New restrictions on financing

[Capricious]

Reportedly Countrywide tightened lending requirements yesterday.


Don't know all the details

 

[Capricious]

Oh Shelly? I won't steal your thunder on this one.

There are not only "predatory lenders:"


There are also "predatory borrowers"


Many who claim to be "victims" are victims only
of their own greed and stupidity.


Does everything have to be "stupid-proof?"

 

[beachmouse]

Probably because it's a credit union, but my lender gets away with writing mortgages in an extremely limited geographic area:

"Maximum Loan Amount and Restrictions

Loans range from $25,000 to $417,000 with 80% Loan-to-Value (90% on refinances & 95% on purchases with Private Mortgage Insurance) for single-family primary residences in the following Florida counties: Escambia, Santa Rosa, Okaloosa, Walton, Bay, Washington, and Holmes. Rates are subject to change at any time. Additional fees may apply for cash-out transactions and transactions with secondary financing."

 

[scooterbug44]

I consider myself a reasonably intelligent & financially savvy person, but a mortage/loan is not set up to be easy to understand! On a good day there are a variety of fees, clauses, and legalese, and the bank is quite happy to lend you more than you can easily pay, despite all of the data you supply to them so they can "calculate" your loan. I had some great people explaining the process/walking me through it and patiently answering my questions and I still had more questions later!

I think that people got in over their heads from a combo of greed/materialism, lack of understanding of the true cost of a loan, and shady lenders. My sympathies do NOT go out to those who were financing their "lifestyle", trying to make a quick buck flipping, or these banks/credit companies who are now in trouble because of their lax standards.

 

[spinDrAtl]

I consider myself a reasonably intelligent & financially savvy person, but a mortage/loan is not set up to be easy to understand! On a good day there are a variety of fees, clauses, and legalese, and the bank is quite happy to lend you more than you can easily pay, despite all of the data you supply to them so they can "calculate" your loan. I had some great people explaining the process/walking me through it and patiently answering my questions and I still had more questions later!

I think that people got in over their heads from a combo of greed/materialism, lack of understanding of the true cost of a loan, and shady lenders. My sympathies do NOT go out to those who were financing their "lifestyle", trying to make a quick buck flipping, or these banks/credit companies who are now in trouble because of their lax standards.

I agree there are some shady lenders/brokers but the bottom line is if you are going to play grown up and borrow 100, 200, 300 THOUSAND DOLLARS, you better make damn sure you understand what you are signing. The bad ones may bait and switch you but no one is at the closing holding a gun to your head. The bank does not decide what you can pay. The bank decides what they are willing to risk lending you. You don't have to take it. You decide what payment you are willing to take on.

Woe is me to the people who say 'My house payment is too high, it adjusted on me and I was lied to, yadda yadda yadda'. Then you see they have not one but TWO car payments of 600 or 700 dollars per month. Sell your car buddy - or live in it.

 

[scooterbug44]

Just saying I could see how some COULD honestly & legitimately not have fully understood the consequences/intricacies of the clear as mud documents they signed.

The stories of banks loaning money w/ 0% from the borrower, not even bothering to verify financials etc. make me feel that those groups got what they deserved!

 

[Mango]

There are not only "predatory lenders:"


There are also "predatory borrowers"


Many who claim to be "victims" are victims only
of their own greed and stupidity.

Does everything have to be "stupid-proof?"

I started in the biz when subprime was a baby, 1985 and we were the first to do 2nd mortgage hard money loans. Subprime loans were initially supposed to be bandaid loans. Then programs changed and they soon became loans for those with sour credit. In the 90's subprime lenders were doing foreclosure bailout loans for goodness sakes. (Which was done away with and also forced some companies out of business....hint, hint about what future problems could occur..........not.)

Then along come the exotics, Alt-A, which was really A-, B paper which subprime lenders were grading anyway. But then they expanded Alt A to more exotic loans like NINA, SISAs whatever you want to call them with interest only features. Now all the Banks see green who've never even touched these types of loans before and one page rate sheets turn into 5, and they scramble to find knowledgeable underwriters to price to paper.
Then layered risks in a automated fashion, of which realistically should have been common sense underwriting.

9/11 happens and to keep the economy going Big Al decides to keep lowering the lending rate. All's good in the world while the only thing carrying our economy is the real estate service sector.

But not once did anyone in regulation look at these programs from a common sense approach. In essence we were dangling candy in front of child in a store front with a for free sign, but put your siggy here and gauarantee me your dental work in the future.

In the meantime, property values are soaring, Banks are inundated with loans requests, credit is so cheap so why not get another SUV? Go ahead, so we have more room for al lthat Home depot stuff for our renovations? :roll:

I never did a subprime loan in my shop ever. I let the monkeys who jumped in the business who didn't know an arm from a leg. If someone had credit issues that resulted from family illness or the like, if I couldn't get them in a traditional loan or something short term that I knew could get them out of without prepayment penalty, I didn't do the loan. I never had a default, and I can sleep at night because no one has ever called me and asked me what the he11 kind of loan did I put them in.

I can tell you that a friend of mine and old timer in the biz who wrote designed progranms for FNMA back in the 80's, we wrote letters to the agencies, requesting tighter controls and licensing of loan officers along with mandatory related business experience. We saw the writing on the wall a long time ago.

So why does everything have to be stoopid proof?
Because human nature and greed will never go away.
and because we can not expect common sense to rule when everything seems to appear to be working in everybodies favor.

Now the markets are seeking to try to get govt' intervention via asking a bailout of FNMA to secure jumbos again to try and bring back a sense of security to the markets.

Maybe if federal regulators stepped in a long time ago, and made it clear that it was not ok to give 100% financing to a 580 fico score or an interest only ARM to a borrower who had zilch for savings other than his 401K plan, we would not be in such the quandry.

Those who are crying wolf now would be crying about govt. intervention, but we might still have had a market.

 

[6thGen]

I started in the biz when subprime was a baby, 1985 and we were the first to do 2nd mortgage hard money loans. Subprime loans were initially supposed to be bandaid loans. Then programs changed and they soon became loans for those with sour credit. In the 90's subprime lenders were doing foreclosure bailout loans for goodness sakes. (Which was done away with and also forced some companies out of business....hint, hint about what future problems could occur..........not.)

Then along come the exotics, Alt-A, which was really A-, B paper which subprime lenders were grading anyway. But then they expanded Alt A to more exotic loans like NINA, SISAs whatever you want to call them with interest only features. Now all the Banks see green who've never even touched these types of loans before and one page rate sheets turn into 5, and they scramble to find knowledgeable underwriters to price to paper.
Then layered risks in a automated fashion, of which realistically should have been common sense underwriting.

9/11 happens and to keep the economy going Big Al decides to keep lowering the lending rate. All's good in the world while the only thing carrying our economy is the real estate service sector.

But not once did anyone in regulation look at these programs from a common sense approach. In essence we were dangling candy in front of child in a store front with a for free sign, but put your siggy here and gauarantee me your dental work in the future.

In the meantime, property values are soaring, Banks are inundated with loans requests, credit is so cheap so why not get another SUV? Go ahead, so we have more room for al lthat Home depot stuff for our renovations? :roll:

I never did a subprime loan in my shop ever. I let the monkeys who jumped in the business who didn't know an arm from a leg. If someone had credit issues that resulted from family illness or the like, if I couldn't get them in a traditional loan or something short term that I knew could get them out of without prepayment penalty, I didn't do the loan. I never had a default, and I can sleep at night because no one has ever called me and asked me what the he11 kind of loan did I put them in.

I can tell you that a friend of mine and old timer in the biz who wrote designed progranms for FNMA back in the 80's, we wrote letters to the agencies, requesting tighter controls and licensing of loan officers along with mandatory related business experience. We saw the writing on the wall a long time ago.

So why does everything have to be stoopid proof?
Because human nature and greed will never go away.
and because we can not expect common sense to rule when everything seems to appear to be working in everybodies favor.

Now the markets are seeking to try to get govt' intervention via asking a bailout of FNMA to secure jumbos again to try and bring back a sense of security to the markets.

Maybe if federal regulators stepped in a long time ago, and made it clear that it was not ok to give 100% financing to a 580 fico score or an interest only ARM to a borrower who had zilch for savings other than his 401K plan, we would not be in such the quandry.

Those who are crying wolf now would be crying about govt. intervention, but we might still have had a market.

You had me until the last few paragraphs. The companies that lent 100% to the 580 fico should take their licks, lose money and learn a lesson rather than waiting on the government to bail them out or tell them how to run their business. Take away the safety net and those crossing the tightline won't do so skipping.

 

[Mango]

You had me until the last few paragraphs. The companies that lent 100% to the 580 fico should take their licks, lose money and learn a lesson rather than waiting on the government to bail them out or tell them how to run their business. Take away the safety net and those crossing the tightline won't do so skipping.

FNMA never has bought real subprime (hard money) so that will never happen. That industry will take it licks.

There have always been regulations against predatory lending, that's nothing new, and that's exactly what happened imho when you dangle loans in front of borrowers who can't even pay their own child support.

 

[scooterbug44]

Prosecute the predatory lenders, let the stupid/greedy lenders flounder, and bail out those who DESERVE it!

What is the word I meant instead of flounder? My brain is mush today, and that word just says "fish" to me reading it right now.....