Boy do the presidential wannabes love to throw the F word around while slamming the mortgage lending industry and blaming us for all the economic ills of the world. And the F word I’m talking about isn’t what you think. It’s FRAUD. In one presidential debate last night I heard the word FRAUD a dozen times and then I stopped counting because I had to go throw up. To hear these guys (and gals) speak as they have in recent debates you’d think that the entire lending industry made it a mission to take down scores of innocent homeowners and blindside Wall Street. Yes, we are evil incarnate and have devoted our lives to perpetrating FRAUD on the unsuspecting public.
I could dismiss the commentary and mindless blaming if the presidential hopefuls’ proposed solutions didn’t demonstrate an appalling lack of knowledge of the mortgage industry and a complete disregard for free markets.
First, they repeatedly and mistakenly assume that if people can’t or don’t make their mortgage payments that the lenders must have ripped them off, fast-talked them, or committed FRAUD in some way. And that industry profits are proof that lenders are driven by greed and FRAUD. Enough already. Nearly all of the borrowers in default received required disclosures and their loans were originated in accordance with federal and state laws. The instances of FRAUD or predatory lending in the news have been isolated cases involving a handful of bad apples. Every industry has them, and enforcement of existing laws should be sufficient to curtail their activity.
Second, nearly everyone running for the top job in the US proposes freezing rates and dictating what lenders can charge subprime borrowers. Naturally, if lenders can’t charge rates high enough to compensate for serving the subprime market they will just stop lending there–effectively barring subprime borrowers from home ownership. The 85% of subprime borrowers who successfully managed their mortgage would not thank their representatives for this I think.
Finally, there is something seriously wrong with proposed bailout schemes that reward subprime borrowers who skip payments by dropping their rate while punishing responsible borrowers by leaving their rates unchanged.
Which brings up a whole slew of F words: FOOLISH, FRIGHTENING, and FAILURE.
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And secondly, freezing rates and forcing lenders to comply with additional regulation or scrutiny is in no way going to help the credit crisis. If anything, it’ll make the situation even worse, as lenders tighten up some more and investors see even less incentive.
Just out of Curiosity, when do the ethics of the appraisors(inflating values) come into the big picture?? Alot of amature wanna be investors and flippers are the biggest problem and they don’t deserve to be bailed out by anyone. They are to blame for more regulation for an already heavily regulated industry. Any thoughts????
Agreed. See previous post re: appraiser inflation called Big Bad Bullies. The answer is not more disclosure, it’s making the ones we have more pertinent (APR needs an overhaul because it can be very misleading) and easier to understand.
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