I don't want to know what they'll propose to do..

The "Home Ownership and Equity Protection Act (HOEPA)"

OK, I know the FED silently strays out of bounds frequently, but in my view this is clearly a case where it's going out of the stadium and into another state.

There are supposed to be 2 principal concerns for the FED addressed by implementing policy: Inflation containment & Employment bounding. They clearly have an impact on the strength of dollar by default as a consequence of any policy decisions, even though it's not their mandate. They also address any concerns over the stability of the banking system as regulators and measure their impacts over the financial markets. OK.

But, since when have they been put in charge of protecting asset prices. Who decided Home Equity Protection is within their mandate. It's troubling when the FED openly broadens their scope. WHo holds the reins, The Supreme Court?

I have been through some tuff times in life...where was my help when i needed it most? I have owned my house for 15 years...why can i not have my rate lowered to help me keep a little more of my (2 jobs) paycheck....this is BS. Why even bother having a credit score system if they are going to bail all thses sub-prime borrowers out? BS

barely,

The mandate you have in mind, the mandate for monetary policy, is not the only mandate the Fed has. It is also a regulatory institution. The law cited requires the Fed to guard against abusive lending, whatever that may be. The Fed is an arm of government. when Congress instructs the Fed to undertake a certain task, odds are the Fed will.

Bloomberg's second story on this hearing, right after the simple press release, took the view that the Fed is holding this hearing because Congress is leaning on the Fed get involved in this problem, as required by law. I would not be too surprised to see the Fed drag its feet in actually doing anything about abusive lending.

Thank you for this site.

So people who borrowed more than they could afford are going to get some help?!

If the govt subsidizes some of my down-payment, I will gladly make sure one of the forclosed homes in my area will not go unused. Why should I use my money in the smart way if Congress is going to do something dumb like this?

PS: I am not going to argue with those who claim that some borrowers knew what they were doing. It is obvious that they did. But when you have 70 year olds who had their houses nearly paid off and who now find themselves in an absolutely untenable situation, there is adequate room to bring a case. Everyone who got rooked by these mortgages was not a knowing participant.
MaxedOutMama

MOM: The gov't and all its various RE/mortgage progams and tax incentives are unending. More tax payer dollars going into maintaining the RE industry/HB industry/mortgage indusry. All we seem to be getting from this money is higher priced homes.

http://www.builderonline.com/industry-news.asp?sectionID=26&articleID=490694

good article: a bit below:

McPherron, on the other hand, says he wouldn't be surprised if home sales were still soft well into the summer months, even though year-over-year comparisons could improve. And if the trend set in March continues, as the numbers suggest, into April, May, and beyond, the many sellers who are struggling to make their mortgage payments and holding out desperately for a spring buying boom could be in for a shock, at least, and foreclosure at worst.

"Many people think, 'if I can just hang on 'til the spring,' they will get an offer," says McPherron. "This spring, they'll be lucky to sell."

Yes. You are missing the kind of lending that was common before 1994 and not so common these days.

Ah, I see, this is related to the 1994 HOEPA law as opposed to the new rules being considered. Makes sense now.

"Forclosure moratorium- that should give lenders food for thought when making future lending decisions in MA"

deb, that was exactly my thought as well. What lender in their right mind would want to lend in a state where the main recourse against non-payment has been effectively eliminated? Talk about unlimited risk potential!

This should have the effect of totally siezing up the MA RE market. I wonder how many other states will follow MA off the cliff?

Excellent post on piggington by a REO broker

A small excerpt:
"I called a couple of local REO brokers to get a feel of what the business is like these days. Here is what I heard:

Hearsay #1 – early or first payment defaults are truly intentional. Borrowers maxed out on a cash-out refinance and then simply wait for the foreclosure process to finally end when the Marshall removed them from the premises, often a year or more from when they first stop payment. This behavior is not only irresponsible but it surprised me that so many are knowledgeable enough to choose this way out.

Hearsay #2 – all REO brokers have more business than they can handle, even as more brokers are reclassifying themselves as REO “specialists”. Based on the numbers that I was told, REO volume has indeed surpassed the worst of times in SD since the early 1980s.

Hearsay #3 – asset management companies are more prevalent than previous cycles. In other words, lenders/servicers outsource REO disposition to a third party who then contracts with individual brokers where the REOs may be located. These asset management companies are swamped nationwide, hence the auctions in hope of disposing properties in volume.

Hearsay #4 – REOs had been clogged in the pipeline because lenders were slow in reacting to the rapidly declining market. They are now at a point of realization and are adjusting prices accordingly. If this auction proves to be disappointing, the lenders are likely to be far more aggressive."

Guest Commentary: Ramsey on Foreclosure Auctions and More | Piggington's Econo-Almanac | San Diego Housing Bubble News and Analysis

I'm not cheering for a bailout by any stretch, but I wonder if one of the most important solutions to the problem is turning mortgage brokers into fiduciaries.

I have lots and lots of clueless-friends mortgage stories, but a common thread seems to be the naive assumption that the guy across the desk doesn't want to screw them over. I don't think the thought ever crosses their minds that what's best for the broker isn't also necessarily best for them. Believe it or not, they trust loan officers too.

They come away from these transactions HAPPY because they get what they want and don't have a clue that they've just been taken. An older gentleman who's another friend of mine was delighted with the broker who steered him into a no-doc because it was "easier," even though I'm sure he would have had no trouble documenting his income and assets. He actually recommended her to me, like he thought she was being nice to him and doing him a favor. It's pitiable.

Shouldn't we make all of these loan reps what people actually think they are?

Considering there are still 17 states to adopt the nontraditional guidelines that were introduced in 2005 I wouldn't hold my breath for the Fed.

FYI, some good stuff from Mason & Rosner on their paper here: Hudson Institute >

Hudson Upcoming Events Detail

"Seriously. If the broker isn't representing some party in a fiduciary relationship, then the broker is doing nothing but adding to the consumer's costs by being a middleman with its hand out for fees."

Yeah, you nailed it -- a middleman collecting his toll. A useless moron who has somehow managed to create for himself an impassable toll both on the bridge between the real buyer and the real seller -- preferably with Congressional or "Legislated Trade Group" backing. Think NRA, AMA, etc.

Also known as "Rent Seeking", or "Making (Grabbing) a Ton of Green by doing almost nothing". Our Great, 21st Century, Morally-Putrid, American Uber-Innovation. Look around, everywhere you turn your head, what do you see -- every would-be "New Economy Genius" beating their 6 brain cells trying to come up with an "innovation" on the Pet Rock theme. "Gee, if only I could come up with a way to pick up rocks off the ground for free and sell them for a huge profit, I'd be as Happy as a Pig in a Wallow!"

I keep laughing when I read the crap coming out of the Fed, Congress, the financial know-it-alls with regard to "financial innovation"! There's no "innovation" in fraud, deceit, scamming, ponzi, and 3 Card Monty schemes -- that's as old as the Bronze Age. What is "innovative" about loan programs that try to mask the truth -- the damn property is too freakin much money for the poor bastard to afford -- EVER.

But this environment of fraud, scam, deceit, phoney-baloney is all around us -- Real Estate only being the latest and most Headline Grabbing. Just look at the current White House Administration and the House of Clowns called Congress. Just look at the 401(K) scams whereby your Great Father -Figure Employer farms out the paperwork management of your 401(K) to some 2-bit Boozo who basically does nothing Value-Added and takes a whopping chunk of your retirement for that "Service" -- and HIDES tha fact to boot! Yeah, for all you numskulls who don't know about this one -- just Google lawsuit + 401(K) and see what you come up with -- and don't be surprised to find your own Employer's 401(K) plan mentioned.

Ask almost anyone today what their ideal path to a successful life is -- especially those under 40 years of age -- it's likely to be some form of Rent Seeking activity.

I could go on with 150,000 examples -- but what's the point -- it's right there in our faces -- either you see or you don't. The Simple Moral Value -- that you should Deserve (Earn) What You Get has been lost, The Simple Moral Value that Leaches Are Bad For the Human Race and should be SQUASHED ON SIGHT has been lost.

As usual (with an accent on the "usu"), when the heat starts to singe the little toesies of the chiselers on relief, who do people look to?

Well, it isn't the Ghost Busters.

It's the lenders. It's all their fault. Boo hoo hoo.

C'mon. Give me a break. The lenders have been doing everything in their power to explain and clarify the usurious terms of their loans. There are guys in Brooklyn with baseball bats gathering dust in the back of the room, crying their eyes out in envy of today's lenders.

Here's an analogy. All the Democrats say they were tricked into voting to invade Iraq. Do you believe them? Hell, no. They knew there were no WMD's. They knew an extraordinarily sophisticated guerrilla force would oppose us for years and years, killing thousands of our troops. They knew the country would sink into anarchy. Who are they trying to kid?

We're in big trouble when people start casting aspersions on the selfless lenders who have made this country great.

How about a little "there but for the grace of [insert theological preoccupation of choice] go I?"

Tanta: I totally agree. But there's plenty of fraud to go around these days it seems. Not all of the fraudsters were lenders; some of 'em were borrowers who lied about their income and other stuff too.

We definitely need some sort of government regulations so that borrowers are made very much aware of what the term "negative amortization" means if there's the slightest possibility that they're getting into that kind of loan, for example.

But I worry about any bailouts that will rescue people who engaged in risky economic behavior - that will just encourage more of said behavior.

And then there was an article linked here a bit further up about how the House has voted to allow FHA loans with smaller downpayments (3% isn't small enough?) and higher loan limits. That just seems crazy at this point.

CR | Tanta (or Others)

I just saw this post on a different site:

What happens to their previous quarters if you strip out their subprime gains? Oops. That’s a question they sure don’t want to answer. And how much accumulated interest income have they recorded but not actually received?

NYCityBoy
The Housing Bubble Blog » Bits Bucket And Craigslist Finds For May 3, 2007

I bolded (is that a word?) the part that I thought was interesting. I haven't read much on this nuance (the way that companies have been able to record non-existent (phantom) interest income) and how it might effect their bottom line. Has anyone read anything that attempts to quantify this value?

As I understand it when a person pays less than the interest on an option arm the company can record the whole interest payment as income. So I would be looking for lenders who have lots of negam option arms right?

Does anyone know if plain old negam loans also allow for this accounting anomaly?

btw, Tanta you got a shout out on that website, I bet if I asked you a year ago if you ever thought you'd be a mortgage superstar you would have thought I was nuts-o!
.......

Alot of it is second houses for wealthy Germans, Brits etc. From what I've read they are vacation homes so they will not be dropped on the market in 16 months... They maybe empty but wont apply downward pressure on the prices...

People seem to forget the entire world around Americans is a social contract whereby there are damn few people living in cardboard boxes and begging on the streets. The same social contract gave you schools, hospitals, social security, roads, disaster relief and even television, among many other things. Try saying that you've never received a handout or a hand up. Are you taking care of your sick, retired parents in a room in your house on your own income? Are you grawing your own food? Are you clearing a path across the prarie or woods evey day so that you can shoot a bear for dinner. Spare the fauz outrage. Even if a 100 billion was proposed for morgage relief (which it is not), what does that compare to the hundreds of billions being WASTED right now by this gvernment in Iraq. Leaving aside the reasons for the war the word WASTE applies to the money spilled without result. The first, and lowest form of human behavior is to say sanctimoniuosly, thank God, I'm not like them.

THE BEARS REMAIN UNCHANGED:

Anger, hatred, foaming at the mouth, bitterness, envy, victimology, unaccountability, non-responsibility, unpatriotic anti-Americanism, whinniness, pissiness, moaning and self-loathing and all with a dash of mental instability and lunacy--not to mention moonbattery!

Some things never change.

Betting against the massive, muscular USS Economy will get you what you've - your trembling, exposed asses blown off.

"all I really have to rebel against from my religious upbringing are potluck dinners and tuna noodle casserole with those danged crunchy canned onion rings on top."

Ooohh, after I quit distrusting people over thirty (I became one so what could I do) I did a second childhood number and fell in love with that stuff. But then, I was raised in So Cali by Midwestern parents ...jeez, I feel so dirty (sob).

OnT: Brokers et al -- and this goes for stocks as well as mortgages -- either need to be called what they have, for the most part, been until now -- that is, sales-people -- and forbidden by law to refer to themselves otherwise or they need to be reconstrued as fiduciaries with whatever regulatory overhang that entails and licensed accordingly.

Anything else is false advertising whatever one thinks of the other problems. JMO

Has anybody seen my RECESSON? Huh, have you? I know it was here in 2001 or thereabouts. At least someone said it was, although almost NOBODY noticed it.

As long as you’re looking, keep your eyes peeled for my 600,000 lost residential construction jobs too, can’t seem to find any trace of those either.

Unemployment...no jobs...recession...soup kitchens...where are the jobs? ...my income isn't growing...poverty...depression... Buddy, can you spare a dime?...The Grapes of Wrath...Tobacco Road...outsourcing...globalization...its not fair...Bangladesh...redistribute...where's my BMW?...where's mine...you owe me....I'm not accountable...you are responsible...it takes a village!

ATTENTION SCARED OF YOUR OWN SHADOWS BOND HOLDING PERMABEARS:

Data mining and WART DOCTORING for any bad news that fits your narrow, housingcentric world view is evidence of only one thing – that the USUAL LUNATICS who constitute a certain sector of the financial food chain are not and will not be participating in the ongoing BODACIOUS profitfest debauchery.

And with core inflation a mere 2.1 percent over the past twelve months, the stability and continued profits reins supreme.

Yeah, and with gas hitting $3.30/gallon now there's just absolutely no inflation in sight.

We are in the middle of a synchronized global economic expansion the likes of which the world has never seen.

Have things ever been better in all of human history?

Haven't seen it this good since 1928 or 1999.

I am stunned, stunned!, not to find a single reference to the very strong economic state of the union here

Check out The Wall Street Journal article, entitled “Class of ’07 Gets Plenty of Job Offers.” It talked about employers planning to hire 17 percent more graduates this year than they did last year. This happens to top the college-hiring peak of the last economic boom in 2000.

The fact is, jobs continue to boom. So do real incomes, productivity, and profits. Economist Michael Darda points out that real wages over the first five years of the Bush expansion are actually growing more rapidly than over the first five years of the Papa Bush/Bill Clinton boom.

Meanwhile, unemployment today is only 4.2 percent. Federal, state, and local tax collections are soaring through the roof. Budget deficits are plunging. Inflation-adjusted GDP is averaging just more than 3 percent. Family wealth stands at a record of slightly more than $54 trillion. Total employment is at a record 146 million.

Stock markets, as you might have noticed, also continue to rise. CA-CHING! They have done so, almost without interruption, for four years, on the shoulders of a remarkable surge in business profits -- which itself is a function of the high-tech, knowledge-based product explosion.

These corporate profits, along with our record-setting stock markets, have enriched the more than 100 million investors who are participating in this prosperity. In fact, this America boom is spearheading a global economic surge. While the American free-market model is often derided as “cowboy capitalism,” imitation remains the sincerest form of flattery. And it isn’t just China, India, and Russia who are acquiescing to the worldwide spread of American capitalism. It’s also Eastern Europe and parts of South America. Heck, even the socialists in Old Europe -- like France and Germany -- are getting into the act by reducing individual and corporate tax rates to promote growth.

Note to scared bears and other modern-day class warriors: The best anti-poverty plan is a growing economy, one that creates jobs and higher middle-class living standards. As free enterprise has been unleashed around the world, government planning once again has been rejected. This is the spirit of Adam Smith’s Wealth of Nations, where he argued almost 250 years ago for free markets, free trade, and a very light touch with respect to taxes and regulations.

Scared bears should understand the point that if the economy ain’t broke, there’s no need to fix it. Taxing the rich will not make the non-rich rich. Attacking businesses will not produce more jobs and investor-class profits. Imposing trade barriers will not help high-quality, low-cost consumer imports, nor will it promote job-enhancing business exports or help poor nations grow richer.

But the bottom line is the bottom line: As we progress through 2007, the economic state of the union is excellent.

If it ain’t broke, don’

The demise of the U.S. has been predicted on and off for most of my life. As a kid there was the Cuban missile crisis and personal bomb shelters. In the 70's stagflation was going to sink us. In the 80's everyone predicted we'd turned into a banana republic by Japan in just a couple years. Just before it's breakup in the early 90's a good many people (including the CIA) thought the USSR might actually be winning the cold war. Now the doomsayers say Islamo-fascism is on the rise and we have no answer. And Iraq has destroyed our credibility and sapped our will. And China is on the rise and will soon overtake us.

The doomfreaks always have and always will speak with the certainty of the righteous that one and only one outcome is possible.

And betting against the US will continue to be a sucker bet.

I’m sorry America isn’t working for you, I hear the weather is nice in Havana this time of year.

NEXT BEAR SCRIPT: We are in UNCHARTED TERRITORY and NOBODY could have known how the housing market would play out.

Contrast that to the VERY RECENT PAST (or even presently) where Bubbleheads screamed with the CERTAINTY OF THE RIGHTEOUS that this time is “NO DIFFERENT” from the past and the nuclear winter outcome was CAST IN STONE. No other outcome is possible. This is a sure sign of a single cell organism incapable of understanding housing and autos in the CONTEXT of the larger economy.

100 million Americans are FEASTING on porridge which is JUST RIGHT while bears tremble in their caves gnawing on Billy’s frozen burritos.

THIN GRUEL. PLEASE SIR, MAY I HAVE ANOTHER?

PERMABEARS REDUCED TO POOR-MOUTHING THE DATA:

There is a orchestrated conspiracy out there to lie to and deceive the public. The Permabear’s "sources" tell them that the daily tsunami of bullish data is being manufactured in an illegal Tennessee buorbon distillary behind the Big Red Barn that houses unnatural farm animals. You know the Red Barn, the one where the black helicopters take off and the space ships land.

WHY IS THE BEAR'S HOUSING DOWNTURN "SPREADING"?

SCARED PERMABEARS WILL NEVER FLIP...

They will hibernate until the next spring and then emerge, dust-off their old B.S. ; put a little lipstick, rouge and a tight red-leather skirt on it and then recycle their stale old B.S. arguments again and again just like they have been doing for decades. Others will just be reduced to stuck-on-stupid, glooming and dooming Wart Doctors, who contribute nothing but cherry-picking and pointing at anything that supports their failed case and accusing all the other data as being the product of some kind of conspiracy.

The "tapped out consumer," their favorite black & white re-run, will get revived more times than Nick Nolte during a hellacious weekend.

Those posts are like psychological BATTERY!

Can't we SUE HIM?

Please dear God CalcimatedCyst delete all of those HIDEOUS POSTS!

This is unacceptable and akin to battery like young Timmy said.

I feel dirty, violated even.

Can't somebody notify the proper authorities?

Interesting ...The last time I saw troll bombing runs like this was in 2000; the worst was from the dot com bums who were about to be fired (and knew it) and the sales people who were just beginning to suspect they were next to go to slaughter.

That implies this current run of trash-talk must be from a mortgage bum who knows the game is over.

But either way no sense in providing feed to troll or a man-cow walking into the charnel house: One will simply continue to shriek and make threats until it is drowned and the other will only bellow until it is shot, trussed and gutted. Why waste time in chit chat with such?

perhaps it was computer generated... like that spam that doesnt make sense... unreal....

Geez, I guess this is the second face of Sebastien - it's kind of like the second head of Voldemort in Harry Potter.

The troll posts are a perfect example of what is wrong with our society in general.

A whole heck of a lot of misplaced energy and productivity!

If that boob spent just half his misdirected energy on something productive ... he could cure cancer ... or something ) jeeezzz

Anyway ... I really like Tanta's 1,2,3 plan

'1. People who are struggling but could make the loan work with a reasonable modification should get one...
2. People who cannot carry their loans or sell their homes need to get foreclosed ...
3. If the borrower was a victim of predation, you make the lender cancel the loan... '

Sort of like everyone has to stick their finger in the light socket ... so it won't happen again (as easily). ONE caveat though ... the people that fall under (#1) get a BIG DING on their credit score.

What's Cramer say ... BUY,BUY,BUY !

"Financially strapped subprime mortgage lender New Century Financial Corp., failed to receive any bids for its mortgage loan origination business, forcing it to shut down the unit and lay off around 2,000 employees, the company told employees Thursday."

No bids for New Century

What happens on Main St when Wall St moves the party elsewhere!

I, personally, I am glad to have our great country defended in these comments.

Though Thomas Jefferson failed to include "farting through silk" in the Declaration of Independence (probably because Sally Hemings was sitting on his [rhymes with race]), I would say that it is included in the penumbra of the Declaration.

Go Bulls! Defend the country.

It is interesting, to me at least, that one of the Bull commenters included a rosy future for the American consumer in his calculations.

When it comes to the American consumer (who has no savings, whatever else he may have), it's all about psychology.

May the best psychologist win.