I agree that the article is biased with a good bit of rhetoric. But even if there is bias, what parts hold truth?Originally posted by: Vic
Sorry, but this line is utter and complete BS, and I've been in the mortgage industry since 1994. People were selling teaser ARMs back then too, except they used to be just straight 6 month LIBOR ARMs with no 2 or 3 year fixed rate period. God forbid we talk about the time before HOEPA. Oh and Cwide was selling them then too. They've been one of the nation's biggest lenders for as long as I can remember.Here?s what happened. Since the Bush regime came to power, a new species of loan became the norm, the ?sub-prime? mortgage and its variants including loans with teeny ?introductory? interest rates. From out of nowhere, a company called ?Countrywide? became America?s top mortgage lender, accounting for one in five home loans, a large chunk of these ?sub-prime.?
Subprime itself has been around for decades in some form or another. IMO you can trace its roots back to the old Midwest farmers' finance companies. The lenders of last resort. High rates and high fees but hey you got the loan after everyone else turned you down. If subprime says no then you sell your soul to the hard money lenders or go BK.
These loans were never intended for prime borrowers but it was never intended for RE speculation to get this out of control either.
And seriously, I was VERY much against this $200 billion pay-out, am VERY much against any further Fed rate cuts at this time, and know (and care) little about Spitzer's downfall, but that's just the tip of the iceberg as to the industry/technical/historical details that this article got wrong.
IF there was wrongdoing here (and I wouldn't be surprised if there was), IMO it would be nice if we could hear about it from a source that actually knew what it's talking about.
edit: BTW, the thing about usurious kickbacks is BS as well. First, kickbacks are illegal under RESPA anyway. What they are talking about are YSP and SRP, which are totally different. Second, Fannie, Freddie, and FHA have ALWAYS paid more YSP and SRP than anyone else. Especially FHA, who might cap the upfront fees but sky's-the-limit on the back. Having to take your borrower subprime has always meant getting less YSP and having to sell a tougher loan to your borrower.
What this article is confused about there is that subprime lenders have always had less stringent requirements for its brokers, particularly the all-important net worth criteria. What this means is that a lot of the buyers were being sold subprime loans, not so their broker could make extra money, but because he didn't have access to prime products to sell them (and probably never told his buyers that, I am sure).
I don't think the article was pointing out that subprime mortgages were new, just the practices had changed. As seen here:
The authors point is that the "loan sharks" were loosed on the public to offer loans willy nilly and the bailout IMO is proof that government is in bed with corporations. I would have rather seen them fall and we deal with a recession thats here and maybe a little worse, but to float these ignorant companies with FEDeral monies (taxpayer) while the home owners are shafted lets these billionaire cowards go free and allows them the leeway to screw up again and again without thought of loss.?Steering,? sub-prime loans with usurious kickers, fake inducements to over-borrow, called ?fraudulent conveyance? or ?predatory lending? under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.
The more I read about this economic situation, the more I see 1929 all over again but worse. The more I see Government protecting Corporate giants over citizens rights, the more I see consolidation of power and the removal of a Constitutional Republic. Failed Democracies in early 1900's were plagued with financial burdens and corrupt politicians which resulted in two of histories most memorable figures, Benito Mussolini and Adolf Hitler. If we don't pay attention to history, we are doomed to repeat it.