[Rhodes22-list] Economics
DCLewis1 at aol.com
DCLewis1 at aol.com
Wed Mar 28 00:14:51 EDT 2007
Wally,
If you take the average person and stand him up against a team of high
pressure sales people, the sales people will sometimes win. If you’ve been
through a time-share sales experience you know what I mean. So to say it’s the
purchasers “fault” (as per Brad in his rare lucid moments) is not enough, I
think there needs to be some regulation. I don’t think the existing lending
disclosures I’m aware of begin to address the issue - they just give you a lot
of numbers when what’s needed is advice on what you, the purchaser, can
afford. I suspect a lot of home purchasers have taken the position - if I can’t
afford this house they won’t give me a loan - which of course is wrong;
mortgage originators will give anyone a loan and then promptly sell it to someone
else who will be left holding the bag. I think lenders and borrowers both need
some protection from originators who have originated clearly bad loans,
mis-represented them when they were sold, and then moved on down the road.
What I’m trying to say is that there are 2 losers in this melt-down: the
borrower and the loan holder. The only winner is the loan originator who can
pack up and get out of town ahead. From my perspective this is not a
constructive arrangement.
With regards to your point that what was done was perfectly legal: I’m sure
that for the most part you’re right. But I think the financial system has
good ways to deal with legal but overly risky things that appear to be getting
out of hand. There’s no reason why Treas, HUD, or the Fed - or all of them
together - couldn’t have called a meeting with the principal lending
institutions - which are all subject to state and federal regulation - to publicly
convey their concern and ask/require that lending standards be tightened. There
is precedence for this, the Fed did it with the derivatives market and it
worked, I think it could have worked with mortgage originators. This doesn't
take new laws, just call a meeting - again, it's worked with derivatives.
Finally, as a nation we’ve been down this mortgage fiasco road before in our
lifetime. There’s no good reason why the people paid to regulate the
mortgage markets shouldn’t have been on top of NoDoc, NINA, and negative
amortization loans from their start. I do blame the regulators. If I saw this coming
and you saw it coming, they should have seen it coming, and I think they
should have tried to do something about it.
Dave
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