I started this blog because I bought a home a few years ago in Las Vegas, when the market was hot and now I've lost so much money on my home I can't even sell it if I want to. If I did I'd probably end up with a net loss of over $100,000. It was my first home. I put nothing down, with a 5 year arm. I have good credit, and so far have not missed any payments. However because the economy in Vegas is getting worse, I'm not sure how much longer I can afford to stay in this home. And since it's not appreciating and doesn't look like the value will be coming back anytime soon, it's looking more and more like a lost cause. I know there are many others in Las Vegas that are in the same situation that I am in, so this blog will be a good place to express your anger toward the banking system and government. I believe they both share in the majority of the blame for the foreclosures. I hear talk that the Govt. is working on it and Obama is planning on doing something, but not much action or specifics as of yet. I'm not sure the government really does have a plan. At least doesn't seem like they have any real good ideas yet. So I started this blog so Americans can post their thoughts themselves and discuss some possible solutions. The foreclosure crisis is the root of all our economic problems and what triggered the recession, so we will not only be solving the foreclosure crisis, but also saving the entire country from meltdown.
Private sector loans, not Fannie or Freddie, triggered crisis
By David Goldstein and Kevin G. Hall | McClatchy Newspapers
WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.........
ENTIRE ARTICLE- http://www.mcclatchydc.com/251/story/53802.html
People have been dealing with increased unemployment and rising prices for a while. Now, due to subprime lending practices people are starting to lose their homes and life savings. The banks are also going belly up now because of an unregulated environment where they were allowed to greedily overextend their lending resources. Anyway, the real victims are the people of this country who will have difficulty getting a loan and those who are losing their homes. As Barack Obama has said, this is the final judgement on the era of deregulation. In the recent Presidential debate, John McCain made a vague suggestion that the government buy everyone a house. I have a different suggestion that I hope makes more sense.
Certainly we need regulation of the financial markets going forward, but more is needed to help get us through the immediate crisis. We need to free up the credit markets and lend a hand on main street. However, we can't just give away taxpayer money and suspend foreclosures/evictions. Instead, I believe that the government should do two things:
1. As a penalty to the banks and financial institutions who created the crisis, rewrite the interest rates on existing subprime loans with a modest cap of 7% or so.
2. Offer homeowners with endangered subprime mortgage accounts an option for the government to temporarily take over their interest payments. The payments would go into an escrow account (instead of to the banks). The government should probably also charge the banks a small fee for maintaining each escrow account. Any homeowner who takes advantage of this program would get a major break on monthly expenses, but would agree to a government-held lien on the property. The government lien would remain in place until the house is sold. Banks could borrow against the escrow account at preferred rates the same way we can borrow against our mortgages. Proceeds from the loans to financial institutions could be used to help stimulate the economy. The banks would eventually collect the interest out of an escrow account when the mortgage principal has been completely paid off.
If implemented carefully, this plan will lighten the load on main street considerably while providing a much-deserved slap on the wrist to the institutions who engaged in subprime lending. Importantly, this plan is not a giveaway of taxpayer money in any way. The government-held lien on the property would not be exercised unless the home was sold or there was a default on the payment of principal. I believe that the government should also make it possible in certain circumstances for homeowners to transfer the lien to a new home if they have to move and cannot satisfy the lien with proceeds from the sale.
Or, Who is Phil Gramm?
The current credit mess primarily was stemmed from the subprime mortgage mess mixed in with credit default swaps backing those subprime mortgages...
The subprime mess was mostly due to mortgages issued to people who couldn't afford those mortgages.
What if the government re-negogiate the terms of the mortgage by extending the lifetime of the loan to say 40 or 50 years with options to reduce that time amount if the homeowner got lucky and obtain more cash to payoff the loan before that 40~50 years are over ? In this case, the homeowner get to stay in the house, the government still get mortgage payments, and more importantly the government doesn't have to write down a big check right now, when our federal deficit is already sky-high, to payoff the current greedy lenders at a premium.
When the government taking over these bad loans, it'll have a lot of negotiation power to re-negogiate the current terms of the mortgages - perhaps to reset the price what those greedy lenders originally locked down on the initial mortgage - this is especially so if the price of the house was grossly inflated during the 2004-2006 housing boom. If that price was grossly inflated, the government should not pay the premium. The pain should be spreaded amongst the greedy lender, the homeowner (for a longer loan term), and the taxpayers (unfortunately).
Granted, some homeowners will be forced out because the intrinsic price of the house is way to expensive relatively to their salaries / incomes. In that case, the government could still be creative - find a house in some other neighborhoods from its pool and see if the homeowner is willing to take that house where the affordability is closer to their salaries / incomes.
The key is whether the government can re-negogiate with the current lenders. Inevitably, the current lenders need to absorb some loss but hopefully, with the government coming in, their loss won't be a total loss if the house is foreclosed.
The homeowners, on the other hand, can still be creative. Instead of moving to a smaller, cheaper house, they could rent out part of the current house so as to get supplemental income. They can do so until they get better jobs and hence higher incomes..
Just my 2 cents.
-eric
Every four years we go through the same song and dance...this year we'll bring truth and honest debate into the Presidential Campaign. Every four years we Democrats get our clocks cleaned because the Republican campaign machine has not bought into the idea of taking this higher less traveled road.
So here we are in 2008 with a terrific candidate in Barrack Obama. Barrack gives thoughtful cerebral nuanced answers to difficult issues. Meanwhile Senator McCain and his campaign accuse Barrack of being unqualified for the office, a person who would rather lose a war if it means he can win the campaign and a fluff-ball on the same level as Paris Hilton and Britney Spears. Enough!
Here is what Obama should not do:
1. Ask for an apology from Republicans who question his patriotism. It makes him look like a groveling wimp.
2. Pay any more tribute to McCain's honorable service to this country. It's been said hundreds of times already; it's deserved; it's been heard. It does not need to be at the begining and end of every comment by Barrack about McCain because it drowns out the fact that a McCain Presidency is actually very bad for America.
American's like short soundbytes that encapsulate the issues. Here is what Obama should do:
1. Paint McCain as the quick triggered, explosive hot tempered person who will keep America in a state of perpetual war. If you liked the war in Iraq, you'll love McCain because he will drag you into a war in Iran and in Georgia. McCain will handout Nato Alliances like cotton candy. You know what that means don't you: Making Georgia a Nato member means you're willing to sacrifice your sons and daughters for the sake of a border dispute about Ossetia. When McCain quips "Bomb bomb Iran..." he means it. When he demands confrontation with Russia, he means he wants a return to the Cold War with Nuclear missiles aimed at Americans. Is that what you want.
2. McCain Never met a war he didn't want to fight.
3. McCain will destroy Social Security. He is not committed to ensuring the preservation of Social Security for ALL generations.
4. McCain admits he knows nothing about the Economy. So he turned to Senator Graham as his lead economic advisor. Graham is in the pocket of the people who brought you the subprime mortgage mess; the people foreclosing on your home and your neighbors homes; the people who charge over 30 percent interest. McCain has a history of backing those who ruined banks and other financial institutions and left it for Americans to pay for the mess. In the 1990s he tried to protect Charles Keating who's actions resulted in criminal convictions and cost the taxpayers over $3 billion. McCain was censured by the Senate for his misconduct. Now, he's hired the subprime mortgage industry's lead lobbyist as his lead economic advisor. Can we afford to have McCain in charge of our economy.
It's time to campaign without both hands tied behind our backs. Campaign against McCain as aggressively as the Republicans campaign against Democrats.
his is a rather illuminating and humorous portrayal of the origins of the current subprime mess. May God bless Wall Street.
--> Download The Subprime Primer: Part I <--
(Click on the image above to enlarge.)
At the same time as sub-prime lending practices were increasingly blatant, mortgage fraud was rising as well. Of the two forms of mortgage fraud, title fraud is the most insidious because it more often than not involves identity theft. It is a practice where an individual steals another person’s identity to transfer property rights to him or herself in order to borrow money using the ill – gained property rights as collateral. According to a report compiled by the Federal Bureau of Investigation (FBI), mortgage fraud nearly tripled in the United States between 2003 and 2006. How did mortgage fraud increase so dramatically?
There are two fundamental issues that created the sub-prime lending meltdown. One was the re-merging of banks and the stock market – a practice that was blamed to have caused the 1929 stock market crash and the other is a lack of self-policing within the mortgage industry itself.
Banks and non-bank mortgage lenders repackaged loans into a Collateralized Debt Obligation (CDOs). The CDO was then sold on Wall Street. This practice went pretty much unregulated while the shoddy lending practices underlying the loans were rarely discussed, except perhaps in conversations centralized in the office lunch room.
The height of the sub-prime mortgage lending frenzy had an ironic message – profit at all costs. These loose lending practices of the industry created a toe hold for the really bad people, which included banking insiders to devise rather convoluted pathways to entwine the global economy with the lending schemes. More importantly, the lack of self-policing at an industry wide scale ensured human greed a feast from the approximately $2.5 trillion generated from mortgages in 2005 alone.
Identity theft is a necessary component to title fraud. Identity theft has become the dominant white collar crime of the 21st Century (Washington State is the second most impacted state, according to a banking insider). According to a FBI report, “A significant portion of the mortgage industry is void of any mandatory fraud reporting. Therefore, the true level of mortgage fraud is largely unknown.” There is inadequate pre-screening at all levels to keep out potential fraud and as a result, we all are victims – either directly or indirectly.
For example, I have been helping someone in North Carolina who is a victim of identity theft and title fraud. In 2005, a former tenant created a quick claim title deed, which placed the property in the tenant’s name. The former tenant then borrowed $60,000. That was about half of the property’s appraised value. If the lender had done just a basic credit check, it would have found the borrower had no or bad credit. The now defunct Ameriquest Mortgage Lending Company lent the money to someone who had no real interest in the property.
The story gets even better. In June 2006 the fraudulent deed was thrown out but despite that Citi Residential Lending (subsidiary of CitiCorp, N.A.), First American Title Insurance Company and the temporary trustee continued to try to foreclose on the property despite not having a legal basis to do so. Even the temporary trustee had its own deed set aside in January 2008. The most recent pending foreclosure hearing was cancelled, which had been scheduled on March 20, 2008 at the cost of copious amounts of energy and zealously.
To summarize, the lending / banking industry is clearly unable to self-police and regulate itself. The true owner of the property has been victimized through the act of fraud and then RE-VICTIMIZED by the banking industry. My question is this: if the banking industry is willing to harass and act outside the law for two years against an innocent person then what is it willing to do against you and me?
For the consumer the complexity doesn’t end there. About 7 to 8 out of every 10 attorneys and / or law firms sampled in North Carolina appear to be unable or unwilling to take a consumer based complaint, since most have banking industry clients. What is a consumer to do? Since it is likely that there are other cases like this one, I welcome contact from persons who have been victims of identity theft and wrongful foreclosure actions.
H. Nowlin, Esq.
Member of Stevicol, L.L.C. (North Carolina)
John and Jane, brokers, sit in their mortgage originator store front office. They spy a couple reading their window adverts. “Come in, come in. And how are you lovely folks today?” “Good.” “Good.” “May we ask you if you rent or own?” “Ah, you rent. $900 a month and it’s tight. We see.” (They huddle a moment.) “Folks, we’ve assessed your case and our thinking is if you sign right here for a thousand a month mortgage, we’ll see that you get a quarter of a million dollars to get that home you have your eye on. How’s that?” “Don’t you have to write down all your credit card debt?” “No. Your application looks great, just as it is.” “And what will your mortgage and mortgage rate be at the end of the initial term? No one can say for sure but the standard operating procedure is that you come back and refinance with the new higher value of your home”. “Everybody does, just SOP, right Jane?” “SOP, everybody does.” “You’re curious how we get paid. Well, it comes from the lender’s part of the deal. It isn’t a lot but we get to put good folks in great homes. That’s a big reward right there.” “All set? See ya later. You’re welcome, thank you.” John and Jane high five, laughing! “What a couple of con artists those two are, borrowing a quarter mil on their credit record.
The Phoenix Foundation has today released a detailed, but easy-to-understand report outlining the economic crisis, along with a plan on how to solve it.
The non-profit research institute addresses the causes of the sub-prime mortgage crisis, which includes aspects not generally known to the general public - such as hidden financing which was unregulated and uninsured by the FDIC.
These "financial papers" include things called Credit Default Swaps (CDS) and collaterized debt obligations (CDO), which could trigger a $45 TRILLION collapse twice the size of the entire U.S. stock market.
I wonder why the US press is not covering the rise in shantytowns due to the subprime debacle?
BBC Story
Financial Times Story
I dug out my old Foreign Exchange books from my Citibank days. The big takeaway is that currencies don't go up when interest rates go down, EVER!!! Currency rates follow interest rates. That is an easy rule to remember.
We'll never get the dollar back without severe austerity here and much higher interest rates. And, no politician is prepared to tell the American people that after they've allowed the Financial Institutions to gorge them on credit all in the name of "growth".
Whatever that is! Growth in retail sales seems to be the main thing lately. That is really creating a lot of wealth.
Growth of the money supply is very bad for currency rates. That is in the book. That is the outcome of all those subprime mortgages, home equity, and plastic credit lines created by banks and credit card companies and investment banks selling subprime bonds to their best institutional clients (and boy are they mad now). The most inflationary thing to do is grow the money supply, but we don't say that. The Fed doesn't say that, they just say they are lowering the rates again. Growing the money supply and easy credit like that is inflationary. Could rising house prices be inflationary? Housing isn't in the CPI, so I guess not?...(well, you can guess what I guess).
One sure way out of our debt is continued USD de-valuation and inflation at home. That is the course we're on unless we stop this madness.
We may just be printing a lot of zeros on those Benjamin's like Argentina in the past, and Zimbabwe today!
But, that is one way to get rid of our debt, and piss off all our trading partners who bought our Treasuries. But Caveat Emptor right? Oh, but by the way, when that happens the price of a barrel of oil will be like $500 a barrel, or worse. That really is black gold.
Let's have a contest...who do we put on the $10,000,000 note. Oh, the $10,000,000 coin?
This was part of an article in NY times..by Frank Rich
http://www.nytimes.com/2008/02/03/opinion/03rich.html?_r=1&ref=opinion&oref=slogin
You’d never know from Mrs. Clinton’s criticisms of subprime lenders that one of the most notorious, Countrywide, was a client as recently as October of Burson-Marsteller, the public relations giant where her chief strategist, Mark Penn, is the sitting chief executive. Other high-level operatives in her campaign belong to Dewey Square Group, an outfit that just last year provided lobbying services for Countrywide.
Mission Statement:
Create a partnership with an Investment Bank to provide an alternative Reverse Mortgage Product to non-senior residential homeowners.
Key Results:
· Stabilize the Housing Market.
· Reduce Foreclosure Rates.
· Stimulate the Economy.
· Generate a New Revenue Stream for Investors.
With a Reverse Mortgage, the borrower will have no monthly payment obligation. This will result in a complete cessation of non-payment default loans, and stave off all potential foreclosures for those borrowers that qualify. The reduction of which will result in stable home values, and appreciation of neighborhood areas.
The ability to cash out equity in a lump sum, receive monthly payments, or line of credit in combination with the absence of any housing payment obligation will allow borrowers to use a greatly increased amount of disposable income for the purchase of goods and services. With such a vast difference in budgetary restraints, it will allow for an unprecedented economic growth in the United States.
Investors will have the opportunity to lend money to borrowers without risk of non-payment. Processing and Servicing Fees will allow for profits in a non-predatory lending practice. In a virtually untapped market, the investors that initiate the program will have unlimited and unrestricted access to millions of homeowners.
Program Highlights:
The alternative Reverse Mortgage Product will contain the following modifications to the pre-existing HUD specifications (http://www.reversemortgage.org/):
· No Age Limit Requirement. (Currently 62 years of age).
· Loan Term Limits will be mandated. (Currently no term limits exist).
· Investor will hold Title. (Currently the owner holds title).
· Home must be sold, refinanced, or the loan must be paid in full by term limit expiration. (Currently no requirements).
Specifications of age limit requirements, term limits, and details regarding ownership of title in the event of a refinance or sold home will be negotiated and detailed between investors and analysts to forecast the best application of terms.
In the event a home is not sold or refinanced, or the loan is not paid in full within the term limit specifications, investors may implement penalties, liens, judgments, or foreclosure proceedings. This would be in accordance to state and federal laws to determine the proper course of action for maximum adherence to program requirements.
Underwriting Guidelines would be drafted to specify a complete and transparent information source for lending practices and program requirements. Included would be LTV, Income, Credit, Appraisal, and other core topics pertaining to risk and collateral analysis.
Recommendations:
Term Limits should be brief. For example, a 3, 5, or 7-year term prevents the absence of an age restriction to negatively affect investor participation. It also will prevent any stagnation to market conditions and will push new home sales and refinancing.
Within the Term Limits a borrower will have full rights to sell or refinance the home, or pay off the Reverse Mortgage Loan without investor approval.
A borrower can streamline refinance into a new Reverse Mortgage with additional and sufficient build up in home equity.
Market Analysis:
The following bullet points offer a glance at the issues related to the current housing market crisis.
· Poor Stock Market Performance.
· High Jobless Rate.
· High Foreclosure Rate.
· Predatory Lending Practices.
· Federal Announcement to Lower Interest Rates.
· High Inflation.
· Low Economic Growth.
With an unlimited amount of information available on the Internet, a small sample of further research, analysis, and current events regarding the points above may be found by visiting the following sources:
http://www.mortgagenewsdaily.com/
http://www.bloomberg.com/news/index.html
http://www.cnbc.com
http://www.bls.gov/
http://money.cnn.com/
http://www.fxstreet.com/
Demographics:
The Primary focus of the Reverse Mortgage Program will be on homeowners in the continental United States with sub-prime adjustable rate mortgages at risk of foreclosure.
The Alternate focus of the Reverse Mortgage Program will include soliciting homeowners in the continental United States in good credit and equity standing to acquire new loans.
Practices:
Lending practices and requirements should be responsible yet flexible to allow high credit risk borrowers the opportunity to obtain the Reverse Mortgage loans.
Lending practices must be insured against future issues that may result. Examples of which are, but not limited to a high home sale market after term limits expire, low home purchase market, low home appreciation, new or progressive damage to residences.
Lead Times:
The normal mortgage loan process can take anywhere from two weeks to two months depending upon the various factors involved. Third Party services such as Title, Insurance, and Appraisals are required to be completed prior to close. Borrower motivation and document gathering abilities also attribute to the length of time a mortgage is processed and closed.
The creation of the program can be easily done within 1 - 2 months, and will effectively show results within a month of it's introduction. This creates the start of an economically secure landscape within 4 months from the theoretical conception to the 1st mortgage closed.
Competitive Analysis:
Without any mortgage product that rivals the proposed Reverse Mortgage Program, and with the current absence of Sub-Prime lenders, the competition will primarily be Conforming and Alt-A loan products. The strength of the proposed program is that it allows for a new alternative in mortgage lending.
The reputation of the mortgage industry has suffered which allows a new product by a new company to be unveiled that will disassociate itself with the current climate.
It’s necessary weakness in comparison to other loan products is signing Title over to the investor. Due to the current market trends, this issue is less formidable than the prospect of foreclosure. The choice to retain residence over loss of home is a compelling argument.
Regulatory Restrictions:
State and Federal Banking Laws will be addressed and adhered to with the forming of the Compliance Division.
I'm all for a housing bust. The median debt/income ratio is 3x what it was in 1983, much of it due to speculative housing price increases - "It will appreciate." People are so freaking stupid - never thinking that if their house value goes up, so does that of the person who will sell them their next house. It really only works for older people who ultimately downsize on a big scale. In the mean time, everyone finances more debt, and it's much harder for young people to get a reasonable start. Everyone thinks its great when every other consumer cost declines, but politicians knock themselves out to "support" [increase] housing values [costs].
Power from the people!
