Comments on: Is the new affordable FHFA loan program predatory lending?

By: DG

DG — Mon, 31 Aug 2009 15:31:38 +0000

I think you are taking an extreme approach. We don’t even have debtors prisons in the US other than for not paying the IRS. You are correct about it being a poor decision. If they do lose income and eventually end up needing to get out of the house, they would be much worse off. I’m in a similiar situation in SoCal only on the bad side of it. My house was purchased for 380k and is down 65%. I also put nothing down just like the story. At that point is there any reason to even make the payments?

By: Doc Merlin

Doc Merlin — Mon, 06 Jul 2009 23:49:54 +0000

WTF does it mean for a loan to be predatory? Does it mean targeting someone you know won't be able to pay it back? In that case then predatory is short for "bad business decision?"

By: Bruce Krasting

Bruce Krasting — Fri, 03 Jul 2009 14:29:33 +0000

This business of the 125% LTV loans is over the top. Academia and the industry have produced tons of research that prove that.

It would be interesting to look at the State laws on what constitutes "Predatory Lending", or even better "Lender Liability". In Massachusetts the AG just settled a case like this with Goldman Sachs. The finding then was that the loans made were predatory and liability was assessed. The lucky 600 borrowers will get an average of 35% reduction in their PRINIPAL as a result of the settlement. Dumb lenders deserve to be penalized.

Part of 'curing' the system will be to establish clear laws on what a lender can do. When mortgages loans are made with no equity they create a systemic problem. It is not just a matter of the borrower and the lender losing what they have. The defaults that bad lending create devalue whole neighborhoods. It impacts people who were not over leveraged. Victims. We thought 'we' were protected from the follies of bad lenders like Countrywide. But we found out the hard way that was not the case.

My observation is that the private sector high risk mortgage window is closed. It will not reopen any time soon.

The D.C. lenders are making $100b per month of 97.5%++LTV loans. They have not learned from their mistakes. They are 60% of the total $12T market. They are 85%+ of the new market. And they are continuing to make bad loans. Is that systemic risk?

By: Anonymous Jones

Anonymous Jones — Fri, 03 Jul 2009 06:16:06 +0000

gpp — with all due respect, you don't seem to understand the nature of the word nonrecourse. The fundamental (and clearly bargained for, when considering the legal constraints in place at the time of contract) aspect of a nonrecourse loan is the choice of the borrower to either repay the money or deliver the asset to the lender. A nonrecourse debt specifically and absolutely places the risk of loss when the asset value dips below the amount owed on *the lender.* So whether or not this concept you speak of is unfamiliar, reconsidering it seems pretty foolish when the choice to walk away is not just legal, but an obviously contemplated and bargained for right in the basic terms of a nonrecourse loan contract. Or perhaps the lender was duped when he handed the form contract he prepared to the borrower?

By: VG Chicago

VG Chicago — Fri, 03 Jul 2009 06:07:42 +0000

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For a limited time we also free engraving with your name on the pitchfork of your choice. Some of our most popular engravings read: “Foreclose this!” or “Ouch, that hurt!” or “Take this, you mother fuc*r banker”, or, my all time favorite, “Sir, I’m afraid I’ll have to default on my loan… do you mind?”

Call now. Operators are standing by.

Vinny G.

By: plschwartz

plschwartz — Fri, 03 Jul 2009 00:44:22 +0000

While I have great regard for your intellect, I do not imagine that others could not have seen the same dangers.
I assumed in Bureaucratic style this idea passed up several layers and was bounced around elsewhere.

So is pushing it out onto the American public (rated #1 in some international poll of gullibility)
a matter of institutional mindset or an attempt to deceive?

By: gpp

gpp — Thu, 02 Jul 2009 23:46:13 +0000

The program is designed to enable people to pay back money they owe.

Paying back money you owe has become an unfamiliar concept which is well worth being reconsidered.

By: Argel

Argel — Thu, 02 Jul 2009 23:38:51 +0000

Thanks Ed! Information like this needs to be spread as far and wide as possible. There are lots of great posts about the economy, but it's the more personal ones like that this that mean the most. Great job.

By: AZ Skye

AZ Skye — Thu, 02 Jul 2009 22:08:25 +0000

Welcome to the New Society where our government is quietly and deliberately enslaving all but the very, very wealthy. Taxes, especially the regressive type, are rising, while resources for the poor or disabled quickly diminish. Credit is increasingly unavailable – when credit limits are slashed, FICO scores fall as the percent of debt-to-limit increases. Those with student loans are permanently indebted to the lender, often for a degree that is essentially worthless. Inflation has hit our every day consumables, while deflation erodes the value of our investments and the global dollar. All the Maria's out here may not understand the whys, but they are surely feeling more and more desperate, making these loans most attractive. They would never suspect that their government would offer loans that could and would happily take their last dime. Shame on us!

We have the perfect storm coming, it's just a matter of time.

By: skippy

skippy — Thu, 02 Jul 2009 21:39:54 +0000

Can you hear the drum beat, stroke, stroke, all whilst watching your betters on the LCD/Plasma TV in your lounge…ohh look honey we could live like that some day or go there if we work hard.

Skippy…love that new pop song "messing with my delirium" and yes they are.