Georgia could suffer mortgage crisis

[Tom]

Last person leaving Georgia, please turn out the light.

 

[tcsenter]

Vic, I'm curious: how would you amend this law in order to circumvent this problem while still protecting GA's citizens from predatory lenders?

There is no such thing as "predatory lenders" in the highly regulated lending systems, its a figment of someone's imagination.

A. People with excellent credit are excellent credit risks = preferred rates
B. People with some minor credit flaws are somewhat higher credit risks = higher rate
C. People with all other credit flaws are high credit risks = highest rate

Some politicians, particularly those whose constituents are inordinately ignorant and have bad credit, find it some kind of 'injustice' that persons reflecting example C doesn't get as good of an interest rate as those reflecting example A. Because they have no other choice but to pay higher interest rates, or they are too stupid to realize they cannot afford what they are signing, its 'predatory lending'.

 

[dmcowen674]

Originally posted by: rahvin
Regardless of the intentions of the law, or the legality or morality of the clauses the end result of the law the way it is drafted is GA has simply made all GA loans unsaleable on the open market due to the liability concerns. This action has removed competition in the lending pool dollars and as a result banks will be solely shouldered with providing the loans in GA. Without competition the Banks will reinstitute the mortgage policies of the 50's requiring 20% down, spotless credit, approval from the loan manager on your character and uber interest rates. Without the ability for the majority of GA's to get quality loans the housing market will crash and housing prices will plummet because existing owners will not be able to sell their homes. As a result of people being unable to buy homes rental prices will sky rocket for a while until a supply/demand balance is equalized between home sales and home rentals.

Developers and the Banks and the Politicians would never let this happen.

The Legislature said they will do whatever it takes to fix this, they are in session now.
They just won't go back to allowing a little old lady slammed with a $7,000 a month Mortgage payment that was $700 a month before. This is what a lot of Lenders did, that has nothing to with credit risk but everything to do with disgusting.

 

[Vic]

Originally posted by: dmcowen674

They just won't go back to allowing a little old lady slammed with a $7,000 a month Mortgage payment that was $700 a month before. This is what a lot of Lenders did, that has nothing to with credit risk but everything to do with disgusting.

As I already said, loans like that (although the type you describe I have NEVER seen and I did do my tour of duty in sub-prime years ago) are not in compliance with Section 32 so they don't get purchased on the secondary market. So Georgia's law is again proved worthless, sorry.

 

[rahvin]

Originally posted by: dmcowen674


Developers and the Banks and the Politicians would never let this happen.

The Legislature said they will do whatever it takes to fix this, they are in session now.
They just won't go back to allowing a little old lady slammed with a $7,000 a month Mortgage payment that was $700 a month before. This is what a lot of Lenders did, that has nothing to with credit risk but everything to do with disgusting.

You just don't get it don't you? It's ALREADY HAPPENED. When S&P said the bonds are unrateable they became UNSELLABLE on the open market. NO rating is WORSE than Junk status. Junk bonds typically float at interest rates of 17% or higher. Imagine mortage rates that high because the notes aren't marketable on the open market. Mortage rates are so low these days (in comparison to the rates and conditions of the 50's) because the notes are bought and sold on the open market, GA just excluded themselves from that benefit. There is no discussion on this point because the action has ALREADY occured. The only question right now is if the major traders refuse to accept GA loans, if they do the worst has occured and as I said, the Banks will be the ONLY ones lending, and they will have to keep the notes on THEIR books. This increases their risk and decreases their float and hurts business. As a result interest rates will go up and requirements to get a mortgage will skyrocket.