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About Those LoansBack to Article »
The Federal Reserve’s new mortgage rules, to be issued next week, may not go far enough to protect individual borrowers.
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101.
July 9th, 2008 2:25 pm
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Corporate market shares are allowed to get so big that they can't be allowed to fail. When they are about to fail, tax payer money is used to bail them out- for the sake of the economy.Of course, that countless small business form and fail daily is a given that is not talked about. Who cares about small business?This can't be the optimal outcome for the country. We need to do a better job of it.
— charles, California
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102.
July 9th, 2008 2:25 pm
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1. Brokers gross up income of mortgage applicants so that it is easier to "package" in a security by the investment bankers;2.Banks make loans to deadbeat borrowers with no monwey down thinking that they'll be made whole on foreclosure because of rising real estate prices;3.In turn,borrowers with oversized mortgages and no money down are reckless and lazy about negotiating better prices on home purchases. These actions lead to a real estate price bubble which when burst,leaves borrowers and banks short.Solution: Let the market forces do their work; experience is a better teacher and solution than government regulation. Eventually, the prices will fall enough so that a new round of homebuyers will come in.Also, government regulation will permanently distort this natural economic life cycle.
— pete from rochester, peter.white@kodak.com
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103.
July 9th, 2008 2:25 pm
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Sometimes I think I must be the only person who didn't buy a house in the last few years, because I didn't have a down payment, or the means to pay a large monthly mortgage payment, not to mention all the other expenses a home demands, which I know from being a former home owner. I don't blame the victims, but perhaps we also need to focus on educating consumers that one should only do what one can comfortably afford.
— FancyFrancie, Portland, OR
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104.
July 9th, 2008 2:25 pm
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Remember Folks, the Fed is buying that Bad Debt with your hard won money. They are clearing the margins of these crooked lenders by replacing those bad loans with our good money, and adding that bad debt to the Federal Governments ledgers. And, since the Fed is not a department of our government, but represent the Five major Banks, Why should they care if that bad debt drives down the value of our currency, or leads to a crisis further down the road with our entitlement programs. The truth is they are crashing the Freddies and the Fannies, to make the possibility of home ownership much harder to obtain. When this all plays out, Those home borrowers in trouble, will still, statistically, lose their homes, and the dream of the average worker will find that they will not be allowed the same access to the housing market as other well off borrowers. It's another sign that our country and it's leadership, don't really have your best interest in mind, while they drive the ship of state onto the rocks. Time to open your eye's America, and see what's become of your Constitutional right's. You are being bought for pennies, while they cart the cash out the back door. Only you can change the course of events, boycott their products and don't participate in their swindle. Educate yourselves and become involved in your local communities. Remember in "It's a Wonderful Life?" George's small saving and loan co. How they were willing to work for their client's best interest. Those things can still happen. Check it out. just a thought
— p. buckman, monterey,ca
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105.
July 9th, 2008 2:25 pm
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Has it occurred to anyone that banking industry execs and share holders get the combined benefit of US government (taxpayer) bailouts on one side of the coin and super treatment on capital gains tax (stock trading, buying and selling) and personal income tax rates, too.Bush and his administration, including Paulson, Bernanke to name two, are totally at fault for the mess and blocking congressional efforts to fix it, so as to line the pockets of their faithful. It is their policies, their road map, that have proven to be a disaster for the US economy.Lately, what frightens me most is the likelihood of McCain beating Obama. McCain is a cheap proxy for the Bushies and Obama has no real world experience to bring to the fore. Like blades of grass, no matter the direction of the wind, they will bend and sway.Good grief, are we in trouble or what?
— Oceanz, Florida
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106.
July 9th, 2008 3:03 pm
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Thanks for this article. I had no idea the Fed was so decidedly anti-consumer. The kinds of rules you spoke of NY implementing that the Fed has balked at making national to me seem just common sense, if you aren't biased towards wanting to help wealthy finance companies get richer at the expense of consumers. This is truly the kind of article I look to the NYTimes for. I hope the public exposure of their true allegiances and priorities will prompt them to consider just how extreme they do feel comfortable being in their service to Wall St. wealth above America's families. Maybe it's time for Congress to pick up more of the responsibility that had been intrusted to the Fed. At least those representatives have to be re-elected.
— Dutton, CA
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107.
July 9th, 2008 3:03 pm
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When did the Fed become a consumer advocacy agency? It is the job of our elected representatives to ensure a fair playing field, not the Fed Governors, whose job it is to manage the macro issues that affect the overall economy.And once again the Times fails to find any responsibility on the part of borrowers to (a) understand the nature of the loans that they are taking and (b) to not take a loan that they cannot afford to pay.It is possible that mortgage bond holders may have some cause of action against the banks who originated these loans without appropriate underwriting and against the rating agencies who gave the debt instruments investment grade ratings without making sure that the individual loans were properly underwritten.But the consumer who took on a variable rate loan to buy a bigger home or to consolidate credit card debt and finds now that they cannot afford the payment, if they need to find someone to blame, I recommend that they look in the mirror.
— D Palmer, Evanston, IL
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108.
July 9th, 2008 3:03 pm
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Oh, yeah, right, put in a law that says that you can sue if you were damaged by a lender making a loan to you that you couldn't repay. Shouldn't the borrower have thought about that before he/she signed on the dotted line?
— Gary, Virginia
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109.
July 9th, 2008 3:04 pm
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For most societal change, some national disaster needs to occur before nation-state governments react in self-preservation.We'll have some moderate financial regulation arise out of this subprime mortgage crisis.We passed Social Security following the Great Depression as millions of seniors went destitute when they were too old to work.We'll have universal health care as soon as we experience a national medical crisis - like 1,000,000 deaths from an Avian bird flu pandemic (Britain adopted universal healthcare after mass casualties from the WWII German bombings).Welcome to the Human Condition: once the elites, their children or a large portion of the nation-state population suffers horribly, leadership then changes policy. Don't expect much until disaster strikes.
— Concerned Reader, Texas
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110.
July 9th, 2008 3:04 pm
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Isn't it is a little presumptious to expect the Fed, a privately held corporation owned by the banks it regulates (represents), to favor the interest of the consumer??
— M. J. Quiana, Bronx, NY
Recommend Recommended by 1 Reader
111.
July 9th, 2008 3:36 pm
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Apparently, another scheme (Keating 5, Resolution Trust, etc.) has been fostered upon the American taxpayer by the Fed and our bankers who can steal our cash with impunity. As an earlier poster explained, Socialism for the rich bankers, the rest of us eat dirt.(I wonder what rush would say about that one?)Good thing McCain married big money and did not go to jail for his part in the Keating 5 theft. Now he can be president--and don't for a minute think he won't; its all fixed already--and proceed to tell the Fed to do whatever it takes to put more taxpayer cash in his friends' pockets. It does not matter how many rules or regulations the Fed or anyone else makes. Not one bank or lendor or money person in the US will follow any of them.As stated earlier, we are a nation of thieves, period. America is way over.
— richopp, FL
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112.
July 9th, 2008 3:36 pm
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"The tardy response was another reminder that consumer advocacy has never been the Fed’s strong suit."Are you people on crack? "Tardy"? This isn't grade school. This isn't about being three minutes late. This is about criminal irresponsibility being ignored for year after year after year.You want to fix the industry? Find the people who put these loans together, try them in court. If it's determined that they engaged in fraud (and selling someone something you know they can't pay for is fraud) you put them in jail. And the banks that approved these loans? The same thing.The courts will put a guy selling a bag of pot in jail for years but these people gimmicked the housing market so that I will never be able to afford a house AND am now wondering if the whole economy is going to collapse and we can't seem to grasp, as a nation, that these people are the real problem and the real danger.Once the first few CEOs are through with their cavity searches, I am willing to guarantee that similar behavior in the future -- if there is one -- will not happen.Tardy. Pa-tardy-thetic. Call it criminal, at least you'll be right then.
— Alex, New Jersey
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113.
July 9th, 2008 3:36 pm
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I am compelled to reply to those good writers who still don't comprehend that this crisis of American financial confidence is not what-so-ever concerning the choice to save some house flippers and the financially foolish from personal disaster or let them fail. Clearly it concerns immediately returning to orderly fair lending.Currently these millions of festering bad loans many now in foreclosure which now threaten to crush our nation financially is first foremost and ultimately the full responsibility of the FED. It is the prime duty of the FED to ALWAYS SAY NO BEFORE THE FACT to the predictably unscrupulous predatory lenders out there. Not wait until the pirates in pin strip have burned the ship of state.The FED MUST ALWAYS SERVE as the little man on the high stool seated mid court at tennis games to shout "OUT OF BOUNDS". The Fed is required to keep the money game honest FOR EVERYONE. The FED perhaps aided and abetted by this administration has gruesomely failed this nation either by stupidity or guile and now we have a mess.Blaming recent past mortgage victims will never serve to solve our collective dilemma. We must insist on clearly penned honest fair lending practices. We used to do business this way. We used to be about trust.Until we can once again be trusted we will continue in our slip slide to disaster. A free market is for profit and necessarily not a fair market for borrowers.Do we now have to protect our nation from the FED?
— wgm, Southampton, NY
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114.
July 9th, 2008 4:14 pm
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"Should the government protect everyone who doesn't have the sense to protect themselves? As each year passes, we get closer and closer to a socialistic government."The socialism is MOST apparent in the bailout of filthy rich industries. Conservatives will let individuals get turned out on the street and claim free market and personal responsibility. But they will scream for bail outs (with tax payer money. steal from the poor, give to the thieving rich) for the rich. It's a capitalistic society when it suits the rich. It is a socialist society when it suits the rich. It's good to be the king! And yes, this is a class war. America has become a plutocracy, and like all plutocracies, must maintain that unstable society with greater and greater dishonesty. But Rome didn't fall in a day either.
— Charles, New York City
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115.
July 9th, 2008 5:37 pm
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I'm not ready to call everyone who took out a subprime loan a victim. Many of these people took out a loan they knew they had no way to repay. The only hope was for the house to continually increase in value. Some were hoodwinked, but many were not. And quite a few of these people are mailing the keys to the bank and leaving, sticking the bill eventually to the US taxpayer.I read about a woman in California who took out 5 home equity loans in 5 years, each for $100,000. She traveled, bought fancy cars, lived the high life. Now that she can't do that anymore, she mailed the keys to the bank, and walked out. This type of borrowing should be criminal.
— Steve, Minneapolis
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116.
July 9th, 2008 5:37 pm
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The regulatory system's failures are not confined to the absence of prohibitions on predatory lending. The securitization of masses of bad loans, made unknowable by the absence of good securities disclosure requirements, and the resale of the securitized packages of bad loans to another form of unknowing (investment) consumer have replaced the manufacture of goods as the primary national enterprise. Wall Street is invested in making its profits on the securitization and re-sale industries described above, and in perpetuating the absence of regulatory interference. Congress is well-paid by Wall Street to maintain the non-intervention strategy and Wall Street's profits. It is nice that the Fed proposed to replace the SEC -- the former champion of investing consumers -- as primary financial regulator. However, under present plans the Fed seeks only access to information and not additional intervention authority. The administration is proposing deregulation on top of deregulation. Will Congress step up to the plate? You tell me.
— corrina, dc
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117.
July 9th, 2008 5:37 pm
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The FED should have required higher buy in from buyers. Buyers as a group look at the monthly payment and have little or no actual concept of how much money is $200,000 much less a million.Many primitive languages only have words for 1,2,3, and many. The almost evolutionary lack of fundamental understanding abut money means that humans need to be taught and need to understand more about mortgages and economics in general.That said, the FED should not allow deceptive mortgage practices. Unfortunately this goes against Liberal thinking that wants to open up lending to less credit worthy individuals, by having less money down and lower credit scores accepted. This lower SES lending was in fact the origination of sub-prime lending. Conservatives are no better in that they championed many of the rules that allowed for the securitization of packaged mortgages which allowed individual lenders to sell off ugly loans.The confluence of easy lending standards with securitization worked while the market swooned, much like the dot com craze when you could get a few hundred million invested on the idea that a sock puppet could sell dog food over the internet.Although I believe in free markets, we either need to greatly increase the economic education of the populace or tighten the financial regulations or both.
— Ross, San francisco
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118.
July 9th, 2008 5:37 pm
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In 2006, I signed a contract to purchase my first "house," an apartment in New York City. My banker offered me a number of loan options, and despite how attractive some of the subprime offers were, I chose to be conservative or practical and locked in a 6.25% for 30 years. I was seduced by the idea of paying interest only or lower premiums for a loan which would balloon within a few years and felt confident that I would be able to "flip" my 750 sq. ft. one bedroom within a short period of time. But I chose not to. While I have made all payments in a timely fashion, I would really enjoy some assistance from the Fed with my mortgage payments so I can buy another car, or slurge on some gimmick which could potentially make me some money in short period of time. Oh, by the way, I sold my car prior to buying my apartment, again being practical.But I don't get anything for exercising discretion and being conservative in my investment in a home with a fixed, affordable, fiscally responsible rate.I simply do not get why the fault appears to lay exclusively with the lenders. Perhaps all should share in the blame.
— Michael, New York
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119.
July 9th, 2008 5:37 pm
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That the Fed has to issue regulations to outlaw what should, to any reasonable mind, be considered fraud shows how far to the nutball right your country has gone on economic issues (lets not even talk about foreign policy, or where economics and foreign policy colide. Tax cuts during a war anyone? No money for a strong stimulous package because it's all on fire in iraq?). Your country was head and shoulders above the pack in the decades after the New Deal when you had a balanced approach; a strong captialist engine that was effectively regulated and protected with a strong safety net. It's the right wing shift of the last generation that has landed you in this mess. Please learn from history and return to the center on economic policy. It will benefit us all. No more ideologues please!
— Kevin O'Connor, Toronto
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120.
July 9th, 2008 5:37 pm
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OK, so let me get this right. I guy makes $75K and is stupid enough to think he can buy a $500K home. A scumbag lender gives him a loan at 4% but then that loan balloons to 11% after 1 year. Last time I check, that makes the borrower an idiot, and near as I can tell, after we spend my daughters college money to bail out that idiot, he will STILL be an idiot.We call this natural selection. The govt has NO business getting involved in bailing out stupid people or speculators. Welcome to America, where you have a right to "PURSUE" happiness, not to achieve it.
— Eric, Plano, TX
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121.
July 9th, 2008 5:37 pm
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"Sure, blame the victims, if you need to blame someone...I thought it's more about fixing the problem. And we seem very ready to fix the predatory lenders, but hardly willing to lift a finger to help those that fell victim to their scams." — Paul, Silver Spring, MDPaul,This catastrophe has made ALL of us victims. We're ALL paying for this and will continue to do so until things miraculously get worked out somehow.
— Irischermann, Philadelphia
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