Great catch on the FW Weekly article, CR. I have added it to The File.
Here's a way to connect some dots between the predatory lending angle and the DAP angle:
There is solid research data showing the connection between pre-purchase homebuyer counseling and lower rates of default. There is also solid data showing that pre-purchase homebuyer counseling provided by somebody other than the lender (or the DAP) results in approximately 33% pull-through--that is, with decent counseling provided by a party without an interest in the transaction, 33% will decide not to buy, 33% will delay purchase for a significant period of time (to build more savings or improve their debt load), and 33% will go ahead with the proposed purchase.
The truly horrible DAPs (the seller-funded ones) started out with counseling requirements and then either dropped them entirely or started providing their own counseling. It seems they figured out the connection between ingorance and sales.
I have never encountered a DAP whose funds come from block grants or other truly charitable sources--not laundered seller funds--that doesn't require pre-purchase counseling.
The HUD sellout on seller-funded DAPs is one of the most egregious cases of the lending and developer lobby writing its own rules in years. HUD knows perfectly well what's going on and doesn't have the political will to put a stop to it.
We'll all just have to speculate on what effect pre-purchase counseling would have on the option ARM production volume, since to my knowledge there's no data on this particular sub-set of loans. So I couldn't swear in court that pre-purchase counseling would seriously dent that product, but I'd bet on it in Vegas.
I'm sure there is a good deal of ignorance out there, but in my judgement most of the people I talked to understood the technicalities well enough to know what they are dealing with, and have been making bets on the economy turning out favorably for them, and the continued support by Congress and the Fed (the moral hazard), in order to justifyy the notion that current housing trends will more or less continue.
Most of the people I talk to don't know the difference between the Federal Reserve and the local game warden, think "moral hazard" involves gay marriage and the tackier cable channels, and have the distinct impression that "the economy" as a concept is exhausted by the subject of their tax bills. Nonetheless they seem to behave--at least as far as mortgage debt is concerned--exactly like your more "enlightened" circle.
I consider this more evidence that lower income folks are, as usual, way smarter than the rest of us on this subject. (Pre-purchase counseling data is derived from large samples of low-to-moderate income first-time homebuyers, since they're the only ones required to get it as part of an "affordable housing" program of some sort.)
You're right, of course: there isn't any counseling curriculum I can think of that will make any dent on people who believe that only other people get burned.
tanta, when I first read about the DAPs I was puzzled why HUD would not oppose them. It just smells of fraud.
Thanks for that data on counseling. I remember reading an article once (maybe I can find it) ... a loan officer said he didn't write very many option ARMs because he took the time to explain them (counseling). Everyone else in the office just pointed out the low payments.
Debt ConsolidationDebt Consolidation Programs can help you reduce your interest burden by charging an interest rate lower than the rate on your existing loans. Debt consolidation loan can also allow you to make small monthly payments by extending the loan period
The attitude of lenders towards people with a bad credit rating who would like to get bad credit mortgage changed because they realized these individuals were not necessarily going to default on their mortgage repayments. Quite often the causes of a poor credit record can be attributed to unfortunate events such as redundancy, illness or divorce which occur through no real fault of those involved.
Great catch on the FW Weekly article, CR. I have added it to The File.
Here's a way to connect some dots between the predatory lending angle and the DAP angle:
There is solid research data showing the connection between pre-purchase homebuyer counseling and lower rates of default. There is also solid data showing that pre-purchase homebuyer counseling provided by somebody other than the lender (or the DAP) results in approximately 33% pull-through--that is, with decent counseling provided by a party without an interest in the transaction, 33% will decide not to buy, 33% will delay purchase for a significant period of time (to build more savings or improve their debt load), and 33% will go ahead with the proposed purchase.
The truly horrible DAPs (the seller-funded ones) started out with counseling requirements and then either dropped them entirely or started providing their own counseling. It seems they figured out the connection between ingorance and sales.
I have never encountered a DAP whose funds come from block grants or other truly charitable sources--not laundered seller funds--that doesn't require pre-purchase counseling.
The HUD sellout on seller-funded DAPs is one of the most egregious cases of the lending and developer lobby writing its own rules in years. HUD knows perfectly well what's going on and doesn't have the political will to put a stop to it.
We'll all just have to speculate on what effect pre-purchase counseling would have on the option ARM production volume, since to my knowledge there's no data on this particular sub-set of loans. So I couldn't swear in court that pre-purchase counseling would seriously dent that product, but I'd bet on it in Vegas.
I'm sure there is a good deal of ignorance out there, but in my judgement most of the people I talked to understood the technicalities well enough to know what they are dealing with, and have been making bets on the economy turning out favorably for them, and the continued support by Congress and the Fed (the moral hazard), in order to justifyy the notion that current housing trends will more or less continue.
What type of counseling will help against that?
Psychoanalysis? Scientology?
Most of the people I talk to don't know the difference between the Federal Reserve and the local game warden, think "moral hazard" involves gay marriage and the tackier cable channels, and have the distinct impression that "the economy" as a concept is exhausted by the subject of their tax bills. Nonetheless they seem to behave--at least as far as mortgage debt is concerned--exactly like your more "enlightened" circle.
I consider this more evidence that lower income folks are, as usual, way smarter than the rest of us on this subject. (Pre-purchase counseling data is derived from large samples of low-to-moderate income first-time homebuyers, since they're the only ones required to get it as part of an "affordable housing" program of some sort.)
You're right, of course: there isn't any counseling curriculum I can think of that will make any dent on people who believe that only other people get burned.
tanta, when I first read about the DAPs I was puzzled why HUD would not oppose them. It just smells of fraud.
Thanks for that data on counseling. I remember reading an article once (maybe I can find it) ... a loan officer said he didn't write very many option ARMs because he took the time to explain them (counseling). Everyone else in the office just pointed out the low payments.
Best Regards!
Debt Consolidation Debt Consolidation Programs can help you reduce your interest burden by charging an interest rate lower than the rate on your existing loans. Debt consolidation loan can also allow you to make small monthly payments by extending the loan period
The attitude of lenders towards people with a bad credit rating who would like to get bad credit mortgage changed because they realized these individuals were not necessarily going to default on their mortgage repayments. Quite often the causes of a poor credit record can be attributed to unfortunate events such as redundancy, illness or divorce which occur through no real fault of those involved.