Wednesday, June 18, 2008

Go Ahead! Overextend Yourselves, Be Irresponsible! We Will Bail You Out!

Now moving through the House, an eleven bill package. This package of legislation seeks to curb "predatory" lending practices related to home mortgages. It defines "high cost" loans and places additional compliance and judgment responsibilities on mortgage brokers and lenders, but exempts depository lenders such as traditional banks and credit unions.

This package would greatly alter the nature of the role of brokers or lenders by forcing them to make subjective judgments about whether a loan is "reasonably advantageous" for a borrower or whether a refinancing loan would provide a "net tangible benefit" to a borrower. In effect, the broker or lender would assume an unprecedented fiduciary responsibility. The potential for conflict arising from these subjective judgments and subsequent interpretations would cause the
sources of mortgage money to simply avoid Michigan.

A borrower could default and claim that a loan agreement was not "reasonably advantageous" or did not provide a "net tangible benefit" as directed by the act. The broker or lender would then be subject not only to a potential financial loss, but also civil and criminal penalties.

This package would effectively end the availability of sub-prime or non-conforming mortgage loans, even for consumers for which such loans are a viable option for achieving home ownership.

The foreclosure crisis in Michigan is also a product of tough economic times which are also affecting many traditional or conventional mortgages. This package does not address the underlying economic problems that created much of the crisis.

The package unfairly exempts depository institutions such as banks, savings banks and credit unions, and would potentially increase their market share of mortgage lending, especially if they become more active in sub-prime, non-conforming or non-traditional mortgage loan products.

The assumption here is that those who are in this difficult situation are somehow victims of unscrupulous or predatory lenders. Certainly that does happen, but in most cases they are only victims of their own poor judgement or flat out greed.


Vince S said...

This bail out package makes me sick. Whatever happened to good old personal responsibility? People who practice lack of judgement or "spend" money they don't have should pay the consequences for their actions. Granted, I'm sure there are cases of predatory lending, but they are far and few in between compared to people who can't manage their money. If you can't afford your mortgage, you shouldn't have bought the house. If you have to cancel your cell phone or high speed internet, and stop smoking, that's what you have to do. If you need to get a second part time job to pay your it. It's called accountability, and you don't see it too much anymore. What's next, bailing out people who max out their credit cards they're unable to pay and pass a bill seeking to curb predatory credit cards? Give me a break.

live dangerously said...

Hi Jack if I may.

I lost my house to foreclosure at the beginning of this "crisis". You are right, when I was offered 70,000, for what I estimated should of been at most 50,000 I took the cash out of greed. I used bad judgement in that,and in spending that money. I couldn't pay it back. I lost the house. No body bailed me out. I moved into the other small house I owned and had taken another mortgage on and I was also in the process of losing it. Guess what? I learned a lesson, I made a major life change. I've paid off that mortgage through hard saving 2 jobs and discipline, all things I previously lacked. That same instinct that I used to create my greed, I now use to be a wise steward of my money. I even donate small amounts to a worthy local charity. That is the secret, the government has turned into an enabler of bad judgement and or greed. That saftey net is way too big.

The Big Q said...

It is about time someone says the things you are saying. Keep it up Jack!