Clinton Writes Paulson a Letter and Asks For 90 Day Ban on Foreclosures
From the Senate: Senator Clinton Calls for Immediate Action to End Foreclosure Crisis
Washington, DC - Senator Hillary Rodham Clinton today sent the following letter to Treasury Secretary Henry Paulson calling for needed steps to end the foreclosure crisis.
December 3, 2007
The Honorable Henry M. Paulson, Jr.
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Mr. Secretary:
I am encouraged by news accounts that Treasury officials are negotiating an agreement with the mortgage industry to curb the foreclosure crisis. Reports of this agreement indicate that it will allow homeowners to apply to quickly refinance their mortgages or temporarily stop their adjustable rate mortgages from resetting at higher levels.
An effort to end the foreclosure crisis is long overdue. 1.8 million foreclosure notices have been sent out this year, an increase of 74% from last year. And with the monthly payments set to rise on more than 1 million subprime loans next year, the situation is likely to worsen. Experts now say that the foreclosure crisis is weakening the economic outlook, hurting industries from construction to autos, and making banks reluctant to lend companies the capital they need to expand and create jobs. Cities face the prospect of vacant properties marring neighborhoods, cutting tax receipts, and dragging down property values.
It is critical that we address this crisis. The Administration and the mortgage industry must reach an agreement that matches the scale of the problem. If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable. A satisfactory agreement must do at least the following: impose a moratorium on foreclosures, freeze mortgage rates before they escalate, and require that the mortgage industry report its progress on loan modifications:
- Impose a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes. The moratorium will stop foreclosures until lenders and servicers have an opportunity to implement the freeze in mortgage rates. Servicers have complained that they do not have the systems in place to quickly contact the large numbers of at-risk borrowers. Servicers can certainly expect that during the moratorium at-risk borrowers will contact them. The moratorium will also give state and city organizations as well as community groups the necessary time to provide financial counseling to at-risk homeowners. The moratorium only applies to owner-occupied houses, and therefore excludes real estate speculators.
- Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or until the mortgages have been converted into affordable, fixed-rate loans. After the moratorium, there should be a long freeze in rates on adjustable rate mortgages. The overwhelming majority of subprime mortgages have adjustable rates. The long rate-freeze will give the housing market time to stabilize. It will give families an opportunity to rebuild equity in their homes. It also gives the mortgage industry time, and incentive, to convert mortgages that were designed to fail into loans that are actually affordable. The rate freeze and loan modification must be extended not only to borrowers who are current but to some who have fallen behind. After all, it is indisputable that brokers and mortgage companies lured families into mortgages which were designed to end in foreclosure. This was only possible because regulators were asleep at the switch. A rate freeze is critical. An average of $30 billion in loans will reset monthly next year. One study indicates that the average reset increases monthly payments by 40%. It is no surprise that rate resets are the major driver of the foreclosure crisis. The rate freeze and loan modification would only apply to owner-occupied houses.
- Require the mortgage industry to provide status reports on the number of mortgages it has modified. Resolution of the foreclosure crisis will require that large numbers of unworkable mortgages be converted to more stable loans. To date, however, despite pressure from Congress and the press, lenders and servicers have modified only about 1% of subprime mortgages. This obviously has to change. We cannot take the industry at its words that it will follow through on an agreement to convert loans expeditiously. Accordingly, the agreement must impose on lenders and servicers an obligation to regularly report their modifications.
Mr. Secretary, if you produce an agreement that lacks these provisions, I will pursue another course to end the crisis:
- I will consider legislation that enables lenders to convert unworkable mortgages into stable, affordable loans without the permission of investors. Protection from lawsuits will remove the obstacle that keeps lenders, servicers and others from turning mortgages that were designed to fail into mortgages families can afford. Right now, servicers who process monthly loan payments and interface with homeowners have flexibility to modify loans. However, they are reluctant to fully exercise this discretion in part because they fear investor lawsuits. Investors who own the securities into which the mortgages have been packaged may assert that they are harmed when servicers help at-risk borrowers. Protection from lawsuits could enable the servicers to help homeowners avoid foreclosures, help investors avoid the losses they would otherwise suffer, and help the economy.
I also propose to provide financial assistance to communities on the frontlines of the crisis:
- A fund of up to $5 billion to help hard-hit communities and distressed homeowners weather the foreclosure crisis. The fund will support initiatives by states, cities, and community groups to reduce foreclosures, and to help cities cope with the financial and social costs associated with an increase in vacant properties. The fund will provide a much-needed boost to communities already feeling the effects of the economic downturn. States are already piloting programs to stem foreclosures. Many of the programs provide financial counseling to at-risk homeowners, help borrowers work out solutions with lenders and educate homeowners about predatory lending. Studies demonstrate that the overwhelming majority of families that receive financial counseling ultimately avoid foreclosures. Financial counseling can cost as little as $3,000 per household, while each foreclosure costs a local community $227,000 when the harm to surrounding property values is included. Foreclosure prevention is more critical than ever. The concentration of foreclosures in particular neighborhoods has a negative ripple effect on communities. It leads to higher rates of crime, lower tax revenues, and lower property values. Low-income communities are especially at risk. Risky subprime loans are three times more likely in low-income neighborhoods than in high-income ones. Minority communities are also disproportionately at risk because subprime loans are five times more likely in predominantly black neighborhoods than in predominantly white neighborhoods. The Center for Responsible Lending estimates that 55% of African-Americans and 46% of Latinos who purchased homes in 2005 received subprime mortgages. Those loans were mostly adjustable rate mortgages, and most of them will experience escalations in the monthly payments either this year or next. The foreclosure crisis threatens to undo the gains in minority homeownership rates. Lawsuits have been filed against mortgage lenders alleging discriminatory practices. Regulators should be especially attentive to these concerns.
In March I called on the mortgage industry to observe a “foreclosure timeout” so that lenders and borrowers could work out solutions. I also wrote to Federal Reserve Chairman Ben Bernanke urging him to act swiftly to curb abusive and irresponsible lending practices. Just two weeks later, however, you told Congress that the subprime problem was “contained.” Unfortunately it was not. While you and others in the Administration misdiagnosed the problem, over 1 million additional foreclosure notices were sent out. Later, I called on the Administration to convene a “crisis conference” that gathered the housing stakeholders–lenders, investors, mortgage servicers, regulators, representatives of homeowners, and others–to devise a way of modifying the large number of unworkable mortgages. I am glad that the Administration has at least heeded this call.
Now that you have gathered the housing stakeholders, it is imperative that you negotiate an agreement appropriate to the scale of the problem. The proposals I have outlined provide the framework for a comprehensive workout, not a bailout. This is a moment of shared responsibility. Investors, lenders, and homeowners all have a part to play and sacrifices to make. While we work to solve the immediate problem, I call on the Administration, the regulators, and the mortgage industry to ensure that the abuses of recent years never recur. There must be a commitment to tightening underwriting standards and disclosure obligations. Federal prohibitions against abusive lending must be vigorously enforced. Prepayment penalties must be eliminated. Brokers must be subject to federal registration. Mortgage servicing fraud and foreclosure rescue fraud must be prosecuted. Homeowners and homebuyers must have greater access to financial counseling. I have already announced proposals to accomplish many of these things. It is unfortunate that the Administration has been so slow to act. But now that you and others are engaged, I urge you to make the bold decisions that the situation warrants. Thank you for your attention to this critical issue.
Sincerely,
Hillary Rodham Clinton
Popularity: 3% [?]
Dec 3rd, 2007 at 4:31 pm
[...] more of Clinton’s letter here. Below are some more details of her proposal to [...]
Dec 3rd, 2007 at 4:43 pm
[...] Read the rest of this great post here [...]
Dec 3rd, 2007 at 5:21 pm
HILLARY!! What are you thinking?? Forget about my vote, now!!
Your view of this “Crisis” shows us you haven’t even begun to think about the effects of this proposal on future investment, on responsible citizens who have made prudent financial decisions, or IRONY of all IRONIES-the next administration that Paulson hopes will inherit this whole post-poned cotastrophe!! — One would think you would at least have understood the gravity of the later.
Your proposal SEVERELY penalizes both groups so that people that LIED on their applications and bought homes they KNEW they could not afford can continue to trash the housing market. It’s a very simple premise really….They signed the papers…Caveat Emptor. If you can’t afford to stay in a home, MOVE out and RENT, the home needs to be foreclosed on and can then be bought by someone who is much more qualified to be a homeowner. Also, Prices MUST crash before any sembelence of normalcy can return to this market…we can’t keep delaying the inevitable….We must face the music now, or risk a Japan-style decade-long disaster to unfold.
What this market needs now is a good FOREST FIRE, not to be once again artificially propped up by politicians trying to look good, or by idiots like Paulson, who are only thinking about saving his buddies at Goldman. You are sadly mistaken if you think Americans are going to stand for this govt. meddling. The market MUST be allowed to correct itself……….
Dec 3rd, 2007 at 5:26 pm
very good scenario but you are dealing only with subprime loans resetting, actually many loans which are AAA prime 3 to 5 years fixed end and they all move the variable with 40 to 60% increase.
Forget the subprime and deal with prime and all variable loan product freeze rate to 5% Interest only for 5 years this is anyway the cost of fund to lender. ALL VARIABLE loans qualify for this freeze
and only than amount of foreclosure with stabilize
Persecutions shall continue by investors buying AAA toward the masters like all closed mortgage comp. who underwrote loans with no common sense
marc
Mortgage broker
Dec 3rd, 2007 at 5:38 pm
People in my country of Zimbabwe were concerned about rising prices. I simply decreed that price increases were illegal and punishable by death. Immediately, price increases ceased. Funny, though…all the shelves on the stores seemed to be empty after that. I heartily commend Mrs. Clinton for her tough stance in forcing the financial markets to bend to heriron will. Don’t forget the threat of death, since that’s what made it work so well for me.
Dec 3rd, 2007 at 6:12 pm
[...] Here’s Hillary Clinton’s plan–straight from the horse’s mouth–for solving the subprime crisis. Prop up the borrowers with taxpayer money, legislate a freeze on mortgage resets, and strip end-investors of their right to sue when their money market funds tank. Clinton Writes Paulson a Letter and Asks For 90 Day Ban on Foreclosures | Loan Modification & Lo… [...]
Dec 3rd, 2007 at 6:20 pm
Did she say legislation making it illegal to sue for a breach of contract? How can you make it legal to change the terms of a loan…by the Decree of Government? The investors put up the money based on the terms of the loans. They stand to lose as much as anybody. Let the markets do what the markets do. Easy does it Hillary.
Dec 3rd, 2007 at 6:59 pm
So it now comes down to election time follies. And the lead fool would be Hillary Clinton followed closely by Heny Paulson, Jr. for what they want to propose. A hidden government bailout for both Wall Street and the US banking system. It has nothing to do with home owners. It has everything to do with the power of a vote. Dems or Reps. Pick your poison.
Hillary thinks she has the power to stormtroop anyone she wants in any fashion she wants. This will cost you votes you fool but I for one am glad.
She thinks that she can end the foreclosure crisis as does Paulson. They are both wrong. It won’t take very long before more and more people who make mortgage payments in a timely manner become so outraged with a hidden government bailout. We the people should not permit the government to introduce this type of bailout.
Some advise Hillary, a 90 day moratorium will only prolong the pain. Most of the people who bought homes that they could not afford, refinanced using exotic mortgage programs or lied on mortgage applications need to be taught a lesson in financial matters. the first lesson - don’t spend what you can’t afford. These arn’t credit cards we are playing with where you can balance transfer one to another. This is real life finance 101. Millions of people are failing the course. So what does hillary wnat to do? She wants to help people continue to cheat the system by using the old college scoring curve.
Well it won’t work. Not now and not ever.
5 Billion dollars. Not out of my pocket you fool. How much kool aid do you think we will drink. Just like the Universal health care that your lying husband proposed to the American people when he was running for election and you backed him on that. That in itself was a lie and a bust. And so will your demands that something be done. If you want to do it then use your own money and not that of the tax payers. I didn’t tell stupid people to buy homes they could not afford nor use exotic mortgage programs that they didn’t understand.
I have worked in the mortgage industry for 22 years and have seen all kinds of fraud. Fraud committed by loan officers as well as borowers and real estate agents. Let them suffer for their own stupidity.
Stick a fork in Hillary and let they hot air out. She knows absolutely nothing about the financial industry and is playing upon the votes of the foolish and stupid people who chose to create there own financial mess.
Stay out of it Hillary you FOOL!
Dec 3rd, 2007 at 7:29 pm
Over my dead body will my tax dollars go towards this monster. OVER MY DEAD BODY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Kiss another vote goodbye, HILLARY. I’m f@#%ing outraged
Dec 3rd, 2007 at 7:48 pm
to those who have no idea what your talking about here it is. People who have adjustable arms paid every month till the adjustment came. they did lie to get the home but showed 24month to 60 month of payment history after purchasing the home. The problem is that we have banks who hire anyone of the street and make them a loan officer with no mortgage broker license. They never train them to understand what an adjustment is and how it works. I have worked for the bank for over 5 years and also different ones. I have seen LO tell customer’s that when the arm expires the payment will go up no more than 100. per month. You can tell that people made their payments because the mortgage boom started in 2003 and now is when we see the problem. I believe that makes it over 4yrs.
Dec 3rd, 2007 at 8:20 pm
Today the Bush Administration announced they found the Weapons of Mass Destruction. They were camouflaged as Sub-prime loans. Homeland security has raised the red dollar flag, a warning to all potential borrowers be alert to any Mortgage Broker or AE that tries to tease you into a loan. If you find one immediately notify your local Federal Reserve Bank. They will attempt to freeze it to prevent rate reset detonation.
Be safe out there!
Dec 3rd, 2007 at 8:40 pm
why doesn’t she just stick to health care and educating the kids. That is all the politicians ever talk about and nrver do anything about. We know what a great job she did last time when she was going to reform the health care industry until she got paid off
Dec 3rd, 2007 at 8:46 pm
Stupid bitch!
Dec 3rd, 2007 at 9:12 pm
MASSIVE CLASS ACTION LAWSUITS UNDERWAY!!!
To the responsible people out there that didn’t overindulge like gluttons during the boom housing years, to the people that have scrimped and saved, and still were smart enough NOT to take an Option ARM—this is the message from your Government—They do not care about you.
They care more about the wreckless idiots and speculators that lied on their applications and committed outright fraud. They care more about elections and propping up this crumbling market, rather than letting the forces of the market do the painful job of correcting it to sanity. The play now, pay later years are OVER!!
DO NOT stand by and let your hard earned money and families be trampled upon like this. Does Hillary know how many responsible- paying on time families will simply WALK AWAY From paying their mortgages due to the Govt.s illegal involvement???
Why in the hell will any sane person ever want to invest in anything American again, when the Govt. can simply step up and change the terms of the contract??? My GOD, this country is going to the DOGS!!!
Dec 3rd, 2007 at 9:20 pm
Hey! How about me? I pay for mortgage on time and now
these folks who made bad decisions (or were lied to) get off
the hook? How about me? I guess I need a break too! How
about Hillary paying for my mortgage? Shes rich, right?
Lets grab the hay off the ox-carts, and then head up to the
castle and grab the royals and introduce them to the guillotine!
Dec 3rd, 2007 at 9:36 pm
all you fucking haters to mrs. hillary clinton she dont want your vote anyways so dont waste your time everybody know republicans sucks! specially the bush administration and his cronnies big time liars spending billions of dollars in a fucking wars that was totally a big fucking lie and fooling millions of american soldiers to serve to his fucking own interest and make them believe they doing the right thing bull crap! fucking bush can’t even fixed katrina problem and you go to other country and steal their oil come on now that’s to obvious . so anyways all you haters shut the fuck up and screw yourself you guys know who you are. god bless america.
Dec 3rd, 2007 at 9:39 pm
Most of the loans I reviewed as an underwriter that I really had issues with were loans for the minorities that the affirmative action type policies tried to cram down our throats, or investment loans.
Most of the foreclosures are individuals that were investors, liars on applications, if you can’t afford it, don’t buy it. I bought a house, with a 75/25 structure, but with a 30 year fixed. I presented full documentation. While it is unfortunate, I don’t feel sorry for these people. Let them suffer the consequences of their decisions.
The only people we should be attempting to save are those that were swindled into getting the Option arms, and then limited to people that can afford a fixed rate payment. We all must pay for our financial mistakes, get those dishonest brokers and reps while you are at it.
Don’t insult the honest people by bailing out those who lied on their applications and made bad choices by going with the “too good to be true” loans.
Dec 3rd, 2007 at 9:39 pm
well accept the reality to all you haters she’s going to be the next president anyways doesn’t matter if she win she deserve it if she want to help million of homeowners she doing the right thin and there’s nohting you can do haters!
Dec 3rd, 2007 at 9:40 pm
Clinton will destroy the debt markets with her proposals. Who in their right mind will buy a mortgage backed security in the future? When the going gets tough, the government will institutionalize ripping off the investor.
Any proposals that do not address the broken mortgage securitization problem will not work. Any proposals to screw the mortgage backed investor only damages the debt markets all the more.
Dec 3rd, 2007 at 9:48 pm
blah…blah ..blah to all you haters to mrs clinton you guys talk shit! only she know what she’s doing she not like the wall street pigs,loan officers, real estate agent , lenders. investors and appraisser they all fool of shit! they lied they know how to fool specially if your minorites with limited english making you believe you could have a small pieces of american dream bullshit! i hope they all burn in hell!
Dec 3rd, 2007 at 9:51 pm
Wow. I can’t believe the stupidity dripping from the fingers of all you who are so perfect with your financial responsibilty and have NEVER had a slow month, layoff, or family crisis that pushed you over the edge. I baught mt 1st home in July of 2005 while banks had been KNOCKING DOWN MY DOOR for @ STRAIGHT YEARS PRIOR falling all over themselves to give me money. Oh and guess what? At the age of 25 and in California of all places with a 815 fico. So F++K YOU all you pieces of S++T who want to call me Stupid? And you think I’m getting off the hook by paying on a depreciating asset…one of $100,000 interest only that when it does reset in 2 more years I wont have the chance to even refi out of it? Oh and I guess you think me trashing my credit for the next few years is getting off the hook too? I think all of you who have no real idea of what happened cannot do anything from preventing this again in the future and I wish ALL of you lived on my street to get a load of this wonderful new comp you’ll brave…all for something that has nothing to do with you right?…Idiots!
Dec 3rd, 2007 at 10:04 pm
Oh, and another thing…If you want to point the finger at someone, point it at all the stupid lenders that popped up out of no where that made it almost imossible to even HAVE to lie on the mortgage application. I know, I used to review all the NO PROOF of anything types of loans there were floating around. You actually had to try hard to find a loan that someone couldnt qualify for yet you want to blame the consumer who heard nothing but “Appreciation This, Appreciation That, Better get it while you still can, etc., etc, etc,” And the idiot who said that we need to just move out and rent it for the next 7 years if a F++king freak who must live in South Dakota where the typical mortgage payment is what, $400? Try $3,000 per month b++ch! Then you can tell me how smart it will be to rent and still continue to pay on a non-asset? One that has depreciated $100,000…yeah, that’s what I thought!
Dec 3rd, 2007 at 11:19 pm
I really had not considered that Hillary was as stupid as her husband. But it should come as no surprise. God help us all.
Dec 4th, 2007 at 12:06 am
The “I am a victim” culture is alive and well. Have any of you people (Hans, U All Make Me Sick) ever heard of fiscal responsibility?
Are you not able to actually read the documetns you are signing?
How is it anyones fault but your own when somone lends you their money and you dont repay it? The debt is owed reagrdless of the value of the collateral incidentally.
You certainly dont further deserve my money, by way of the Government, to bail you out of your irrational , speculative venture!
Dec 4th, 2007 at 12:30 am
Aside from the sheer stupidity of HRC’s proposed moratorium on foreclosures, the other hilarious part is her targeting $5 billion to help staunch foreclosures. It reminds me of the second Austin Powers movie when Dr. Evil (who’d been cryogenically frozen for 30 years) threatens to blow up the world if he’s not given “Ten MILLION dollars”. Five billion dollars is NOTHING. Write-downs in asset-backed securities have already been twenty times that much. Bill Gross of PIMCO has predicted that this will cost the worldwide financial markets one trillion dollars. Clinton’s $5 billion allocation would merely allow states to issue subsidized mortgages for refinancers (in addition to first-time buyers, as is currently the case). Long-term, there’s no “fix” to someone owing 130% of their home’s value. People like “Hans” & “U All Make Me Sick” are going to take a walk from their houses. Whether they have a subprime ARM or a 5.5% 30 year fixed is immaterial.
Dec 4th, 2007 at 12:31 am
Hans and u make me sick and all of the other illiterate idiots who have made unintelligent comments on this page represent just how dumb the average democrat party voter is. You fools don’t write at a third grade level, no wonder you are either going into foreclosure or are just looking for a government handout. Maybe if school children didn’t have to waste that school time for gay pride week then they would have time to teach them important things like how to make intelligent financial decisions. Freezing the teaser rates on adjustable mortgages(by gov’t decree) is just about the dumbest thing to ever be devised. So let’s see, an investor who owns the loan has to eat shit and lose money for the next 30 years so some dumbass who lost his job because he spells like hans can donate more of their money to their drug habit(since you have to be to vote for hillary). And marc krief, people who received loans from you must be in trouble because you dont have a clue what you are talking about. All arms adjusting by 40-60%. Sorry but I just got a guy 6.375% on a 7 year fixed and when that loan adjusts it would be margin plus index which is LIBOR(4.6) plus 2.25 which if you (go get your calculator) add it up is 6.85%. I dont see how that payment is gonna be 40% higher, maybe you can teach me how that works. And learn the facts you are just as dumb. Maybe if borrowers came to me instead of idiots like you they would end up in quality loans and be building wealth instead of being told they need a government handout which is just taking money from responsible people and giving to illiterate fools who should just move to San Fran and beg for money like Hans. Have a nice life idiots.
Dec 4th, 2007 at 1:06 am
Honest Broker,
Thanks for the lucid post. No one believes people like us even exist anymore. Amazing how many morons are running loose.
Dec 4th, 2007 at 1:47 am
Hans, go back to Africa and get a loan for a hut.
Dec 4th, 2007 at 1:50 am
U make me sick, you make me sick.
Dec 4th, 2007 at 6:07 am
Hans, you make me feel as if I’m sitting an English as a second language seminar.
It’s that good!
Dec 4th, 2007 at 8:38 am
hmmmm…tax dollars to pay for healthcare for the “underpriviledged”, tax dollars to pay for poor-me-i-got-screwed-on-a-loan…sorry, I’m with post 14 - CLASS ACTION LAWSUITS from the rest of the public that actually READ their docs before they signed - AND STILL PAY & PAY ON TIME. While your at it Hillary, how ’bout you limit the credit card rates and set something up for the multimillions of poor-stupid-underprivileged (oh and the welthy too) consumers who have spent beyond their means & can’t afford those minimum payments! And let’s also add in car loans - we all know they immediately depreciate by 25% when you drive it off the lot. Gotta love living in the USA!!!!! Does anyone recognize this as ENABLING???!?!?
Dec 4th, 2007 at 8:57 am
I bought some furniture a year ago, and now I have to start paying for it. I really shouldn’t have spent so much. When I asked the store to change the purchase agreement they laughed at me. Maybe Hil can help!
Dec 4th, 2007 at 9:09 am
Scary to read some of the posts written here but my comment will be very short. The age of responsibility is gone. Hillary Clinton is playing the politics game as this is one of the most important issues garnering the most attention. Class action lawsuits will rain down like snow in the rockies. Gotta love the pols as they always have the answes!
Dec 4th, 2007 at 9:29 am
Oh my gosh, I cannot believe what I just read, Senator Clinton, what are you doing or thinking? I have been in the mortgage lending business for over 30 years and if the lenders would not have come out with the liar loans in the first place these people that are about to go into foreclosure or those who have already foreclosed would never have been home owners in the first place. If we would pull our troops from the war and post them all around the United States to protect our country we would not have this problem in the first place. Most of the people that are going into foreclosure are not even living here in the USA legally. I personally never did a loan for anyone who did not qualify the old fashion way. Money in the bank, this is called liquid assets, a full time job, a 660 or higher FICO and 80% or lower LTV, and a debt to income ratio of 28/38. I know this type of loan sounds strange to today’s world, however, if we would have kept doing loans with these guidelines we would not be having all these foreclosures. And one last thing, what about all those people that have been foreclosured upon? Are you making arrangements to put them back into their homes with the frozen rate plan? I was really hoping we could have a woman in as a President of the USA before I die, but you have totally let me down on this one!!! Have you even thought about consulting people like myself for advice on how this should be handled? There are a lot of honest mortgage loan people out there, we are the ones still doing business while all the crooks that jumped on the ban wagon and made a lot of money off of their own race have hit the road!!! Plus there should have been a closer watch over all these new home building permits. Look at the market now, builders are auctioning off the new homes they cannot sell that they have flooded the market with, and while they are dropping the sales price of over $200,000.00 per home just to get some cash in their pockets, the people that bought in the same developments or surrounding aread just a few months ago will suddenly have a major depreciation in thier home values. You have not even addressed this issue….Senator Clinton, this is a lot bigger can of worms you are getting yourself into than you can even begin to realize…
Dec 4th, 2007 at 9:30 am
Wow, good to see only a couple of the kool-aid drinkers. No need for personal resposabilility. See all the great things Hil’s type of leadership has brought Cuba, including the stellar health care (that Castro did not use)! Market forces are at work, tens of thousands of loan officers are out of the busines, as well as scores of companies. I am a loan officer, and have worked for brokers as well as banks over the last eight years. Eight % was a smoking 30 yr fixed back then. The strong will survive.
Dec 4th, 2007 at 9:47 am
Before abrogating contractual obligations, competely upending the mortgage lending business and imposing measures which may have extremely dire consequences (inflationary, moral hazard and otherwise), one might think Ms. Clinton would at least see fit to gain some rudimentary business exprience attending a 7 Eleven training session and spending a few days selling slurpees.
Dec 4th, 2007 at 10:29 am
damn all you haters there’s nothing you can do and you thing i give a shit to all you mutha fuckers specially the republicans fuck all those mutha fuckers ! as long i work pay all my bills and my taxes that’s all matters. i dont give a shit in this country anyways. eveybody was believe that this country is the land of the free and equal that’s all bullshit! this country was control by the racist mutha fuckers immigrants and minorities being used is this country by those rascist freaks to work for them pay minumum wages or kiss there ass first before you could have a good life fuck all that shit! what did the republican do specially the bush administration they make the average american where fight with the good causes and the freedom of iraqis bullshit! everything is a lie cann’t even fixed the katrina problem and you go invade other country’s and make us believe that they have wmd bullshit! this country are good of stealing other country there resources so people in this country will be happy while the country that they steal are sufferring. anyways to you dumb foll! too i’m not from africa so your fucking dumb ass too and i dont speak good english to so what? you think i give a shit
Dec 4th, 2007 at 10:37 am
evrything in this country are expensive now oil used to be 50 to 60 dollars a barrell when bush invade iraq look at it now almost 90 to 100dollars a barrel and we complain all the product that came to china have leads or the foood we ate is mixed with toxic shit! why dont the govt. not outsource all the job and make all the product in this country fucking hytpocrites! because all the big corporation they take their busisness outside the country so they could have more money and pay other countries specially third world country below the minimum wages.
Dec 4th, 2007 at 11:11 am
Hans, please take your meds.
Plasma levels dropping to below effective concentrations!
Dec 4th, 2007 at 11:38 am
I am not by any means a fan of aversive greed of any party, but I am very much a fan of economic stability, prudence, and common sense–none of which is being reflected in Hillary Clinton’s letter. While I very much appreciate the recognition that this kind of lending environment is irresponsible and had proven destructive to economy and real lives, this letter is absurdly irresponsible and deeply short sighted in that it is (a) basically calling for the suspension of appropriate legal remedies and rights of creditors to sue for breach of contract, (b) an ad-hoc, unforeseeable, government-endorsed interference in the integrity of millions of contracts, (c) rewarding failure of material greed and financial irresponsibility, (d) punishing and destabilizing investors and stakeholders (including growth funds and pension plan reputation and integrity) who depend on promised CDO and MBS integrity, (e) levies a blanket $5-billion burden on responsible and unbenefitted taxpayers to support other people’s stupidity and fraudulent actions, (f) suggests moritoriums and 90-day delays on economic inevitability (a foreclosure now or 90-days later is still a foreclosure.), and (g) deeply offends the intelligence of any financially knowledgeable and prudent person. And this woman wants to lead this nation with (a lack of) judgement and intelligence like this? Her obviously uninformed opinions cannot be a responsible solution. The solution is to allow the economic process to function properly, allow the foreclosures and in so doing penalize the appropriate parties for their greed and irresponsibility.
Dec 4th, 2007 at 11:51 am
The mess that Greenspan made is incredible, but Hillary’s solution is really astonishingly unbelievably silly… after this superbrilliant proof of greater inability I hope she retires soon from the presidential campaign.
USA need someone with guts, really.
Paulson do this, Paulson do that… Didn’t you move that subprime rubbish out tonight? No? Now freeze it!
She is already pretending to be the commander in chief…
Dear USA voters, do a favor to yourselves, vote for RON PAUL.
He has guts. Really.
Dec 4th, 2007 at 12:07 pm
@ esmith512
maybe she is not “obviously uniformed”.
funding by banks and votes from morons… what a perfect strategy
Dec 4th, 2007 at 1:30 pm
Hey, Hans, tell me when the troops in Kosovo are coming home, sent there by your beloved Clinton? Hans, you remind me of my wife’s ex husband. Since he cannot make a rational point, he curses and calls names. I’m curious what you have done for your country, other than berate it. Disagree with it, go vote. Hate it as much as you do? Fix your blood pressure and move to Cuba, since that is the style you prefer.
Dec 4th, 2007 at 1:45 pm
@ sicilyguy
”maybe she is not “obviously uniformed”.”
You have a good point–this is possible. If so the ulterior implications of furthering her personal interests at the detriment of the larger nation is disgustingly sociopathic. I see your perspective–I’m sorry we are seeing this kind of thing.
Dec 4th, 2007 at 2:16 pm
@sicilyguy
I second your idea about Dr. Paul. Personally, I’ve studied this presidential race more than any before it because the USA seems to be in more internal and external trouble than before (comparable to the late 1920s USA and comparable to the genesis of other failure-certain totalitarian states throughout history). The civil liberty, macro-sociological, and macro-economic operating theory erosions are appearing to be increasingly corrupt, critical, and untenable. Clinton’s behavior seems to endorse and aggravate some of these corruptions–this letter here and now being only one of many examples. Ron Paul seems to be the only candidate with a stable, reasoned, honest, and liberty-ensuring and liberty-endorsing platform realistic to the free and democratic republic the USA is supposed to be. The other candidates appear to be “playing the game” for their own sakes and not genuinely focused and interested in the integrity, stability, tolerability, and survivability of the United States. For issues the US Executive Branch, Ron Paul from all records I’ve seen is one of the best solutions (and right now we need many genuinely excellent and well-designed solutions) to our national problems. We need a Federal system true to the Constitution, intelligent and responsible government, and the upholding and maintenance to the People and Nation of the United States. From everything I’ve seen, the best administrator for this mission is Ron Paul.
Dec 4th, 2007 at 2:35 pm
HELLO? Is anybody in there?
Pretend you have a $Trillion dollars…
Pretend you’ve been loaning them out on mortgages.
Pretend that you were expecting to receive interest payments of X%.
Pretend that the US Congress/politicians/treasury secretary arbitrarily cut your expectations in HALF. With NO recourse…
When will you make the next loan to the US… the Government or it’s people again?
When HELL FREEZES OVER?
This will FAIL HORRIBLY!!!!
It’s going to be WAY WORSE than the GREAT DEPRESSION… with UNIMAGINABLE INFLATION in food, gas, and utilities.
Good Luck Hillary!
Dec 4th, 2007 at 2:45 pm
TO HANS:
It sounds as though you are related to Hillary Clinton in some way. Obviously you have no conception of the meaning of intelligence as your verbage lacks quality and meaning.
You have no idea as to what you are speaking about. So go ahead and speak. Hillary hatters really enjoy seeing the intelligent people that are backing her such as yourself.
Dec 4th, 2007 at 6:53 pm
Testing
Dec 4th, 2007 at 7:17 pm
Hillary has lost her mind.
She’s rooting for people who, when asked to show W2, will not do so, because they lied about their income. They have no equity, not 3%, much less 20%. People who gambled (c’mon, you can call them ‘hardworking’ or whatever, but it doesn’t change the fact that they themselves want to foreclose - because they have no equity to lose, and IRS won’t tax them for it!!!!)
Hillary, you are tanking among middle class americans faster than ball-and-chained pirate falling off the plank….
Why would I work and try to make anything if government does this? I want my dollar to be worth something, or else forget it, I can just as well be deadbeat American enjoying today and not thinking about tomorrow, because people like Hillary will steal it ANYWAY….
I lived good part of my life in a socialist country before I became US citizen, and I can tell you, this is BAD BAD BAD, thinking like this (if Hillary wins) will start the death spiral in economy that you’ve seen only in CNN footage from across the world so far….
Hillary you bad, or maybe just misguided girl…
Dec 4th, 2007 at 7:20 pm
Sicily & ESmith, excellent points. Another excellent question is whether Hillary voted for the Bankruptcy Reform Act of 2005? I would suspect that since she trails only Dodd in fundraising from Banks that she did, and the purpose of that Act was to make people debt slaves ad infinitum. The same as the result of refinancing a home loan in which the principal is $400,000.00 and the current value is $300,000.00. The interest rate is academic.
I am a property manager of apartments in Suburban Philadelphia, and over the prior two years watched in amazement as my worst tenants (in terms of payment history) have moved out for the purpose of buying homes. The mortgage company would send over questionaires: Has the tenant ever been late? Yes. How many times? 9 in 12 months. Is the tenant currently arrears in their rent? Yes. How Much? $1,800.00. Would you rent to this tenant again? I do not answer that subjective one out of liability concerns but I’m sure you can imagine the answer.
Result: Mortgage approved.
I am reminded of General Winfield Scott Hancock’s reproach of a fellow General’s ill advised attack at Gettysburg: “Wait awhile, you’ll see him tumbling back.”
Contrast that with a responsible couple, Chinese Immigrants with their children, who are my tenants, that came to me to lock in a two year lease a year and a half ago. They could have afforded a house, but surmised that the market was overpriced and chose to save their money for a time when it was not. These responsible people would be losers from this proposal, is that fair? Hopefully they had the wisdom not to save the money in dollars.
I am also a supporter of Dr. Ron Paul. I do not agree with him on many issues, BUT I have no doubt in the sincerity of his beliefs & the honesty of his character, and think that the most important issue of all is that we rein in this Federal Government, so that we stop foreign adventurism, building bridges to nowhere, and 400 programs to make housing affordable. What they didn’t tell us was that the housing would only be affordable in the crash following the bursting of the bubble.
Government action results in all sorts of unintended consequences, no different with Hillary’s proposal.
Brian
Dec 4th, 2007 at 10:40 pm
to all the haters fuck all you mutha fuckers! specially you tim mcgrady your asking me what have i done to my country i never disrespect my country and my country dont go to war for just for the best interest of my country. so you stupid bitch fuck your ex husband i dont give a shit! problem in this world should be deal by the UN not like ameirca try to be hero shit! just for there best interest and anyways they control UN anyways so they all full of shit! there puppets in this country all those members in the UN.
Dec 4th, 2007 at 10:51 pm
all country’s around the world must be equal if other country with bad leader try to invade other countries or they do something not right it should be dealt by all countries in the world and punish them not like america when the UN did not approved the US govt. speaically the bush administration to go to war they insist and they go and invade iraq and other countries even with oor without the help of the UN. if majority of the world disagree with you then you have to respect it america have no respect to other countries but for themselves only. this country is a big bully and arogant country.
Dec 4th, 2007 at 11:07 pm
america is not a country its a big fucking corporation they steal other countries resources pretend they want to make business that all bullshit! look what puerto rico now they have a fucking dumb ass gov’t and the us govt see an opportunity the country itself own alot of debt from the world bank and the US govt. taken it over instead of helping them now they own the country pretend they the good samaritan america mentality where going to help you but in return there’s nothing such free in this world.
Dec 5th, 2007 at 6:47 am
All I can say is that now is the time to dump dollars and get gold, silver and physically held commodities and food to last for 6 months. It doesn’t matter who gets in, because idiots are the majority and will be appeased by every candidate except for Ron Paul, and he has a snowballs chance in hell. All that really matters is will you be able to keep what is yours.
Dec 5th, 2007 at 6:51 am
There are so many great posts here…. #s 3, 50, 53, 40, 31, 21, 17, hope I got them right. Those are only some of them. Thanks for taking the time, people. Keep educating people on what is REALLY going on in this country. Down with the “good ole boys [and girls]” that are ruining this great land like a cancer.
Good luck to all those folks in housing, but please don’t wreck the dollar any further.
I’m voting Ron Paul.
Dec 5th, 2007 at 12:51 pm
Socialism is not the American dream. Stop entitlement programs in America. Hillary needs to take some time out of her busy schedule and read the constitution! I worked through College and busted my balls to obtain a degree and a good job. Why should I have to pay for everyone else who is not willing to sacrifice themselves.
I’m also voting Ron Paul 08.
Oh and Hans keep digging that hole. Puerto Rico was ceded over to the US as part of the victory over the Spanish in the Spanish American war. The goverment there is the same as the goverment in any state. Get your facts straight. Try to use google for once and inform yourself.
Dec 5th, 2007 at 1:21 pm
Could anybody come up with a worse idea? It punishes people who (myself included) have not taken out a housing loan because they wouldn’t be able to get anything other than a sketchy ARM. It rewards people who got loans by lying or ended up in default by acting irresponsibly. It absolves lenders of any responsibility for making loans to people who should not have gotten them.
More importantly, it makes it impossible for investors to seek recourse when the bonds they own are downgraded to junk because of the increased risk. This will cause a contraction of credit. From this point on, who in their right mind would invest in a security backed by mortgages if the lender and borrower are free to change the terms of the mortgage on a whim, increasing the risk fo the security? This plan basically ensures that, even after the market corrects, the commercial paper issued by SIVs and CDOs will remain junk. No one will ahve any confidence in it.
Perhaps even more importantly, extending the teaser rates might require extending the terms of the loan, in effect turning people into debt slaves. There is no reason to believe that a person who cannot afford a 13% 30-year mortgage in 2007 will be able to do so in 2012. One pictures a never-ending series of freezes and extensions, and debtors never able to pay down their loans.
At any rate, the plan makes no sense from the debtors’ side. If you put 0% down on a house and included the closing costs etc as part of the loan, you have basically just been a renter for the last few years. Why on earth would you renegotiate the interest rate on a loan on a property that, thanks to the downturn, is probably worth less than the value of the loan? You could walk away with no losses other than crappy credit, which, if you have an ARM, you probably had in the first place.
Dec 5th, 2007 at 5:06 pm
Hans, my good man, you make my point. Please list one point where the UN has worked. Hmm Darfur perhaps. Regardless. Thankfully this country was built by people of all races and religions who did not get on the entitlement bus. Do your research. Who took social security and put it in the general fund, who taxed it, who made it available to illegal aliens? Yes, that is right, the democrats. They did such a great job there, now they want to fix the mortgage industry by a redistribution of wealth. No sense in holing people accountable. This industry has it’s share of crooks, and most of them are either gone or on the way out. Let the market make the corrections.
Dec 5th, 2007 at 7:03 pm
Uh…I’m sorry Blake but where in my posts (21 & 22) did I EVER say I wanted a hand out or the goverments help? Hell…I’ll be the first to tell you it will be easier for me to just walk away (after living here for the next 6 months saving future rent money so I can pay 1 years worth) from my home than try for a lame short sale just to extend the inevitable. Truth is…we can afford to continue to pay our mortgage but we, like many other Alt-A homeowners, are going to choose not to. Have I ever been late for any payment? No. Why do you think I had a 815 mid fico when I bought my home? That my sweet dear does not come from fiscal irresponsiblity. Hell sweet heart, that’s in the top percentile of the US! So, I am making a sacrifice and far from playing the “I’m such a victim” song - my posts werent going in that direction either.
To Honest Broker: If your not able to read and understand my posts then that’s your issue not mine…get a dictionary. Your name is an oxy moron all on it’s own!
To Chin: Your Chin is making me sick! Stay out of it if you don’t have anything to contribute.
Dec 5th, 2007 at 8:55 pm
U All Make Me Sick:
I am desparately trying to understand your logic:
You are able to pay the mortgage , but choose not to because the parcel has depreciated. Where in your note/mortgage/ deed of trust did it say “Payment only necessary as long as borrower has equity”?
By the same line of reasoning I can only assume you must walk everywhere you go. Certainly that vehicle isn’t what it was worth last year just like your real estate.
Your comments prove what I have thought for years: FICO scores are extremely poor indicators of loan performance. Down Payment, cash flow and character are better predictors. I suspect you probably did a Stated Income loan since you have an ALT A loan, hence you knew you couldn’t actually afford your speculative venture. I would further submit that you probably did a high LTV 95% or even 100%. So really the only thing you had going for you was the high FICO which probably consisted of a few credit cards and a car loan with very little depth , breadth or aging in your credit bureau. I think you’re jilted because you came into the game right as the music stopped and now can’t find a chair.
Dec 5th, 2007 at 9:06 pm
In the advertisement below, eloan says:
“You may currently be enjoying a low monthly payment on your Adjustable Rate Mortgage (ARM), but do you know how much more you’ll pay when it resets? In some cases, it might be nearly 50% (or even more).”
Find Out When Your ARM Resets
First, you need to know how much time you have at your current payment. Learning when your ARM will reset can be fairly easy if you know where to look.
To do this, simply find your loan documents and locate your “Note”. Look for the section that talks your adjustable interest rate and monthly payment changes. You should find the date when your loan will adjust.
Seem like a lot? It is. And many people who currently have an ARM DON’T EVEN KNOW THIS WILL HAPPEN (emphasis is my own). Thankfully, you do have options.
Now ask yourself: Are you prepared to cover that extra cost every month? If the answer is “no,” you need to act now.”
The industry well knew that people did not know what they were signing when they entered into these ARM loans. The industry well knew that this product was designed to fail and that most homeowners would find themselves in a terrible bind.
Everyone knew.
That’s why advertisements like this, encouraging people to refinance yet again are being written. So what’s there to not understand?
The industry knew and understood completely.
http://eloan.com/s/show/newsletter/0712?user=uni116
Dec 5th, 2007 at 9:16 pm
One other thing, there is a stereotypical thinking with regard to who has an option ARM and who is now facing foreclosure that is just FALSE.
One person wrote:
“I personally never did a loan for anyone who did not qualify the old fashion way. Money in the bank, this is called liquid assets, a full time job, a 660 or higher FICO and 80% or lower LTV, and a debt to income ratio of 28/38.”
I was such a person. I had and have a 790 FICO score, had no outstanding debt other than one or two revolving credit cards, a full time job and I was swindled into an Option ARM by a greedy, overly agressive shady broker looking to make a buck.
He overstated my income by 7K a month and put me into an option arm that would aggregate neg. amor. of $14K in one year because I COULD NOT afford the fully amortized payment.
So screw me, right? I was just stupid?
I don’t think so. Those liar loans made LIARS out of a lot of people and really allowed the scum of the industry to rise to the top. Maybe that’s for the best — maybe they’ll be flushed out now.
Dec 5th, 2007 at 9:21 pm
“I think you’re jilted because you came into the game right as the music stopped and now can’t find a chair.”
OMG!!!! Really? Your SO enlightening!!!! Your wife must just be so all over that when you get home from work every evening…
You just don’t get it do you? You would rather insist on placing all the blame on borrowers (investors, new homeowners, 2nd home buyers, builders, contractors, developers, etc…all of which are apparently illegal aliens…note the hike in bus passes) while the banks were out there getting high off the hog giving loans to anything that had two legs but your right…it’s everyone else’s fault but theirs. It had nothing to do with thier crazy guidelines I suppose. You must not live here to really have grasped the speculation during 2004 and 2005 so if you don’t know what your talking about , then shut the F++k up. Just like I said before…that as long as America continues to have that same twisted outlook, this is going to happen all over again in the future. I hope several foreclosures happen on your block since that’s all you deserve, A-hole.
Dec 5th, 2007 at 9:48 pm
U All Make Me Sick:
Is that the best argument you can present:
’shut the F++k up’
‘A-hole’
None of these people you mentioned had an issue as long as they could sell or refi and get cash out. Now that you can’t do either, you cry foul!
Give me one example where a borrower was forced to sign up for that Option ARM , SISA with a 3% teaser start rate? Not a one! They signed up for it because they liked the ‘easy monthly payments’! It’s incumbent upon them to look out for their own best interest and read their documents. No one else will, certainly not their mortgage broker, Realtor, title agent, appraiser, and least of all the government!
I noted you didn’t bother to argue with my analysis of your situation. That speaks volumes!
Dec 5th, 2007 at 10:05 pm
Yeah and you speak volumes if all you took from my posts were my 2 cuss words…stick to the topic at hand. Not all foreclosures are coming from Option Arms! Those are just SLIGHTLY different from the 2, 5, and 7 yr ARM’s that most are foreclosing on.
BTW…I have no interest in further justifying or exlaining my so called ‘perfectly’ anaylzed situation to a total A-hole. OH! There I go again! Sorry….that just really does not appeal to me. I’m out and hopefully I shed a little light on the rest of you with what is really happening out there.
Dec 5th, 2007 at 10:36 pm
2U all make me sick:
It takes two to tango, stupid lenders met their match in stupid borrowers. As you may have noticed quite a few of stupid lenders went belly up. Stupid borrowers will have to do the same. I’m sorry but that’s life. As far as being through hard times, you at your tender age of 25 you don’t even know what is hard times. The ones I had to go through taught me one thing: DO NOT BUY STUFF YOU CAN NOT AFFORD.
You are not going to get any compassion with the picture of yourself that you putting together with your comments: young, know nothing arrogant prick with ginormous sense of entitlement. I can certainly empathize with single mothers who got swindled when they were looking for reliable shelter for their kids but with you, spouting words of entitlements ? No f…king way.
Banks that you were so pointing with your angry finger unlike you are going belly up and taking huge losses. So you see, lenders ARE PAYING for crap they did, it’s time for you to pay your dues now and remember NO ONE OWES YOU ANYTHING.
Dec 5th, 2007 at 10:48 pm
Alan,
The only difference between what you “call stupid lenders and stupid borrowers” is that these lenders were ran by CEO’s that are walking away with hundreds of millions and these borrowers are losing their homes.
How the hell did these people qualify for these mortgages????? Didn’t lenders have guidelines and underwriting to make sure that what you call “stupid borrowers” did not get loan they could not truly afford?
I don’t know about you but I am on the front lines daily. Fielding calls and emails from homeowners who are trying to refinance out of these toxic loans that have just adjusted 3,4,5% higher and they cant refi, they cant get a loan modification.
These are the same borrowers that QUALIFIED for a REAL MORTGAGE using REAL UNDERWRITING GUIDELINES for the lenders to DETERMINE if the borrower that is APPLYING for the REAL LOAN can AFFORD that there MORTGAGE that they are APPLYING for at the BANK using UNDERWRITERS that are EMPLOYED by the LENDER to MAKE SURE that there BORROWER can PAY THEM BACK once they LEND THEM THE CASH.
I am not yelling at you or anyone, I am just emphasizing my words here.
You see, every loan that is originated has to be sold to the consumer before it becomes and origination. Many loans that were sold over the last few years, as you know, were adjustable rate mortgages.
Consumers never say, ” Please put me in an ARM that adjusts in 2 years.” No they were “SOLD” these loans. Here was the typical sales pitch by licensed professionals. ” I know that you didn’t want an adjustable rate mortgage but that all you qualify for. But don’t worry Mr. Jones, I’ll be able to refi you in 2 years and get you into a fixed loan, no problem. This is just a band aid loan because you have tarnished credit, can’t prove income and you don’t have a dime to your name.”
Do you think these same homeowners would have been sold the loan if it went like this? ” Here’s your loan Mr. Jones. It’s and adjustable rate mortgage that will shoot through the roof in two years, your payment will double, you’ll be screwed financially, the bank will eventually foreclosure on you, ruining your credit for 7 years and your life will leave you because she’s sick of you drinking cheap scotch on their dirty linoleum floor.”
I guarantee that if that was the case then we wouldn’t be where we are at now. But what can we do? We can’t turn back time and we must look forward to solutions.
Yes Alan, some borrwers are stupid and deserve their fate but you shouldn’t catergorize all borrowers that way. That just isn’t true or right.
Like it or not, there will be a plan coming and supposedly tomorow, Bush will announce the details of this plan. So stay tuned because it will be the “plan” that we will all have to live with for now.
Dec 5th, 2007 at 11:01 pm
I happen to agree with U Make Me Sick. He has it right about the lenders and from what I’ve read it doesnt sound like he wants any sympathy or money from us or the government, just telling us one scenerio out of millions. Borrowers as well as homeowners will pay and all the losses will be relative to that individual and establishment. These young first time homebuyers are learning a hard lesson like everyone else.
I don’t agree with the statement that all foreclosed homes are full of people who could’nt read what they were signing but truly believed that they could afford what they were buying, and at an appreciating rate if it was back in earlt 2005. I also don’t think that the majority of foreclosures are illigal immigrants. I’d like to see the data that supports that.
Dec 5th, 2007 at 11:07 pm
U All Make Me Sick:
The fact is simply this: borrowers, brokers, Wall Street and rating agencies and all developed a toxic , enabling co-dependency for money, profits, and yield. The bubble has popped and now everyone is paying for their bad decisions, including the Banks who were living ‘high on the hog’ just as you are , or were.
You’re correct in the fact they never should have given you a loan, obviously. It doesn’t change the fact that you none the less agreed to pay it back. Now you walk away from your obligation leaving the investors left to eat the loss and then have the nerve to say they never should have given me the loan, it’s their fault. Yet when they turn you down you are probably the same one screaming and jumping up and down about how you deserve a loan.
I know whats happening out there, I’ve been in the middle of it for the last 13 years and I’ll be in the middle of it for another 30 years. Luckily, people like you will be out of it for the next 7-10 years. I couldn’t agree with Alan (post #66) more!
Dec 5th, 2007 at 11:51 pm
Sandra and Moe:
I agree that not all borrowers who are in default deserve a blanket stereo type. And certainly not all foreclosures are the borrowers fault ie loss of employment, death, sickness.
Alternately, depending on the source of repayment of your loan by way of appreciation is a dangerous gamble, ie speculative by definition. You better consider what you’re going to do if you cant sell or refinance.
A note, at least in Florida, is only 5-10 pages depending on the lender. If there’s something you don’t like when you read it, dont close! There’s another lender or broker one block over who I’m sure would like to do the loan on more reasonble terms, assuming you qualify.
Dec 5th, 2007 at 11:54 pm
Moe — thanks for jumping in with the voice of reason. Thank God this is YOUR blog. I’d hate to read what would be here if this was a broker’s or lender’s blog.
The point is these loans were DEVELOPED by some one — the bankers
for the benefit of someone — the banks, lenders/investors
and YOUR’E RIGHT MOE SOLD, sold to someone — the consumers (buyers) to their detriment, I might add.
Sold, coaxed, coerced, talked into, advertized, peddled — you call it what you want.
Anyone who walks away from their property WILL PAY in the form of their trashed credit.
But if even with trashy credit, the banks sell this same person a toxic loan product hoping to make a profit, then that’s THE BANKS bad — a stupid risk that they shouldn’t have taken. You can’t blame the buyer for coming in to get a loan when the bank is the one that stands to lose big time for giving it to that risky buyer.
And about the old, NOT WITH MY TAX DOLLARS argument. Last I heard, not paying taxes is a crime. Everyone will pay their taxes no matter what and they won’t get a say in how it get’s dispensed and to whom, they never do or have.
Unless you count fixed elections where one party steals the win no matter what the voters say.
Welcome to America. The land of entitlement, greed, passing the buck and pointing the finger. Where the rich get richer and while the real poor gets constant hands outs to KEEP THEM POOR, the middle class get’s kicked in the ass big time.
But thank God it’s also the land of free speech (sometime) and opportunity.
If enough people belly ache and it becomes a significant risk to the fat pockets, something WILL BE DONE but it won’t be to help out the middle class working American. It will be so that the rich won’t have to find out what it feels like to be middle class.
This subprime mortgage disaster is like the old smoking argument. If I develop a toxic product and promote it, selling it to unsuspecting people who I don’t disclose the risk to, do I have any responsibility if they drop dead from a product that I knew would kill them?
Can I say, Oh, they knew it was deadly. THEY bought it — They WANTED to smoke!
That’s bullshit.
It’s bullshit when it comes to the big fortune five hundred companies peddling deadly cigarettes and it’s bullshit as to these toxic loans.
But the cigarette companies have been getting away with it for years and so have the banks.
Dec 6th, 2007 at 12:22 am
Someone please explain to me how these loans were not disclosed when everyone of the borrowers signed a note, HUD and mortgage and all the other secondary documents associated with a closing.
Should someone read every letter of every word of every page to someone in order to qualify for accurate disclosure? Maybe we should videotape all closings with the settlement agent reading the entire closing package to the borrower to verify full disclosure.
It is the Banks ‘bad’ if they make a bad investment in someone else.
Conversely, it’s the borrowers bad if they agree to a loan that they can’t pay. It’s not diffcult to figure out that if my house payment is $2000 per month, plus $2000 in other expenses and I have $3,000 in actual cash income per month, I have a problem. It’s a back of the envelope calculation that takes a minute or two. The cash flow shortage can only be made up by increasing liabilites (HELOC / CO refi / Credit cards) or by liquidating assets (sell the house). The problem is now occuring because increasing liabilities is no longer an option (bad lending is gone) and neither is selling the parcel due to negative equity.
Dec 6th, 2007 at 12:37 am
Borrowers were qualified at the start rate and not the adjusted rate. Many borrowers may have known that their loan would adjust, but many were told they could most certainly refinance in 2 years, “don’t worry, I do it all the time and the loan officer actually did think these loans would be around and the bonanza would last…..that was the all too common “close”.
Your saying they can’t afford the loans, but most can, just not now because they have reset and are shooting through the roof.
The ones that can’t afford the start rate, shouldn’t be helped.
Everyone signed these documents but most ALL of them relied on a licensed professional in most cases to properly educate and guide them into a good mortgage. This “professional” in most cases made thousands and sometimes tens of thousands of dollars and they by no means deserved it or acted like a professional that should be handling ALL that money. No way…and the fraud on these loans.
Fricken scary the things that went on.
Yes, some knew exactly what they were doing and took loans they knew they couldn’t afford. Those are the minority. Really.
I am in favor of a 1 page document labeled “Everything You Want To Know About This Loan”
rate now
rate later
how many years fixed
hidden fees to broker and lender
total fees to third party
prepayment penalty
true cost of the loan
I think these loans should be worked out on an individual basis, but it looks like it may not happen.
Dec 6th, 2007 at 12:51 am
Moe,
I would respectfully submit to you that data I have seen indicates portfolios are having major problems prior to rate resets. This is simply due to poor underwriting judgment. Rate resets will serve to further degrade the performance.
Furthermore, the borrowers were complicit in a majority if the fraud either passively or actively. After all, they sign the 1003 at closing.
However, I won’t disagree with you in that the brokers were profoundly more involved in the fraud than anyone else.
The document you propose does exist, at least in FL. The information is contained within a Good Faith Estimate and the TIL (Truth in Lending) disclosures.
Dec 6th, 2007 at 1:15 am
I can’t believe the stupidity of many of the people who are posting comments on this blog. Americans, God bless them, are the most anti-intellectual, non-critical thinking group of people in the world. While it is undoubtedly true that some people were acting irresponsibly when they got into these bad loans, most were victims of bait and switch tactics that were revealed at the 11th hour when commitments had been made that could not be avoided. This is particularly true of people in the refi situation. When the loan product you were told you were going to get changes at closing, and you have made promises and commitments to creditors and others (e.g., paying your kids college tuition) concerning the proceeds from the refi, your back may be up against the wall although you know you are screwed. Some people were able to refi into a better deal and some were not.
A lot of people with good credit were steered into subprime loans when they were eligible for prime loans. And many of the people who I know who have lost their jobs in the last five years are well educated, highly skilled individuals who were performing a valuable service, but whose jobs were lost to outsourcing or some other circumstance beyond their control. When job loss is actually occurring on a significant level, and the gov’t is lying to us and making us think that everything is honky dory, people are going to fall behind, particularly if they are in a bad loan that they were scammed into taking.
Finally, take your pick of poison. Skyrocketing foreclosures will hurt everyone including investors, property owners who are not in default (whose homes will lose value and whose neighborhoods will be ravaged), homeowners who are in default because they were scammed (not because they were stupid or irresponsible) banks that did not get involved in the scam to the same degree as others who are trying to hide behind Countrywide or the defunct Ameriquest, foreign economies, and the value of the dollar!! VERSUS some kind of sensible plan that benefits us all. Stop falling in to the trap. The whole idea is to pit people against one another instead of really looking at what the problem is. Wake up!!!
Dec 6th, 2007 at 4:02 am
2 Francis: what sensible plan ? Do you realize that no foreign investor is going to buy notes if government can change terms of mortgage contract just because it wishes to ? You will go to lending standards quite of few decades back and rates will go through the roof regardless of Fed rate actions because there will be LOWER DEMAND for MBS. No investor in sane state of mind is going to provide cheap pricing of political risk (very unpredictable and investors hate uncertainty more than anything) of government meddling with terms of mortgage note and risk pricing will be expensive so rates will be high. And when cost of money goes up price of asset financed goes down. Just a reminder: US is a net debtor nation, it HAS to attract outside monetary resources to finance its consumption.
Remember, any solution must have net benefit otherwise it’s like sub prime refinance cash out, you get very short term boost and you are screwed right after cash runs out. And turns out net benefit was very fleeting. That’s a f..king problem with people in US: everyone behaves like an addict, too focused on the next 5 minutes, just get me high now and I figure out where to get next dose tomorrow even if I have to steal the money. How about rehab ? Yeah I know withdrawal is painful and very, very unpleasant but it’s better long term than getting high on daily basis.
I personally get a feeling that solution will be worse than the problem: mortgage rates will go up and property values will tank anyway and we end up in the same end state but with worse confidence in US financial system.
Dec 6th, 2007 at 8:59 am
Frances, you’re hitting the nail right on the head.
Alan, I think the problem is polarized thinking. It is convenient for brokers to say that the majority of buyers were in on the scam and new exactly what they were getting into because it absolves them of the responsibility to look at their own behavior.
Change the names, and it becomes convenient for the banker, the loan officer, the investor, you name it.
It seems that most of the players are looking at the solution which puts the most blame on the other person.
MOE, this is perfect:
“I am in favor of a 1 page document labeled “Everything You Want To Know About This Loan”
rate now
rate later
how many years fixed
hidden fees to broker and lender
total fees to third party
prepayment penalty
true cost of the loan”
Blake when you said:
“Furthermore, the borrowers were complicit in a majority if the fraud either passively or actively. After all, they sign the 1003 at closing.” — you were joking, right?
Do you know how many lawsuits are started on the basis of contract fraud, when seasoned professionals are signing documents?
If the broker’s job is not to get the BEST loan for his client and disclose all the terms fully in PLAIN ENGLISH so that anyone can understand, what the hell is that person getting paid for?
It’s just oh, soooooooo convenient to pretend that all the buyers out their could read legalise and contracts like an ARM rider?
I’ve read that bullshit about twelve times, and I STILL don’t understand it. That’s why some people here have wisely said you should hire a professional (a broker?!?!?) to explain it to you!!!!! Because most people won’t understand it.
Alan, you said:
“That’s a f..king problem with people in US: everyone behaves like an addict, too focused on the next 5 minutes, just get me high now and I figure out where to get next dose tomorrow even if I have to steal the money. How about rehab ? Yeah I know withdrawal is painful and very, very unpleasant but it’s better long term than getting high on daily basis.”
Respectfully, I think the problem here is generalization. It’s easy to lump everyone into the same category. Look, no one feels that many Americans are a quick-fix, get high, take it easy people than I but I RECOGNIZE that’s not every one.
So to say this problem is created by those types of people is to ignore the businesses and the products that cater to that type of thinking and those types of people.
Why were these loans peddled to the everyday American?
Couldn’t a seasoned industry professional have predicted what would happen?
The type of thinking you’ve described is real, but it was present from the top to the bottom, and has to be eradicated from the top to the bottom if there’s going to be a solution.
It’s not enough to say, F#$k you buyer, you knew what was up or F#$K you, investor, you greedy bastard, or even F$#K you banks, the cash cow is dead.
We all live together and need each other, and so we’re going to have to work together to find a solution and stop playing the blame game.
Dec 6th, 2007 at 9:12 am
Blake:
“It’s not diffcult to figure out that if my house payment is $2000 per month, plus $2000 in other expenses and I have $3,000 in actual cash income per month, I have a problem. It’s a back of the envelope calculation that takes a minute or two. The cash flow shortage can only be made up by increasing liabilites (HELOC / CO refi / Credit cards) or by liquidating assets (sell the house). The problem is now occuring because increasing liabilities is no longer an option (bad lending is gone) and neither is selling the parcel due to negative equity.”
Here is the brokers version of what you just wrote:
“Your house is worth X, and so I can get you into a loan where you’ll only have to pay Y, don’t worry, because the money that’s left over, you’ll make that up in equity, and when the minimum payment ends, I can refi you into another loan, no problemo. I’d get you into another loan, but this is the best thing for you right now. Think of how much money you’ll save with this low monthly payment. You’ll get this amount of cash right now and you’ll be saving this amount of money a month, so by the end of the year, you’ve saved this much. Don’t worry about what you might owe. Look the rates are low now and they’ll probably stay that way. You can use the money you’ve saved with you super low payment to pay whatever you might owe at the end of the year, which look, like I said won’t be much. If your minimum payment doesn’t cover what you owe, and it will, I’m sure becuase the rates are so low, don’t worry. You’re saving so much money, you can pay it. Like I said, don’t worry, the rates are reallll low and you’re not going to end up owing the much more at the end of the year. But remember, I can refi you into a new loan no problem if anything starts to get rough. Don’t worry, you’ll be fine. Look at how much money I’m saving you. So sign here, okay?”
Talk real fast and add in terms like ARM, and index, margin, throw in some bullshit about the market and appraised value and smile and keep saying, Okay, Okay, Okay. Then at closing throw in some extra crap that the buyer never heard anything about and don’t say anything about it. Just say, Sign, here, Sign here, Initial here. Don’t worry about that. Sign here and here and here. That’s nothing, that just means this (lie, lie, lie). Okay, Sign here. Now smile real big, shake the victims hand and say CONGRATULATIONS!!!
That bullshit takes up much more than the back of an envelope.
Dec 6th, 2007 at 9:31 am
Alan, this is an economic emergency and the government NEEDS to step in because most of these mortgages were fraudulent and unlawful. They know this and they know it will get very ugly with litigation and foreclosures for years.
The AG’s will go after the investors and lenders to shut them up and yes, they know this also.
An these investors you speak of. They were all burned, scammed bu their brokers and investment firms. Its not as if they are going to be in the market buying all the MBS’s anytime soon.
Maybe if we clean out the crap with a little help from our government, our markets will improve.
The wild, wild west days are over.
Blake, I am aware of this data. The problem with the mortgages defaulting before resets was poor underwriting, crappy lending products and massive fraud, I MEAN MASSIVE FRAUD.
I have worked on this side of the fence for some time and borrowers definitley did it more passively. 9 times out of 10 it is broker fraud.
Most of those homeowners could not afford their home, plain and simple and they shall suffer their fate.
Do you all understand that this is not a “natural” occurance of financial markets? OH NO, this is the result of what has the likes of the largest ponzi scheme is US history perpetuated by the most fraud, greed and theft in our country’s history.
JacMac, I couldn’t have said it better myself.
Dec 6th, 2007 at 10:39 am
Thank you Moe and JacMac. Now we are elevating the discussion to a higher level. These CDO, MBS, derivatives, etc., things are ponzi schemes. They work like a game of musical chairs or “One potato, Two potato”. Someone(s) either gets left without a seat, or left with a potato he/she/it does not want. My husband worked in investment banking for years and he and I saw this crisis coming. Truthfully, if the subprime crisis hadn’t erupted, something else would have caused this house of cards to fall. The pervasive greed in our system is so immense, that sound and honest business principles(have you ever studied the real JP Morgan) have gone completely out of the window. Can you imagine Wall street big wigs getting 38 bil in year-end bonuses for 2007 when everything is in such a mess? Also, foreign investors who went for this swindle to beat all swindles would rather see a strategy designed to bring this crisis under control than a continuance of the laissez-faire policies that got us here. Right now, they are getting little or nothing on there investments and certainly not what they anticipated. MBS’s and CDO’s are considered toxic waste. At least if a strategy is implemented that gets these defaulted loans performing again on some level,the cycle of destruction will be broken. Otherwise, hello 1929 on steroids!!!
Dec 6th, 2007 at 10:58 am
JacMac I agree with your scenario and it played out like that no doubt countless times.
Moe I agree with you as well.
Where I disagree seems to be on the level of accountability and responsibility for borrowers to the situation. Everyone in the vertical structure is to blame except the end investor who depended on everyone downline to do the right thing. In reality, no one did. The borrowers were fraudulent ,either actively or passively, the broker was, as well as the wholesale lender, Wall Street and the rating agencies. They all had a hand.
At any point in the game someone could’ve raised their hand and called a spade a spade. No one did. Why? Because the borrowers desperately wanted the money as did the brokers, lenders, Wall Street and the ratings agencies. None of this would have occured if borrowers had more insight than just ‘What’s my payment?’! No one cried foul for fraud when property was selling and everyone was making money. When things go bad everybody wants to displace as much blame from themselves as possbile. The fact is there is plenty of blame to be placed at ALL levels and everyone in this country will suffer. The worst is yet to come.
Dec 6th, 2007 at 11:27 am
Great commentary Frances and thank you. Thanks for your thoughts Blake.
I agree with some of your points Blake and just so you know, I am not pro 110% for all borrowers to get saved. Not at all.
I think that borrowers have taken responsibility ie: over 1 million foreclosures=Borrower Medicine, plus thousands more that are having the stress of losing their homes. So, they are learning their lessons. As are the brokers and LO’s that have to go work at Home Depot if they are lucky and Del Taco, if they are not.
You are correct Blake, it was a feeding frenzy from all sides. But the huge difference here is that the lenders, banks, servicers, Wall Street, investors etc. did it all for the mighty dollar and greed.
The majority (not the minority) of homeowners borrowed money to have a slice of the American Dream. A plce to raise their family in a home where they could feel secure.
Why not blame to the end investor? I compare the end investor to the borrower. They all depended on someone in this “downline” to do the right thing. Why don’t they have to do their own due dillegence?
Yes, there are a tremendous amount of homeowners that did it also for the greed. Bigger, better etc….But again, thay are truly the minority.
You said: “None of this would have occured if borrowers had more insight than just ‘What’s my payment?’!”
That is way too broad of a statement. You and I both know that yes, that did happen a lot. But there were many, many people who were spetical in taking an ARM and were convinced by their broker that they could refi in 2 years or placed in a neg am or ARM when they could have qualified for a prime fixed loan, but the broker or LO made more money on the subprime deal.
Yes, the worse is yet to come and it will change the face of our country forever………….
What have we all learned in this…..
DON’T TRUST NO ONE (ESPECIALLY SOMEONE WHO IS PAID A COMMISSION ON WHAT HE IS OFFERING YOU) AND DO YOUR DUE DILLEGENCE X’S 100………..
Don’t trust the lenders, don’t trust the brokers, the real estate agents, Wall Street, appraisers, notaries, processors etc……
Burn me once, shame on you, burn me twice shame on me………
So, essentially, high schools should teach finance 101-and mortgage loans 101 or ALL borowers should undergo mando finance counseling class prior to taking our a mortgage.
That way, people can handle their own loans with no middle man and take responsibilty for their own actions..
But for now that mortgage downline was ran by mostly fraudsters, snake oil salesman and greedy money hungary grubbing professionals that had their best interests in mind and not their clients X’s A MILLION.
So clean out that downline ie: lenders, brokers, wall street etc. Fix loans for the ones that deserve it and let’s all move on………….
Dec 6th, 2007 at 5:54 pm
JacMac,
I was mainly addressing Clinton’s proposal of blanket mortgage mods or foreclosure freezes. Government shall not mingle with terms of already signed contract unless both parties are amenable to change. It may be free to do so on future contracts and then it will be priced in but to do backdating on existing ones is absolute worst that one could think of.
Looks like Bush announcement was non binding, non imposing agreement that was reached with some of the mortgage servicers. And it appears they have somewhat strict criteria and loans will be looked at one by one. That’s what I think is reasonable. Any silly thing like government imposed blanket moratorium on foreclosures or rate resets without agreement from investor/servicer side is just complete violation of contract law.
As far as brokers, my opinion is the same: ANY MIDDLEMAN industry must be regulated so tight so they can’t even poop without disclosures. It applies to any kind of broker: insurance, securities, and of course mortgage. I don’t understand why it’s so hard for regulators to realize.
Dec 6th, 2007 at 6:58 pm
I’m curious as to what the actual numbers are. Just what percentage of people holding mortgages are late? Where would I find that information? WHen we hear the horns being blown regarding record number of foreclosure notices, do we realize that in many cases that there are two sets of notices for each homeowner? One for their fist, and another for their second. I am not saying there is not a problem, and there are a large number of lenders out of business, but how much does hysteria play in this. The market could not support what was happening, so it has collapsed to some degree. It is a house cleaning that was much overdue. Seems however that there is a lot of America bashing going on, which makes me wonder why tens of thousands are trying to get here every year. Someone should let them know how screwed up things are here, so they can go somewhere esle that provides more opportunity.
Dec 6th, 2007 at 9:10 pm
2 tim:
http://calculatedrisk.blogspot.com/2007/12/mba-mortgage-delinquencies-highest.html
The MBA is reporting today (no link) that mortgage delinquencies increased sharply in Q3 2007. A few data points:
Total, 1-4 units delinquences increased to 5.59% from 5.12% in Q2.
Prime increased to 3.12% from 2.73% in Q2.
Subprime increased to 16.31% from 14.82% in Q2.
Delinquencies and foreclosures increased for every category, including prime fixed rates.
Dec 7th, 2007 at 8:50 am
Thanks Alan. So in other words, on the 1 to 4 95%
on prime 97%
and on subprime 84%
are still paying on time?
I wonder in what other industry numbers like those would mean catastrophe. Once again, I am in no way saying there is not a problem that needs attention, but come on, it is like concentrating on unemployment being at 5%, rather than 95% being employed. In most cases if you do not work, it is because you do not want to work.
With almost 200 lenders out of business, and more on the way, including tens of thousands of loan officers, it would seem the market is making the much needed changes in our business. I will continue originating loans as I have done for the last eight years. Always keeping the clients best interest at heart, so I will still be here when the dust settles.
Dec 7th, 2007 at 2:41 pm
Tim, Tim. Your knowledge of how our economic system works is clearly limited. It’s not your fault though, a lot of the truths that would enable people to see things from a different perspective are not readily shared via mainstream media.
The truth is that the unemployment statistics at any given time DO NOT INCLUDE people whose unemployment benefits have been exhausted, people who elected not to collect unemployment benefits and who are depleting their assets while they are still looking for work, people who are receiving public assistance after having worked whether they were eligible for UI benefits or not, and people who are part of the subterranean economy. When you add all of these numbers up, the percentage of people who should be in the labor force who are not is much higher than reported. The labor market can not accommodate these people especially when jobs are continually being lost to outsourcing, automation, or economic downturns in particular industries. Do you know how many people in the tech sector (programmers, project managers, operators) are out of work because of outsourcing to India? Do you know many customer service jobs have been lost due outsourcing, automation, and the internet? Do you know how many auto industry jobs are being lost because the BIG THREE are now Toyota, Honda, and Nissan? I am not against progress, nor am I against the right of businesses to cut their costs. But when