Mortgage delinquencies a rising threat

[ckramer]

Mortgage delinquency and foreclosure rates are on the rise, and the impact could be greatest on low-income families that took out higher-interest loans for risky borrowers, some experts said Monday.

Treasury Secretary Henry Paulson said the government wants to issue guidelines to banks and savings and loans that will allow people to get home loans "without taking unnecessary risks."

"Expanding opportunities for more people to buy a home is a good thing. But we do not want Americans to become overextended and see their dream end in foreclosure," Paulson said at a conference on the housing market organized by the Office of Thrift Supervision, a Treasury Department agency.

Some experts are concerned that the increase in mortgage foreclosure rates could affect the banking system's financial health.

There have started to be "early signs of credit distress" in financial institutions' holdings of so-called "subprime" mortgages, especially in California, Richard Brown, chief economist for the Federal Deposit Insurance Corp., said at the conference.


http://news.yahoo.com/s/ap/20061211/ap_on_bi_ge/home_mortgages

[Tandalayo_Scheisskopf]

1. "closing the barn door..."

Well, you know the rest, right?

[Gormy Cuss]

2. I think the barn door is about to be repossessed. n/t

[rpannier]

4. That was great

That comment was funny.
I'd give you a greatest if I could.
But since I can't, here are a few I can give:
:toast:
:bounce:
:wow:
:thumbsup:
:dem:

[Gormy Cuss]

5. Wryly funny, I hope.

All of a sudden everyone seems to be noticing that the mortgage lending practices of recent years were problematic.

[OrangeCountyDemocrat]

3. I Can't Stand Watching Or Listening To That Right Wing TOOL.

PAULSON IS A TOOL.

"Expanding opportunities for more people to buy a home is a good thing. But we do not want Americans to become overextended and see their dream end in foreclosure,"

Like you give a shit you White House SHILL.

It disgusts me that people like him enjoy stature and prominence, while the economy crashes and burns.

[On the Road]

6. Why Are You Dumping on Paulsen

when he is opposing the same variable-interest and interest-only mortgages a lot of us on DU are opposed to also? He's indicating in that article that additional regulation may be needed.

You may not like wealthy investment bankers, but that's a pretty common profile for Treasury Secretary. Paulsen is NOT a shill and is probably one of the less right-wing members of the administration. He is a Master of the Universe (industry term) who is not about to kowtow to Bush or anyone else. Here's from his Wikipedia entry:

Paulson has quickly distinguished himself from his two Bush administration predecessors by listing the wide gap between the richest and poorest Americans as an issue on his list of the country's four major long-term economic issues to be addressed. Notably, he highlighted this issue in one of his first public appearances as Secretary of Treasury, helping to trigger the Inequality Debate of 2006.

Paulson...has been a member of the Nature Conservancy for decades and is the organization's Board chairman and co-chair of its Asia-Pacific Council. In that capacity, Paulson worked with former President of the People's Republic of China Jiang Zemin to preserve the Tiger Leaping Gorge in Yunnan province. He donated US$100 million worth of his Goldman Sachs stock to a family foundation dedicated to conservation and environmental education.

http://en.wikipedia.org/wiki/Henry_Paulson,_Jr.

I think it's interesting that he's a Christian Scientist.
On Edit: And BTW, Paul Krugman likes Paulsen and described his appointment as "scraping the top of the barrel."

[CreekDog]

7. Big part of the problem...

Is even if you qualify for a traditional 30-year fixed rate loan, that the mortgage brokers and lenders both make more money off you if you get non-fixed, non-traditional loans and they have lots of little ways to see that you end up in them.

First, it's really hard to get a traditional loan with competitive terms when you are selling and then buying because you qualify while holding another mortgage.

Second, they will steer you towards the nontraditional loans, their bias and their higher commissions will not be disclosed to you unless you ask.

Third, sometimes they will even promise you the traditional loan, but at the last minute, say that you don't qualify or that something went wrong with the original loan and then, with your financial life and deposits on the line, you will be forced into a hard decision, but it will essentially be too late to make any changes without creating a bunch of other problems. The mortgage broker will then offer to refinance you into a traditional loan right after your closing.

Fourth and this is bad, bad behavior, you go to sign the papers for your closing and the paperwork actually has a different loan with different terms. This is probably the nastiest thing, but it does happen. Many times people don't notice, many times they notice but sign anyway.

And this is from an industry that is heavily regulated, but thanks to loopholes and very savvy operating around the regulations, all this is basically legal and screams for update of the regulations that will be lawyered around sometime in the future.

Of course, ethical lenders and mortgage brokers would also avoid these practices, but for some reason, in working with many mortgage brokers, I haven't met one who did not do something that made me swear I would never use them again (changing my loan without telling me, incorrectly reporting something on my application which I had to correct, but I sense was done intentionally to build up my application, trying to get me to refi after closing, etc.)

Sad to say, but my experience with mortgage brokers is such that I expect surprises at closing, most times, serious enough to have me not sign. To the extent that I now ask for a copy of the closing documents to be provided to me beforehand (they hate this, but will comply) where I go over everything and insist on fixes or I will not sign.

But the average person doesn't do this and if I get rolled even when I take precautions, certainly the average person gets rolled worse and more often.

It sucks. Maybe that should have been the subject line of this post.

[On the Road]

8. Creekdog, I am Completely on Board with the Sins of Mortgage Companies

I have had a series of horrible experiences myself. I had Well Fargo change their offer three times, finally offering me 13% and four points. (It was a rental house, but still.) I told them to go to hell, and finally got a decent offer from Bank of America. Along the way, I went through five lenders who played the same goddamn tricks with me -- enough for me to know these are not isolated incidents.

This kind of thing is done deliberately to put borrowers in the position of having to take bad offers or lose the house they want. It is criminal. These "pre-approval" offers that sound so customer friendly should be made illegal, and lender should have to stand behind their offers.

Coincidentally, my girlfriend was closing on a house just a few hours ago and the lender added a point that was not part of the deal. Fortunately, she was able to get it removed and will close tomorrow. That's a $1600 "oversight."

As far as the last post goes, I can't understand why Paulsen was being criticized for giving a speech in which he expressed concern about interest-only and variable mortgages that are not in the customers' best interest. His words were measured, but he's a Treasury Secretary, not a politician or activist. This is more likely to result in some action that half a million letters to Congress.

[thingfisher]

9. That a highly regulated business

is able to perpetrate such practices is a real indictment of the industry as a whole.

Once upon a time there were institutions called Savings and Loan companies that specialized in inderwriting home mortgages. The interest rates were modest and set by law. This was so that people would be able to afford to buy a home. It was good for the economy.

Eventually greed kicked in and these establishemnts were de-regulated and allowed by law to engage in other enterprises. Free market and all that. Remember Siverado? The big scandals involving the Bush boy?

These "creative" financing instruments will cause a lot of pain and suffering as the housing bubble deflates. Interest only loans, adjustible rates and such are predicated on the bet that ones economic fortunes will continually improve enabling you to afford in the future whart you cannot in the present. In the current economy that is a risky bet for anyone.

WE need government regulation on such enterprises that are designed to protect the consumer and to aid in creating stable, safe lending practices that are aied at promoting home ownership with all of the attending economic benefits that translates to for the larger economy. Home mortgages should not be just another slick money makinf scheme used by bankers and mortgage brokers to increase their profits and commissions regardles of the risks encurred by the borrower.