis. He says innovation in the lending market would have found a way around even an all-encompassing bill. "Just a year ago we were talking about how great it was [that] the highest percentage of Americans ever were in their homes," he says.
A State's Blind Eye
The nation's laissez-faire climate permeated California, where subprime lending soared as home prices outraced incomes. Here, regulatory shortcomings spanned party lines. Republican legislators generally opposed antipredatory lending bills. And Democrats, who controlled the state legislature, didn't want to threaten one of the state's star industries. The state's regulators, meanwhile, were poorly equipped to oversee the booming mortgage industry.
California banks are regulated federally, some jointly with the state's Department of Financial Institutions. But the largest subprime originators were other kinds of institutions: mortgage brokers and finance companies which were overseen by the Department of Real Estate and Department of Corporations, respectively.
The Department of Corporations, which regulates more than 300,000 corporate entities in a wide variety of investment and financial businesses, has long been business friendly. Spokesman Mark Leyes says it has to strike a balance between regulating and facilitating business. "We're the cop, but we're the friendly cop," he says.
Since 2003, the department had been run by a series of interim commissioners. Preston DuFauchard, an assistant general counsel for Bank of America, was appointed and confirmed commissioner in June 2006. That year, companies regulated by the department loaned $252 billion to Californian home buyers.
But the mortgage industry wasn't the top priority. Mr. DuFauchard says his first tasks were to bring securities regulations in line with federal rules and to tackle concerns involving financial scams against senior citizens. Mortgages moved to the top of the list only in early 2007, after a high-profile California lender collapsed.
Armed with 27 examiners for 4,800 consumer-finance companies, including mortgage lenders, the department examined mortgage companies once every four years. The department checked whether these companies charged proper fees to borrowers and kept adequate capital reserves, but it generally wasn't tasked with assessing whether the loans themselves were sound.
In August 2006, the department examined Irvine, Calif.-based New Century Financial Corp., one of the biggest subprime lenders, and found no violation of state laws. What the examiners missed, because it wasn't technically their mandate to look, was the rapid corrosion of loan quality that would force New Century out of business seven months later.
That same month, the department notified Ownit Mortgage Solutions, Agoura Hills, Calif., another big subprime lender, that it was four months late filing its 2005 audit report and levied a $1,000 fine. In December 2006, unable to honor commitments to repurchase defaulting mortgages from investors, Ownit ceased all lending and filed for bankruptcy protection. Only nine months after that did the Department revoked its license.
"The Department of Corporations effectively fulfilled our obligations as state regulator of both" New Century and Ownit, says spokesman Mr. Leyes.
In January 2007, Democratic State Sen. Michael Machado pressed Mr. DuFauchard, the Department of Corporations commissioner, to adopt tougher federal guidelines for state lenders. Mr. DuFauchard began the process of approving the rules, but cautioned it could take months. Enforcing them "may be a bigger pill than the Department of Corporations can swallow with existing resources," he told the state senate banking committee.
Last summer, after soaring defaults ended the most questionable practices, the department swung into action. Mr. DuFauchard said the federal guidelines would apply to state lenders effective January 2008. He also initiated talks that led to mortgage-servicing companies agreeing to extend some initial interest rates to protect some homeowners from defaulting.
The department has added seven examiners while the number of mortgage lenders it oversees has shrunk by more than 100. It also has broader scope to audit licensees. Under a new state law, subprime and nontraditional mortgage lenders must evaluate a borrower's ability to repay the loan over its full life, not just during the period of introductory fixed interest rates. The state legislature had blocked such a provision back in 2001.
Certainly the points about personal responsibility are valid. But for better or worse, we have had consumer protection laws in the past.
There are also stories about banking interests circumventing efforts to reduce some lending abuses at the state levels by lobbying at the federal level to get the feds to run interference and get state enforcers to back off.
Put aside the issue of which party's more at fault. Could a different regulatory regime have prevented the problem from at least reaching the level it did?
========================
PAGE ONE
Housing Bust Fuels Blame Game
Democrats Seize On
Opponents' Role;
Bipartisan Failures
By GREG IP, JAMES R. HAGERTY and JONATHAN KARP
February 27, 2008; Page A1
As the falling housing market shakes financial institutions and pummels Americans in an election year, the nation's economic woes have surged to the top of voters' minds. The timely question: To what extent are politicians and regulators at fault?
Democrats are quick to blame Republicans, who were in power during the housing bubble and subprime lending frenzy. For years, America's leaders failed to restrain the markets, companies, investors and consumers from the missteps that led to the most pervasive financial crisis in decades.
But in hindsight, the failure stretches across government and across party lines. At bottom are two strong currents. From the Republican president to urban Democratic congressmen, homeownership was pushed as an overriding and unquestioned goal. And many significant attempts at regulation were obstructed by the prevailing belief that the economy did best when financial markets operated as freely as possible.
The Bush administration coupled cheerleading for homeownership with pressure on government-sponsored mortgage lenders Fannie Mae and Freddie Mac to provide funding for riskier mortgages. Both Democrats and Republicans stood by as Fannie and Freddie invested heavily in securities backed by subprime loans. Democratic congressmen pushed a federal law to restrain lending practices later discredited, but Republicans with some Democratic allies blocked or countered with weaker versions.
And at the Federal Reserve, Chairman Alan Greenspan, revered by both parties for his economic management, resisted using the Fed's authority to more aggressively regulate lender behavior.
The blame spreads beyond Washington, to state capitals. In California, home to most of the country's subprime lenders, Democratic state lawmakers didn't support laws that would have imposed tougher regulations on a prized local industry. Politicians of all stripes cheered on the lower interest rates that sparked the boom in housing and excesses in credit.
FINDING FAULT
Now, as Washington scrambles to repair the damage, momentum appears to be swinging back toward a more significant role for government in the American economy. Congressional Democrats have proposed the federal government guarantee up to $400 billion in troubled mortgages if lenders first write down their value. The Bush White House, which opposes the use of public money to bail out borrowers and lenders, is signaling it is open to compromise.
It is impossible to know whether a different approach to housing and financial regulation would have produced a different outcome. As in the 1990s stock-market bubble, many victims began as willing participants seduced by ever-rising prices and easy credit.
One thing is clear. The nation gorged itself on home-buying, something once considered as American as apple pie. "Let's be honest with ourselves," Richard Syron, chief executive of Freddie Mac and a former Carter Treasury and Federal Reserve official, said in December. "We went crazy as a country with the goals...saying, 'Everybody's got to have a house.'"
Below, a look at what went wrong.
Pushing the Dream
As far back as the Civil War, owning a home has been associated with civic virtue and moral behavior. Democratic and Republican administrations alike sought to raise homeownership through subsidies, tax breaks and dedicated agencies.
When George W. Bush took office, that push became a pillar of his "ownership society" campaign. "We want everybody in America to own their own home," Mr. Bush said at a housing conference sponsored by the White House in October 2002. Earlier that year, he issued a "challenge" to lenders and others in the industry: Create 5.5 million new minority homeowners by the end of the decade. In 2003, he signed the American Dream Downpayment Act, creating a program that would offer money to the poor so they could secure a first mortgage.
These challenges came just as the lending industry was finding that subprime loans could be very profitable, at least in the short term. The administration's push also bolstered industry claims that such loans -- made to people with weak credit records -- were answering a vital social need.
Homeownership is "our mission," Angelo Mozilo, chief executive of Countrywide Financial Corp., a giant mortgage lender, said in a February 2003 speech. Citing Mr. Bush's drive, Mr. Mozilo said lenders needed to bring the rate of minority homeownership closer to that of whites. One answer, he said, was to stop requiring sizable down payments from people who couldn't afford them.
Countrywide and other lenders soon were promoting mortgages that allowed subprime borrowers to buy homes with little or no money down. The percentage of subprime borrowers who didn't fully document their income and assets grew from about 17% in early 2000 to 44% in 2006, according to data from First American CoreLogic, a research firm in San Francisco.
Subprime was initially aimed at people with weak credit. But by 2005 and 2006, lenders encouraged many types of better-off borrowers to take such loans, including people with large incomes who wanted to speculate on rental housing. Many subprime loans were made to refinance low-income people who already owned homes, often loading them up with more mortgage debt and creating the risk of foreclosure.
Government-sponsored companies that buy and guarantee mortgages also joined the subprime fray. In 2002, the Bush administration began criticizing the companies, Freddie Mac and Fannie Mae, saying they were "trailing" the rest of the mortgage market in terms of their financing of homes for low-income people and minorities.
To push Fannie and Freddie, the Department of Housing and Urban Development, or HUD, eventually required that a higher percentage of loans they fund go to low-income borrowers. The pair met HUD's requirements partly by buying the AAA-rated portions of mortgage securities created by Wall Street firms and backed by subprime home loans. After the initial low-payment period, many of those loans proved unaffordable to borrowers and are now going into foreclosure.
The homeownership rate, which rose from 65% in early 1996 to a record 69% in 2004, has since fallen below 68% and is almost certain to fall further as foreclosures rise and credit tightens for first-time buyers. Moody's Economy.com forecasts that three million home loans will go into default in the 30 months ending in mid-2009, with about two-thirds of them resulting in foreclosures.
HUD says minority homeownership has increased by about 3.1 million since mid-2002 -- more than two million shy of President Bush's goal. The Bush administration is "proud" of having pushed for more minority homeownership and never favored reckless lending, says Tony Fratto, a White House spokesman.
From the time subprime took off in the mid 1990s, legislators and regulators tried to balance two conflicting goals: increasing low-income families' access to credit and minimizing the potential for abuses by lenders. As home prices soared, tighter curbs usually lost out to a laissez-faire attitude in tune with the ruling Republicans. The result: Congress blocked legislation and the Fed was slow to regulate.
Congress Adrift
In 1999, Democrats, inspired by a groundbreaking antipredatory lending law in North Carolina, sought a federal equivalent. Predatory loans are typically described as those that involve excessive fees and high interest rates. Generally, such abuses occur in the market for subprime loans, those for people with weak credit records or high debt in relation to their income. Republicans, who controlled Congress, blocked the antipredatory legislation, arguing it would interfere with legitimate lending.
"Don't apologize when you make a loan above the prime rate to someone that has a marginal credit rating," Texas Republican Phil Gramm, then chairman of the Senate Banking Committee, told a group of bankers in 2000. "In the name of predatory lending, we could end up denying people with moderate income and limited credit ratings the opportunity to borrow money."
From 2000 on, Democrats continued to introduce bills aimed at safeguarding against alleged predatory lending. In 2005, Rep. Brad Miller of North Carolina and two other Democrats introduced one such bill. Alabama Republican Spencer Bachus, the Republican chairman of a House committee on mortgage lending, was interested in co-sponsoring the bill.
In spring 2006, Mr. Bachus abruptly toughened his stance, in effect killing negotiations, Mr. Miller says. Barney Frank, then a senior Democrat and a co-sponsor of the bill, says while Mr. Bachus was cooperative, the Republican house leadership didn't want any such bill reaching the floor.
Mr. Bachus disputes that the Republican leadership interfered with his efforts, adding: "I was very concerned about the subprime situation." He says Democrats were the ones who toughened their negotiating stance. Mr. Bachus notes that many of his provisions are contained in a bill that the House approved last year.
Fed's Light Touch
Even without congressional intervention, regulators had other tools to address potential abuse. But Alan Greenspan, chairman of the Federal Reserve until 2006, wanted to be sparing in their use.
In 2000, he rejected an informal proposal by then-Fed governor Edward Gramlich that Federal Reserve staffers examine the lending practices not just of banks but of their mortgage affiliates. In 2002, he rejected calls from Democrats to use the Fed's power under the Federal Trade Act to write rules on unfair and deceptive practices.
Mr. Greenspan, in an interview, said examining mortgage affiliates wouldn't have prevented fraud, and would have given shady operators the additional cover of claiming to be Fed-regulated. Regarding the calls from Democrats, he said he and the other governors were following the advice of the Fed's professional staff. More broadly, he said, Congress, not the Fed, was best suited to define "unfair and deceptive" practices and to create legislation to address such lending.
He says he erred in thinking that other investors and market participants would adequately monitor lending standards in the mortgage-backed securities market. "I turned out to be wrong, much to my surprise and chagrin," he said.
Mr. Greenspan and other bank regulators did take some steps to tighten oversight. In 2001, they barred banks from making "loans to borrowers who do not demonstrate the capacity to repay the loan." But that didn't explicitly apply to state-regulated finance companies and mortgage brokers, the entities that originated the majority of subprime loans. Many observers say the Fed also fueled the housing bubble by keeping short-term interest rates low in 2003 and 2004.
The pendulum is now swinging back toward intervention. Mr. Frank last November pushed an aggressive antipredatory lending bill through the House with the cooperation of Republicans. Among other things, the law would hold firms that package mortgages into securities responsible if those mortgages were predatory -- even if someone else, like a mortgage broker, originated them. The Senate has yet to take up the matter.
Rep. Scott Garrett, a New Jersey Republican who actively opposed many antipredatory-lending bills, says earlier action might not have mitigated the subprime crisis. He says innovation in the lending market would have found a way around even an all-encompassing bill. "Just a year ago we were talking about how great it was [that] the highest percentage of Americans ever were in their homes," he says.
A State's Blind Eye
The nation's laissez-faire climate permeated California, where subprime lending soared as home prices outraced incomes. Here, regulatory shortcomings spanned party lines. Republican legislators generally opposed antipredatory lending bills. And Democrats, who controlled the state legislature, didn't want to threaten one of the state's star industries. The state's regulators, meanwhile, were poorly equipped to oversee the booming mortgage industry.
California banks are regulated federally, some jointly with the state's Department of Financial Institutions. But the largest subprime originators were other kinds of institutions: mortgage brokers and finance companies which were overseen by the Department of Real Estate and Department of Corporations, respectively.
The Department of Corporations, which regulates more than 300,000 corporate entities in a wide variety of investment and financial businesses, has long been business friendly. Spokesman Mark Leyes says it has to strike a balance between regulating and facilitating business. "We're the cop, but we're the friendly cop," he says.
Since 2003, the department had been run by a series of interim commissioners. Preston DuFauchard, an assistant general counsel for Bank of America, was appointed and confirmed commissioner in June 2006. That year, companies regulated by the department loaned $252 billion to Californian home buyers.
But the mortgage industry wasn't the top priority. Mr. DuFauchard says his first tasks were to bring securities regulations in line with federal rules and to tackle concerns involving financial scams against senior citizens. Mortgages moved to the top of the list only in early 2007, after a high-profile California lender collapsed.
Armed with 27 examiners for 4,800 consumer-finance companies, including mortgage lenders, the department examined mortgage companies once every four years. The department checked whether these companies charged proper fees to borrowers and kept adequate capital reserves, but it generally wasn't tasked with assessing whether the loans themselves were sound.
In August 2006, the department examined Irvine, Calif.-based New Century Financial Corp., one of the biggest subprime lenders, and found no violation of state laws. What the examiners missed, because it wasn't technically their mandate to look, was the rapid corrosion of loan quality that would force New Century out of business seven months later.
That same month, the department notified Ownit Mortgage Solutions, Agoura Hills, Calif., another big subprime lender, that it was four months late filing its 2005 audit report and levied a $1,000 fine. In December 2006, unable to honor commitments to repurchase defaulting mortgages from investors, Ownit ceased all lending and filed for bankruptcy protection. Only nine months after that did the Department revoked its license.
"The Department of Corporations effectively fulfilled our obligations as state regulator of both" New Century and Ownit, says spokesman Mr. Leyes.
In January 2007, Democratic State Sen. Michael Machado pressed Mr. DuFauchard, the Department of Corporations commissioner, to adopt tougher federal guidelines for state lenders. Mr. DuFauchard began the process of approving the rules, but cautioned it could take months. Enforcing them "may be a bigger pill than the Department of Corporations can swallow with existing resources," he told the state senate banking committee.
Last summer, after soaring defaults ended the most questionable practices, the department swung into action. Mr. DuFauchard said the federal guidelines would apply to state lenders effective January 2008. He also initiated talks that led to mortgage-servicing companies agreeing to extend some initial interest rates to protect some homeowners from defaulting.
The department has added seven examiners while the number of mortgage lenders it oversees has shrunk by more than 100. It also has broader scope to audit licensees. Under a new state law, subprime and nontraditional mortgage lenders must evaluate a borrower's ability to repay the loan over its full life, not just during the period of introductory fixed interest rates. The state legislature had blocked such a provision back in 2001.
On the issue of bailouts, nobody will support them if they're couched as helping people who made bad decisions.
Certainly they made bad decisions and some were outright duped -- some low-income people were targeted for refinancing with the promise of lower monthly payments. But the fine print, while documented, were beyond the sophistication of many borrowers.
Still, many will say tough break.
Some of the proponents of bailouts will couch it in terms of fairness. Chrysler, Long Term Capital Management and Bear Stearns among others were bailed out because they're too big to be allowed to fail.
Yet if you're saying that individuals who made bad decisions deserve their fate, what about these institutions which got into trouble creating and trading securities which were based on mortgages taken out by these stupid individual mortgage holders? The economic scale of the problem has arguably been exacerbated by SIVs and CDOs.
Certainly Wall Street doesn't have stupid or unsophisticated people who are incapable of seeing the potential pitfalls of their decisions.
So are we saying that stupidity doesn't deserve to be bailed out but greed does?
Still, the fairness argument isn't convincing either because ultimately, you get into emotional arguments about what's just.
A better argument might be trying to determine what the cost of the bailout would be vs. the cost if you didn't do a bailout.
For instance, if one home is foreclosed, the property values of the other homes in that neighborhood are adversely affected.
It might be costly to bail out these people but ultimately, it might cost more, in terms of decline in asset values and decline in GDP, if they were all allowed to default.
Certainly they made bad decisions and some were outright duped -- some low-income people were targeted for refinancing with the promise of lower monthly payments. But the fine print, while documented, were beyond the sophistication of many borrowers.
Still, many will say tough break.
Some of the proponents of bailouts will couch it in terms of fairness. Chrysler, Long Term Capital Management and Bear Stearns among others were bailed out because they're too big to be allowed to fail.
Yet if you're saying that individuals who made bad decisions deserve their fate, what about these institutions which got into trouble creating and trading securities which were based on mortgages taken out by these stupid individual mortgage holders? The economic scale of the problem has arguably been exacerbated by SIVs and CDOs.
Certainly Wall Street doesn't have stupid or unsophisticated people who are incapable of seeing the potential pitfalls of their decisions.
So are we saying that stupidity doesn't deserve to be bailed out but greed does?
Still, the fairness argument isn't convincing either because ultimately, you get into emotional arguments about what's just.
A better argument might be trying to determine what the cost of the bailout would be vs. the cost if you didn't do a bailout.
For instance, if one home is foreclosed, the property values of the other homes in that neighborhood are adversely affected.
It might be costly to bail out these people but ultimately, it might cost more, in terms of decline in asset values and decline in GDP, if they were all allowed to default.
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matthewk
- DSP-Funk All-Star
- Posts: 3324
- Joined: Mon Apr 07, 2003 3:00 am
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In some discussions, officials have been talking about reducing the mortgage value to whatthe house is currently worth. I was thinking of that at the time I replied. I do not even agree with reducing their rates. That is the deal they signed on to, and I bet the majority of them knew what they were getting into. Why should they get another 5 years at a great rate while I'm locked into my fixed rate?JRod wrote:First off, I didn't say to reduce their mortgages reduced, I said to have their rates reduced to manageable levels. Most people are suffering when their payments ballooned. The loan companies sold individual programs based off of low interest rates or programs where you didn't pay the principal.
Some (not all of) these people banked on their homes rising up $200,000 in three years like all the HGTV shows tells us they will so they could sell them off for a great profit before the rate reset. Now of course they will say they were tricked, and that this mess cannot possibly be their own fault.
If someone can legitimately prove they were decieved or taken advantage of, then I think the responsibility falls on the lender to redo the contract, not the US goverment to bail them BOTH out.
I do think the government rewards this behavior. Not sure why you thought otherwise. Our goverment is becoming just as much a problem as the lenders and borrowers. I've seen people declare bankruptcy after blowing through inheritance money and credit cards without a care. I'm just as upset with them as I am with the consumers who figure "what the heck, if they're willing to lend me the money I'll do it". The government has turned chapter 11 (or 13, whatever the right one is) into a way for irresponsible consumers to get a "get out of debt free" card.JRod wrote: Second, you are naive to think this government doesn't reward this type of behavior.
Those people are the ones I feel sorry for. I know there are people that were taken advantage of, but I do not trust our government to come up with a plan that will successfully help those who really need it from those who were knowingly irresponsible.JRod wrote: Finally, there are no absolutes in anything we do. I think you would find that some of these people weren't irresponsible but sold terrible loan programs, as TheGamer described.
-Matt
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matthewk
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I agree. This is where the government has gotten itself into a bit of a mess. Now that they helped to bail out Bear Stearns, a whole wave of others, both consumers and corporations, are going to be lining up for their bailout.XXXIV wrote:I do have one when that same govt bails out every freaking corporation that fucks up....
Should all be one way or the other.
-Matt
While we can point the finger in umpteen different directions regarding the subprime mess the securities markets are working through, the simple question every homebuyer must ask themselves BEFORE signing on for ANY loan is this, "Can I/we afford the monthly note?".
And if it's a reset loan, the question is this, "While I can afford this loan at it's initial rate today, can I afford the monthly rate when it resets in 2/3/4 years, etc.?"
While I feel badly for ANYONE who goes through periods of financial stress (been there, done that), one also has to avoid taking on debt they know UPFRONT they can't afford, especially when buying a long-term asset like a home.
I truly hope this subprime fiasco hits home with the citizens of this country about one thing, home OWNERSHIP simply isn't for everybody.
The old-fashion notion of renting a place to live until you can comfortably afford to buy a house is beginning to look like an intelligent strategy once again...it's about dang time, too!
And if it's a reset loan, the question is this, "While I can afford this loan at it's initial rate today, can I afford the monthly rate when it resets in 2/3/4 years, etc.?"
While I feel badly for ANYONE who goes through periods of financial stress (been there, done that), one also has to avoid taking on debt they know UPFRONT they can't afford, especially when buying a long-term asset like a home.
I truly hope this subprime fiasco hits home with the citizens of this country about one thing, home OWNERSHIP simply isn't for everybody.
The old-fashion notion of renting a place to live until you can comfortably afford to buy a house is beginning to look like an intelligent strategy once again...it's about dang time, too!
People also get loans which are fixed at lower rates for 3,5, 7 or now 10 years, with the intention of moving or refinancing before it changes to ARM.fsquid wrote: And if it's a reset loan, the question is this, "While I can afford this loan at it's initial rate today, can I afford the monthly rate when it resets in 2/3/4 years, etc.?"
This has been done for years, even before this crisis, as a way to get the best terms and save on monthly payments and use the savings for other things.
But falling real estate values remove that refinancing option or even selling your property. And this isn't done by people with bad credit. Many of these people can qualify for and afford 30-year fixed mortgages but mortgage consultants do advise that if you don't plan to live in a home for the full term of the loan, you can save a lot of money with these fixed/ARM loans.
See the article about ownership society. The desire to own rather than rent is not irresponsible. Maybe unrealistic but you can't compare it with people who go deep into debt to finance extravagant lifestyles.I truly hope this subprime fiasco hits home with the citizens of this country about one thing, home OWNERSHIP simply isn't for everybody.
The old-fashion notion of renting a place to live until you can comfortably afford to buy a house is beginning to look like an intelligent strategy once again...it's about dang time, too!
There are too many financial and tax advantages to owning over renting that people are going to try to buy homes.
But as noted before, a lot of the people who got into trouble are not only first-time homeowners but people who had mortgages they could afford already but were enticed into refinancing under these balloon terms.
You can't completely absolve the lenders, many of which appeared and then disappeared within this decade.
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Slumberland
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ScoopBrady
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Did anyone else think this was a link to a pic of Hilary's penis?Slumberland wrote:http://sportspickle.com/features/volume ... inton.html
I am a patient boy.
I wait, I wait, I wait, I wait.
My time is water down a drain.
I wait, I wait, I wait, I wait.
My time is water down a drain.
More deficits from McCain?
[/b]
http://www.slate.com/id/2187570/McCain wants to extend the Bush tax cuts, which he once opposed as a needless sop to the rich in a time of war.
...
But McCain wants to see Bush's tax relief and raise it some. McCain would slash the corporate-income-tax rate from 35 percent to 25 percent (because corporate profits as a percentage of GDP didn't spike enough this decade?), and he'd abolish the Alternative Minimum Tax, which would be a welcome move for many upper-middle-class taxpayers. "In all, his tax-cutting proposals could cost about $400 billion a year, according to estimates of the impact of different tax cuts by CBO and the McCain campaign," the Wall Street Journal reported. And how to make up for the lost revenues? Hmmm. McCain promises to cut earmarks; to eliminate waste, fraud, and abuse; and to reduce the projected growth of Medicare; but he won't provide many numbers.
As the WSJ deadpanned: "The cost will make it difficult for him to achieve his goal of balancing the budget by the end of his first term." That's perhaps the understatement of the year. The 2009 budget calls for a deficit of $407 billion on projected receipts of $2.7 billion, as this table shows. Essentially, McCain wants to cut revenues by about 15 percent from current levels, with nothing close to that in spending reductions, in a time when, even after spending excess Social Security payroll taxes, the deficit is running at more than $400 billion.
[/b]
It is easy to look back and blame Bush for the mess we are in today - although there is plenty of blame to go around on both sides. That is relatively easy to do - especially for a liberal such as myself.
But when I look to the future to see who can get us out of this mess, it is not so easy. Based on the way the Democrats have run this election campaign - from the changes in the way delegates are handed out after primaries to the cluster in both Florida and Michigan, it makes me strongly doubt that this group of idiots could turn around the economy or manage the war.
Rather than feel good about the fact that this election will involve either a minority or a woman, I feel like we are looking at a choice between a Washington insider who raised a fortune in campaign funds and then mismanaged her way into second place against newcomer with lots of pretty ideas that have no chance of becoming laws. I also feel like the party and its "Move On' supporters are trying to shove this guy down my throat whether I like it or not.
It is starting to look like a choice between leaving the last ballot choice blank or voting for McCain.
But when I look to the future to see who can get us out of this mess, it is not so easy. Based on the way the Democrats have run this election campaign - from the changes in the way delegates are handed out after primaries to the cluster in both Florida and Michigan, it makes me strongly doubt that this group of idiots could turn around the economy or manage the war.
Rather than feel good about the fact that this election will involve either a minority or a woman, I feel like we are looking at a choice between a Washington insider who raised a fortune in campaign funds and then mismanaged her way into second place against newcomer with lots of pretty ideas that have no chance of becoming laws. I also feel like the party and its "Move On' supporters are trying to shove this guy down my throat whether I like it or not.
It is starting to look like a choice between leaving the last ballot choice blank or voting for McCain.
Well leaving the ballot blank or voting for McCain will have the same result.
It would be a vote for the status quo, since McCain has promised to double-down on the same policy bets Bush has made on the war and budget/economy.
It would be a bet that things self-correct, that if you ignore problems, they go away.
But it might be fitting. Some of those who advocate staying in Iraq as long as it's necessary (despite vague and shifting definitions of what success there would be) argue that we have an obligation, because we have to fix that country.
Similarly, why not continue the fiscal and pro-business policies (such as the energy policy which has us heading towards $4 gas or pushing the "ownership society") and see where they lead?
Maybe things can only get better so we might as well "stay the course."
It would be a vote for the status quo, since McCain has promised to double-down on the same policy bets Bush has made on the war and budget/economy.
It would be a bet that things self-correct, that if you ignore problems, they go away.
But it might be fitting. Some of those who advocate staying in Iraq as long as it's necessary (despite vague and shifting definitions of what success there would be) argue that we have an obligation, because we have to fix that country.
Similarly, why not continue the fiscal and pro-business policies (such as the energy policy which has us heading towards $4 gas or pushing the "ownership society") and see where they lead?
Maybe things can only get better so we might as well "stay the course."
Our country's going to hell in a handbasket. Now people are choosing candidates based on free tickets to a concert?
http://www.indystar.com/apps/pbcs.dll/a ... 8804030466
Does that seem the least bit ethical to anyone?
http://www.indystar.com/apps/pbcs.dll/a ... 8804030466
Does that seem the least bit ethical to anyone?
www.trailheadoutfitters.org
trailheadoutfitters.wordpress.com
facebook.com/Intentional.Fatherhood
trailheadoutfitters.wordpress.com
facebook.com/Intentional.Fatherhood
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matthewk
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It's the hard right that WANTS to balance the budget. McCain is barely on the right at all. He had one foot on the right and a few toes on the left. The further you go to the left, the further out of balance our budget will get.Feanor wrote:It's really sad that McCain's policies are just the same same old hard-right nonsense that have got the economy in the mess it is today. Whatever happened to those Republicans who desperately wanted to balance the budget?
-Matt
Would you put Reagan, Bush I, and Bush II as on the right?matthewk wrote: It's the hard right that WANTS to balance the budget. McCain is barely on the right at all. He had one foot on the right and a few toes on the left. The further you go to the left, the further out of balance our budget will get.
The concert is a free concert by Dave Matthews in support of the Obama campaign. If Toby Keith gave a free concert in support of McCain, would that be unethical?tealboy03 wrote:Our country's going to hell in a handbasket. Now people are choosing candidates based on free tickets to a concert?
http://www.indystar.com/apps/pbcs.dll/a ... 8804030466
Does that seem the least bit ethical to anyone?
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matthewk
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There's a lot more needed to explain government spending than a 30 second Google search to find a chart.Jared wrote:Would you put Reagan, Bush I, and Bush II as on the right?matthewk wrote: It's the hard right that WANTS to balance the budget. McCain is barely on the right at all. He had one foot on the right and a few toes on the left. The further you go to the left, the further out of balance our budget will get.
It is interesting to see that only 2 of the last 9 presodents has come out with a net gain, and one of those is a Republican.
Last edited by matthewk on Thu Apr 03, 2008 12:55 pm, edited 1 time in total.
-Matt
Selling votes is the American way! I can't understand why all those people who say they don't like any candidate or hate all politicians don't just sell their votes. If I were truly undecided I'd find one Obama supporter and one McCain supporter and open the bidding at $50.00. 
Anyone who can keep down their lunch after a Dave Matthews concert is welcome to donate to whomever they want...
Discussing the budget without discussing the Congressional composition is useless, btw.
On a related note, interesting how that pork book is playing out...
Anyone who can keep down their lunch after a Dave Matthews concert is welcome to donate to whomever they want...
Discussing the budget without discussing the Congressional composition is useless, btw.
On a related note, interesting how that pork book is playing out...
XBL Gamertag: RobVarak
"Ok I'm an elitist, but I have a healthy respect for people who don't measure up." --Aaron Sorkin
"Ok I'm an elitist, but I have a healthy respect for people who don't measure up." --Aaron Sorkin
To an extent. The interesting comparison is looking at the deficit from 1995-2000 (Democratic President, Republican Congress) and the deficit from 2000-2006 (Republican President, Republican Congress). Or to compare 1976-1980 (Democratic President, Democratic Congress) with 1980-1988 (Republican President, mixed Congress). Congress plays a role...but there are clear differences when with a Democratic vs. Republican executive.RobVarak wrote: Discussing the budget without discussing the Congressional composition is useless, btw.
The Bush budget plan seems very strange.
Incresed spending matched with tax cuts.
Im not very good at math but that looks to be a bad idea if you actually want a balanced budget.
Seems to me he really doesnt care about the red ink and is leaving it to the next guy. Wether its Mcain or Obama to straighten it out.
Incresed spending matched with tax cuts.
Im not very good at math but that looks to be a bad idea if you actually want a balanced budget.
Seems to me he really doesnt care about the red ink and is leaving it to the next guy. Wether its Mcain or Obama to straighten it out.
McCain has proposed to eliminate the deficit by the end of his first term (there's actually some speculation that he may announce he will only serve one term), by ending earmarks and reducing growth of programs like medicare -- but presumably spending "whatever it takes" on the wars and DOD in general.
While at the same time extending the tax cuts past 2010/2011 when they are due to expire, as well as offer some more corporate tax cuts.
There was a lot of skepticism back in 2001 that the tax cuts would not cause deficits.
There is now skepticism about what McCain has talked about in terms of his fiscal/economic policies and their impact on the budget.
Maybe McCain isn't too concerned because it won't be his generation which will have to pay.
While at the same time extending the tax cuts past 2010/2011 when they are due to expire, as well as offer some more corporate tax cuts.
There was a lot of skepticism back in 2001 that the tax cuts would not cause deficits.
There is now skepticism about what McCain has talked about in terms of his fiscal/economic policies and their impact on the budget.
Maybe McCain isn't too concerned because it won't be his generation which will have to pay.
Which Republican, Bush 41? Bush left Clinton deficits.matthewk wrote: There's a lot more needed to explain government spending than a 30 second Google search to find a chart.
It is interesting to see that only 2 of the last 9 presodents has come out with a net gain, and one of those is a Republican.
If you believe the fiscal conservatives, you wouldn't expect anything but Republican presidents to be responsible for budget surpluses?