I used to be a libertarian in that I thought people should be able to enter into whatever contracts they wanted.
After 20 years as an adult, I now realize that external controls for some contracts are needed. Correctly evaluating the value of a neg-am loan in a hot market requires PhD level knowledge in multiple fields (economics, law, statistics, etc.) There is no way the average consumer can make an informed choice or that there can be a real "meeting of minds."
In the old days, a bank manager or loan officer could just say no. In my twenties, this irked me extremely, but as a result I never had more than $1K debt, and could pay it off quickly: the nasty calls started, and I switched to rice and beans until I was solvent.
When I was 30, I realized I just didn't know enough to a bet on things I didn't understand. Picked a career, worked at it, saved money, invested in things I understood. Who are the thirty year olds today with the $300K mortgages, and why do they think this is a good idea?
Such a phrase ("After 20yrs as an adult") gorobei, has the effect of erasing every good word you had to say about being financially responsible.
I agree entirely. You are absolutely right about those 30 yr olds with $300K mortgages, but "after 20years as an adult" sends me.
Like any good line of poetry.
df, it sounds like some mandatory guidelines - kinda like the new credit card rules. My guess is the borrower will have to qualify for the higher future rate, not just the current rate.
Dugan's example of payments increasing 50% ... or even doubling, is scary. This is the type of speculation (excessive leverage) that I think will cause problems over the next few years.
gorobei, good points. There appears to be some systemic risk and moral hazard associated with these types of loans. In that case, tighter regulation seems appropriate.
Didn't mean "20 years as an adult" to be so loaded -- I am annoyed that I wasted so much time and money in my early twenties (a time when I was clearly not an adult.)
If I could have a do over (e.g. send me now back in time to meet my earlier self,) I'd have said "forget sports cars, etc. You're going to marry an intellectual like yourself, not a woman who cares mostly about money and status toys. Save the money, and work on what you enjoy."
The memory of doing 130mph on the Merritt Parkway at 2am, top down, Abduction from the Seraglio filling the car, passenger's white dress billowing seductively, has a certain value in today's dollars.
The trick is to live within your means. Don't try to save everything, just try to save 10% or so each year.
i'm afraid the neg-am phenomenon is way past infancy stage and into the "terrible two's". That's just about the time they start to randomly destroy things and then show you to see if you are impressed with their "creativity".
I think most poetry is accidental. Not that there isn't a body of it that is recognized as 'poetry' and you can go find it in the library or in a volume marked 'poetry'. That's well and good but I don't go there --although after this, I might.
Nope, I just hang out and occasionally get dinged.
"After 20years as an adult" smacked me good. Like some metamorphosis was about to occur (it did) and it was time to try out something else or be something or somebody else. It was quite unravelling, much more exhilarating than speeding down an empty highway in the early morning with the top down and the skirt billowing up.
So excuse me for being waylaid by that phrase. All that sound advice afterwards --trashed like tbizzle's 2yr old showing the world who's who.
Gotta sit up and fly straight.
(People might be watching.)
[No, could be another piece of poetry in the pipe.]
My sister-in-law works for a RE attorney, the office does 10-15 refies a day, day in, day out. She told me 100% of the refis are ARM of some sort with 70-80% IO or negAM. Almost every one is also pulling cash out based on a new, higer appraisal.
Of the new purchases, everyone is going 80/20 piggyback with no (or almost no) money down, also getting an IO-ARM of some sort or other.
When this all starts to unind it is going to be scary.
Dugan's glib dismissal of the 'regulatory void' issue is the most interesting part. He's arguing from the existence of laws, but the state regulators' beef is that enforcement is what's deficient. We get no stats or even instances of effective enforcement. Under this administration, we have to expect that rules will give whenever lenders run to their pols, and that pre-emption will function here as it does eleswhere, to ward off consumer protections.
Regulating guidlines for neg-am loans will be challenging. If borrorwers are to be "qualified" at the fully amortized rate and payment then something must be done about stated income and allowable debt ratios also. Keep in mind this will be fought very hard by the mortgage industry which likely will water down any changes in regulation. Until there is evidence of mass defaults on these products I suspect nothing but more useless talk about the danger.
You people are just horribly too responsible. Loosen that neck tie. Unbutton that shirt. Kick a shoe off.
Ok that's far enough. (I am so family oriented.)
Does this need some attention?:
John C. Dugan, Controller of the Currency
Who wouldn't die for a title like that?
(Aside from the section heads, Mary B. Jingle, Controller of the Coins and Chris P. Cash, Controller of the Greenbacks?)[Don't forget Rob N. Hood Chief Enforcement Officer]
Ok that's all the incitement I have today.
CR - will the guidance be manditory or will it only be suggested as a best practice but still remain optional and maybe ignored?
Anyone know?
I used to be a libertarian in that I thought people should be able to enter into whatever contracts they wanted.
After 20 years as an adult, I now realize that external controls for some contracts are needed. Correctly evaluating the value of a neg-am loan in a hot market requires PhD level knowledge in multiple fields (economics, law, statistics, etc.) There is no way the average consumer can make an informed choice or that there can be a real "meeting of minds."
In the old days, a bank manager or loan officer could just say no. In my twenties, this irked me extremely, but as a result I never had more than $1K debt, and could pay it off quickly: the nasty calls started, and I switched to rice and beans until I was solvent.
When I was 30, I realized I just didn't know enough to a bet on things I didn't understand. Picked a career, worked at it, saved money, invested in things I understood. Who are the thirty year olds today with the $300K mortgages, and why do they think this is a good idea?
Such a phrase ("After 20yrs as an adult") gorobei, has the effect of erasing every good word you had to say about being financially responsible.
I agree entirely. You are absolutely right about those 30 yr olds with $300K mortgages, but "after 20years as an adult" sends me.
Like any good line of poetry.
df, it sounds like some mandatory guidelines - kinda like the new credit card rules. My guess is the borrower will have to qualify for the higher future rate, not just the current rate.
Dugan's example of payments increasing 50% ... or even doubling, is scary. This is the type of speculation (excessive leverage) that I think will cause problems over the next few years.
gorobei, good points. There appears to be some systemic risk and moral hazard associated with these types of loans. In that case, tighter regulation seems appropriate.
Best Wishes.
Hi Calmo,
Didn't mean "20 years as an adult" to be so loaded -- I am annoyed that I wasted so much time and money in my early twenties (a time when I was clearly not an adult.)
If I could have a do over (e.g. send me now back in time to meet my earlier self,) I'd have said "forget sports cars, etc. You're going to marry an intellectual like yourself, not a woman who cares mostly about money and status toys. Save the money, and work on what you enjoy."
Ok, on reflection, I lied.
The memory of doing 130mph on the Merritt Parkway at 2am, top down, Abduction from the Seraglio filling the car, passenger's white dress billowing seductively, has a certain value in today's dollars.
The trick is to live within your means. Don't try to save everything, just try to save 10% or so each year.
i'm afraid the neg-am phenomenon is way past infancy stage and into the "terrible two's". That's just about the time they start to randomly destroy things and then show you to see if you are impressed with their "creativity".
I think most poetry is accidental. Not that there isn't a body of it that is recognized as 'poetry' and you can go find it in the library or in a volume marked 'poetry'. That's well and good but I don't go there --although after this, I might.
Nope, I just hang out and occasionally get dinged.
"After 20years as an adult" smacked me good. Like some metamorphosis was about to occur (it did) and it was time to try out something else or be something or somebody else. It was quite unravelling, much more exhilarating than speeding down an empty highway in the early morning with the top down and the skirt billowing up.
So excuse me for being waylaid by that phrase. All that sound advice afterwards --trashed like tbizzle's 2yr old showing the world who's who.
Gotta sit up and fly straight.
(People might be watching.)
[No, could be another piece of poetry in the pipe.]
My sister-in-law works for a RE attorney, the office does 10-15 refies a day, day in, day out. She told me 100% of the refis are ARM of some sort with 70-80% IO or negAM. Almost every one is also pulling cash out based on a new, higer appraisal.
Of the new purchases, everyone is going 80/20 piggyback with no (or almost no) money down, also getting an IO-ARM of some sort or other.
When this all starts to unind it is going to be scary.
Andrew
Dugan's glib dismissal of the 'regulatory void' issue is the most interesting part. He's arguing from the existence of laws, but the state regulators' beef is that enforcement is what's deficient. We get no stats or even instances of effective enforcement. Under this administration, we have to expect that rules will give whenever lenders run to their pols, and that pre-emption will function here as it does eleswhere, to ward off consumer protections.
Regulating guidlines for neg-am loans will be challenging. If borrorwers are to be "qualified" at the fully amortized rate and payment then something must be done about stated income and allowable debt ratios also. Keep in mind this will be fought very hard by the mortgage industry which likely will water down any changes in regulation. Until there is evidence of mass defaults on these products I suspect nothing but more useless talk about the danger.
You people are just horribly too responsible. Loosen that neck tie. Unbutton that shirt. Kick a shoe off.
Ok that's far enough. (I am so family oriented.)
Does this need some attention?:
John C. Dugan, Controller of the Currency
Who wouldn't die for a title like that?
(Aside from the section heads, Mary B. Jingle, Controller of the Coins and Chris P. Cash, Controller of the Greenbacks?)[Don't forget Rob N. Hood Chief Enforcement Officer]
Ok that's all the incitement I have today.