By Moe
“I have always been told by bankers that the prime rule of banking was ‘know your borrower.’ And what has happened is that we have created through a whole group of new methods a situation in which you not only don’t know your borrower, you have no idea who your borrower’s borrowers’ were or are. The nexus between the borrower and the lender, I believe turns out to have been a more important safeguard than we thought and we have been trying very hard, the private sector has, and some of us the regulatory field have been trying to find a substitute for the borrower-lender relationship and we have as it turns out have been less successful than we thought.” said Barney Frank in his, “Opening Statement for Hearing on Accelerating Loan Modifications, Improving Foreclosure Prevention and Enhancing Enforcement.”
The borrower/lender relationship and everyone holding hands for the greater good of human kind and affordable home-ownership is a crock. It has never worked and it never will.
There needs to be an “independent” third party layer to separate the haves (lenders) and have nots (borrowers). A referee of sorts and the government, as Chairman Frank appears to agree, has failed in refereeing the lender/borrower game.
In fact, the home team, the lenders, have committed various fouls and instances of unsportsman like conduct, that they should be suspended from any negotiations, contract talks and in fact, they should sit the rest of 2007 and 2008 seasons on the side lines.
It behooves me to think that the very people that have contributed massively to the foreclosure & mortgage crisis, placed millions of Americans is financial turmoil and may bankrupt our country, are involved in trying to “solve” the mayhem that they created.
It’s like asking Richard Ramirez, the infamous night stalker, how he thinks that the crime scene investigators should clean up the gruesome and bloody crime scenes from his brutal and completely random killing sprees.
Then when it’s all said an done, the prosecutor invites the serial killer over to his house for some tea to discuss his punishment and what they can do together to help the victims and their families. Hell, why don’t you just invite him to the funerals?
That’s kind of “sick” thinking, isn’t it?
“Finally, there is one where I do think there is a problem but it is not the Administration’s fall back. Now let me say here, I am going to say this later, and I, it is not comity, it goes against a lot of the norms, but I have to say that the increasing inability of the United States Senate to function is becoming a threat to governance. And that is not partisan.” Frank said.
It appears Rep. Frank, Chairman of the House Committee on Financial Services, is getting a bit perturbed with the ability of the United States Senate to act on certain key initiatives and legislation that are affecting our country and in Mr. Franks words, “I do then want to make two points today. One is a general point and what’s been striking about the subprime crisis is not just simply the subprime crisis but the extent to which it has spread to be the most significant financial problem in the world since it seems since the Asian financial crisis.”
Let me repeat these words coming from a man that is in charge of leading the Senate in regards to our country’s financial issues, “the most significant financial problem in the world since it seems since the Asian financial crisis.”
A little brief history lesson on the “Asian Financial crisis of 1977″; from wikipedia
The crisis had significant macro-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries.[25] Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 1997-1998. Indonesia, South Korea and Thailand were the countries most affected by the crisis.
The economic crisis also led to political upheaval, most notably culminating in the resignations of President Suharto in Indonesia and Prime Minister General Chavalit Yongchaiyudh in Thailand. There was a general rise in anti-Western sentiment, with George Soros and the IMF in particular singled out as targets of criticisms. Heavy U.S. investment in Thailand ended, replaced by mostly European investment, though Japanese investment was sustained. Islamic and other separatist movements intensified in Southeast Asia as central authorities weakened.
I conclude this post with these words from Barney Frank, “How do you keep the benefits of this increased liquidity and find some way to preserve again what has been the great safeguard of not lending money to people who you didn’t think can pay you back. When you don’t have to worry about whether they pay you back, and when the people who now own the loans don’t know who in effect they lent it to ultimately, we have problems.”
Yes, Mr. Frank, we have BIG problems. Now, get the damn lenders out of from referring their own game and lets get to work and help the American people.
There has been a problem. Government involvement at this point – while understandable and possibly mildly beneficial is largely irrelevant – witness the rate-freeze plan that will affect very few borrowers, many of whom will go on to default anyway. Securitization was originally necessary in order to protect banks against interest rate risk: lending on a thirty year fixed basis against short-term deposits led to the S&L crisis. Mortgage-backed securities spread that interest rate risk across the wider society. After the ’70′s, if there had been no mortgage-backed securities market, there would have been no fixed mortgages. But securitization evolved to be a way not only to avoid interest-rate risk but also to avoid credit risk. And therein is the problem of which Barney Frank speaks. Now the loosey goosey underwriting standards are tightening radically and home values will fall dramatically. Cash is king. Spend less than you earn. Spend as little as possible. Let the other guy’s “consumer spending” prop up the economy. Take care of your own. We’ll probably be through this tunnel by 2012.
Cash is king, buy gold were told and where a helmet because the sky IS falling as the result of toxic loan fall out. Mayday, mayday………. I think we have a problem here.
The main problem is that politicians are getting invloved. Maybe Barney Frank would be willing to change the tax laws so people can take that money and send it to the lender THEY signed up with. These sale people did not sign up for the tax levels they now pay.
They have to get involved. It is their civic duty. They know that much of the market was driven by fraud and steering of our market.
A “real” fix will be placed on this sooner rather than later and after that, heads will roll.
The END.
“These were defective credit intruments and should have NEVER been offered to borrowers and should in theory be recalled due to their predatory nature.” ~ Moe
From Moe’s mouth to God’s ears.
Hey Moe, when are you going to write that book?
I’m not sure what do you mean by real fix. But more than third of homeowners owns homes outright and about third of total households do not own, meaning 55% of total households do not have a mortgage. Among those homeowners that do have mortgage only about 30% at most at the danger of negative equity if prices drop 20% nationally. If you think that 15% of voters are going to get bailout financed by the 85% I’m certainly interested to see how this is going to shape up. You already know which side I am on. I’m fine with stricter regulation and other things but there is snow ball chance in hell I’m going to support any representative that wants to modify existing contracts.
Frank is scum, why are you even talking to or about him?
Being new to this process, what then happens after the 7 year fixed?
Al, excellent question. I hope TxAngel can fill us in. Wiil this go back to an ARM in 7? Will you be amortizing your principal over 23 years, instead of 30? Did the mortgage company analyze that you can afford this bump in payments? Do you know what your new payment can be, worst case? Or, is it the same story, different day?
Tx, can you give the lender that is working out the Mod, a mention ?
You can find TxAngel in our forum where you can ask her questions.
http://www.loansafe.org/forum/showthread.php?t=327
That’s great. But be on alert! The 7-year mark is the point at which they fabricate a foreclosure so they can turn over the property for a profit. They refinanced you because they can’t sell the property for a profit at this time. Some income is better than none, so for the time being you’re alright, but refi. away from them to a small local bank as soon as possible. See MSFraud.org for more information.