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Thread: Fed to crack down on shady lenders

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    Featured Member Vamp's Avatar
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    Exclamation Fed to crack down on shady lenders

    Central bank will propose rules on Tuesday to protect mortgage borrowers from banks and brokers.

    December 15 2007: 12:08 PM EST
    WASHINGTON (AP) -- People taking out home mortgages may gain new protections soon against shady lending practices as the Federal Reserve seeks to back even the riskiest borrowers, already hit hardest by the housing and credit crunches.

    Rules expected to be proposed Tuesday would apply to loans made by all types of lenders, including banks and brokers. The plan from the Fed, which has regulatory powers over the nation's financial system, could be finalized next year. The effective date would be know then.
    The Fed is considering:

    --barring lenders from penalizing subprime borrowers - those with spotty credit or low incomes - who pay their loans off early.

    --forcing lenders to make sure that borrowers, especially subprime borrowers, set aside money to pay for taxes and insurance.

    --restricting loans that do not require proof of a borrower's income.

    --examining lenders' failure, in some cases, to consider a borrower's ability to repay a home loan.

    --improving financial disclosure so people better understand the terms and conditions of their mortgages and get this information when it is most useful.
    --curtailing abuses in mortgage advertising.

    "We have an obligation to prevent fraud and abusive lending," the Fed chairman, Ben Bernanke, said earlier this year. "At the same time, we must tread carefully so as not to suppress responsible lending or eliminate refinancing opportunities for subprime borrowers."

    http://money.cnn.com/2007/12/15/news...ex.htm?cnn=yes
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    Default Re: Fed to crack down on shady lenders

    ^^^ which will essentially amount to lenders avoiding 'discrimination' charges by not offering new loans to semi-qualified Alt-A borrowers right along with not offering new loans to 'subprime' borrowers !

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    Default Re: Fed to crack down on shady lenders

    Sub-prime borrowers should be discriminated against - not because of anything but ability to pay back the loan - but yea, special consideration. And they shouldn't have been giving these people 100's of thousands of dollars. I might lend $2,000 to a subprime borrower for a car or something but damn - 100K+ ?

    And the truth of the matter is, Alt-A borrowers can usually come up with some money to put some skin in the game. If not, they are reckless with their money as is obvious from making some coin and not having a penny to put into play. Put some money down with the lender and everyone feels a little better about stuff.

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    Default Re: Fed to crack down on shady lenders

    I love it, first, the bleeding hearts cried and whined that minorities, low income earners, and the middle class were being frozen out of home ownership because bof strick lending guidelines. Some even went so far as to lable this "racist"

    Now, those same morons are whining and crying about the poor, uneducated shmucks who "fell for" viscious lenders who "forced" people into these "shady" loans that they wouldn't have qualified for before. Some have even called these practices racist.

    So, who is right and who is wrong? What ever happened to personal responsibility?

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    Banned Katrine's Avatar
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    Default Re: Fed to crack down on shady lenders

    My sentiments exactly scorpio. Now my mortgage broker clients are getting laid off and not getting their loans closed because of this shit. And they are good, responsible brokers.

    Why the fuck does everyone in this country feel entitled to a house?

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    Default Re: Fed to crack down on shady lenders

    ^^^ I'm glad to see that this tread came back to life. With previous 1990's HUD / Fannie / Freddie / Bank 'community service' gov't mandates to extend mortgage credit to would-be borrowers who knowingly didn't have the long term ability to pay, the gov't is in no small measure directly responsible for today's mortgage debt debacle. Now that same 'well intentioned' gov't is proposing to bail out people who were extended mortgage credit that they couldn't afford to pay by forcibly 'renegotiating' the terms of their 'teaser' ARM's by forcibly sticking mortgage investors with losses and by forcibly sticking middle class taxpayers with 'stealth' tax increases. Election year politics sucks, especially when the politicians focus in on 'buying' votes via transferring more of my tax money to subsidize a deadbeat.

    And this bailout plan creates so much Moral Hazard, both in terms of forcible renegotiation upon lenders, 'cram-downs' of outstanding balances, and removal of 'taxable income' consequences on forgiven debt, that for many Americans the subject of 'personal responsibility' can't compare to the $50k-$100k-$200k 'cash value' of loan forgiveness, interest savings etc. that will stem from the gov't bailout plan or simply 'walking away' from their $100k-$200k underwater mortgage debt via bankruptcy (while still retaining their IRA / 401k money).

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    Default Re: Fed to crack down on shady lenders

    That really chaps me and the good, responsible people I know and work with.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Quote Originally Posted by Mia M
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    Default Re: Fed to crack down on shady lenders

    ^^^ I hear that ! Just imagine what some people will be able to get away with ... an original $400k mortgage with zero down from say 3 years ago, followed up with another $250k in cash-out refi's in the meantime --> they can spend or closet the $250k refi money, and walk away from all of the cumulative mortgage debt with NO income tax penalty. Throw in probably another $50k in credit card debt they can spend and also walk away from. Throw in the fact that the $100k-$200k or whatever balance in their IRA / 401k is untouchable by bankruptcy creditors. Net 'cash value' of the bankruptcy $300k ... equalling $60k per year in after-tax income over the 5 year bankruptcy period. Sure beats giving lap dances !

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