Monday, April 22, 2013

Mortgage Reform.....Practices

One can only fear that Congressional reforms to Fannie Mae and Freddie Mac - when and if ever adopted - will improve U. S. mortgage lending practices as much as Dodd-Frank has improved U. S. banking practices....

For all who despise "regulation", some quick advice:  "GET OVER IT !!"...  Unless you can say with a clear conscience and a straight face, that the 2008 collapse of the U. S. financial markets was just an accident, just one big misunderstanding... (if you believe that, better quit reading right now!)

A joke ?
The "tea-hee" market ?
Happen to be a great fan of "free markets": but if what has occurred since 2008 is the "free market in action", then "free markets" are a catastrophic joke.  But, before you start heaving "teabags", one other thought : If a market is to be free,  that market must also be fair.
The Ponzi Pigs Free Market!!!

Our financial system leading up to the 2008 collapse was not a free market, because it was not a fair market.

Here are eight mortgage practices which must be proscribed if we want to return to a free market in the U. S. :

  • Deceptive marketing better known as "bait and switch".  
  • Risk-"rused" interest rates - better known as "gouging".
  • Excessive origination points - better known as "fleecing".
  • Frequent refinancing and balloon payments - better known as "flipping".
  • Outrageous add-on fees and insurance - better known as "packing".
  • Broker yield-spread premiums - better known as "bribery & kickbacks".
  • Prepayment penalties - better known (according to Stephen Colbert) as "rhymes with Fox News".
  • Lending without regard to a borrower's ability to repay - better known as "stealing".
Predatory mortgage lending existed because we had a regulatory system which failed to protect, a disclosure system which failed to inform, and a buyer-be-damned "free market" system which failed to care.

And, because we had a credit union movement which failed to "Unite for Good" due to an absence of leadership and a lack of true commitment to fundamental, cooperative, "People Helping People" core values and principles.... and due to the suspension of plain old common sense !!!

Credit Unions currently have another chance to set the standard for principled, free market lending in America by standing up for reform....  but I do realize how busy we all are right now with our own self-importance.
                                     Have a nice day!


Anonymous said...

Preach on, brother. Sometimes the truth makes us squirm in our seats, but we still need to hear it.easy

Doug Ferraro said...

Mr. B: To quote Doc Holiday in the movie Tombstone; your "hypocrisy knows no bounds." While you are the first to point out the difference between banks and credit unions, in today's post you group us in the need for regulation brought on by big (pig) banks. Bah!

Credit unions as an industry didn't participate in the bad behaviors that caused the mortgage crisis. When the bad behavior banks, mortgage companies and indeed, the GSE's, created and executed the aggressive lending practices you cite, credit unions overwhelmingly said "no!" I remember members who said they would finance elsewhere to get interest only mortgages if we wouldn't do them and we said "no!" I'm sure most of us reading your post could tell you all the temptations we resisted in 2006-08 because they didn't make sense.

To suggest it is appropriate for small institutions that didn't cause the problems to have to comply with the overreaching and over-burdensome regulations being spewed by the various agencies is absurd and unfair. Many of the new regulations are not only costly and timeconsuming for the instititions to comply, but they are simply BAD for consumers. The result in many cases is opposite the government intention and makes it more difficult for the average American to qualify for a home mortgage.

Credit unions are about improving the lives of our members by understanding the individual and meeting their needs. The new regulations make that far more difficult if not impossible. The only thing making me "squirm in my seat" is having to tell members we can't make the loan that best meets their needs because the government has decided it knows what is best for them.

The market share owned by the largest banks is staggering. The only hope that consumers have to be treated like individuals, is for credit unions (and community banks) to step up and demonstrate the difference. Regulations designed to force conformity and eliminate our uniqueness are contrary to the best public policy.

Credit unions and community banks should be exempt from most new regulations because they are unnecessary and actually HARM consumers. If we are to fulfill our original purpose; to make credit available at a fair price to those who are limited by other channels, then we need to retain our uniqueness, and we need exemption from the rules that make us "JUST LIKE THE BANKS."

Dennis Moriarity said...

Wont happen because those that can do something will not. Too much cash in it for them to make rules that will stop the nonsense. Roadblocks will be set out constantly by people protecting their interest (read revenue stream)so they keep getting their cash. Take all the good people of Washington dc how about say Chris and Barney aren't they good people? They could have done something long ago but, unlike the song, they did start the fire.
Take the credit unions and how many are gouging their members? Free Market is just another way of saying gouge away. Of course if you don't you will be blamed anyway. We will get lots more regulation because thats what makes the writers of such trash feel like they have accomplished something. Of course that requires enforcement kind of like the enforcement we got in the buildup to the stuff we endure today. The bad part about regulation is that it changes and affects the people and institutions who never contributed one iota to the problem but it costs money and increases risk for the institution for no good reason other than what some dip---- bureaucrat thinks. Getting over it is hard particularily when its stupid and increases risk. Just my humble opine.