October 23, 2007

Now this is interesting... Congress considering legislation that would allow housing gamblers to sue mortgage companies for giving them a mortgage


You've gotta be kidding me.

I guess Barney Frank didn't get his checks from the REIC this year.

I wonder if he'll also introduce legislation that would allow mortgage companies to sue housing gamblers who lie on their mortgage applications?

Two words: Personal Responsibility.

Meanwhile, if this passes, there will be no more stated income BS, no more 5-times income loans, and lenders who go from reckless to overly-cautious. And that means significantly less buyers, even more unwanted supply, and prices will fall even further.

OK, sure, go ahead, pass this one. You have the HP endorsement Barney.

Bill Allowing Mortgage Lawsuits Expected to Stir Fierce Opposition

WASHINGTON, Oct. 22 — House Democrats introduced legislation on Monday that would for the first time let homeowners sue Wall Street firms for relief from mortgages that the borrowers never had a realistic chance of repaying.

Critics warn that the bill could chill and perhaps freeze a huge source of capital that has helped push homeownership in the United States to its highest level.

The legislation, introduced by Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, would require any mortgage lender to verify that the borrower has a “reasonable ability to repay” based on documented income, credit history and debt level.

34 comments:

tim73 said...

Just let it burn...

"The fire is the latest blow for Malibu property owners, who are already struggling because of the recent housing crash. One property, Malibu Castle — also known as Castle Kashan — had been on the market this year for $17 million (£8 million). It is now in ruins."

Prophet of Panic said...

I don’t know – this may be one of the more reasonable bills introduced by the Dems so far.

No bailout (seemingly)
Prohibit some of the more egregious practices
Essentially eliminate sub-prime loans

Gotta love the mortgage people saying these steps to discourage them from making loans they already stopped making (mostly) would cause a world wide crisis.

Anonymous said...

Congress is run by Democrats. Democrats are run by trial lawyers. Why does this surprise you?

Anonymous said...

How about that stock market crash? Oopsie. Keefer why no reporting on Apple's blowout numbers.

Oh look some new idiotic law will be passed by congress. Wow. Like that's news. Yet you ignore the fact the bull is back. Look for Dow 14K by next week. Keep buying those 5% CDs everyone!!

borkafatty said...

Well well well looks like countrywide is going to do a bail out for Homeowners after all

http://www.marketwatch.com/news/story/countrywide-offer-refinancing-subprime-borrowers/story.aspx?guid=%7B5A3748BB%2DFDCF%2D48F8%2D9D0B%2D9FCB78F99FE2%7D


Ahh the smell of Play Doe in the morning...make you want to puke.


Ehm! Ehm! Countrywide can you please mail me $500,000 in large bills please...I need to go Food shopping...and I can not afford my Mortgage Either.

shock and awe said...

If housoholics are allowed to sue their mortgage pushers then before you know it we will have:
alcoholics suing the bar that gave them drinks that made them drunk
gamboholics suing the casinos where they lost money
clumsyoholics suing fast food chains for giving them the coffee that they spilled in their laps
painkilleroholics suing the big pharm companies that gave them the pain drug
heroin addicts suing their dealer
...
where would it all end?

So do you think any of the builders were involved in starting the fire? Would make sense to wipe out other people homes to up the price of the ones not selling.

hurin said...

"Critics warn that the bill could chill and perhaps freeze a huge source of capital that has helped push homeownership in the United States to its highest level."

Why is it so difficult to accept, that there will always be a certain percentage of the population who are not financially responsible enough to own a home.

Why is it a good thing to put people into mortgages they can't pay.

Marky Mark said...

Well, trial lawyers are the #1 money contributors to democrats - and they will never pass an opportunity to give them work.

Anonymous said...

CALIFORNIA FIRES..

I SUSPECT THESE WERE SET BY UPSIDE DOWN HOUSE HOLDERS.

HOW CUNTVENIENT THAT FIRES ARE BURNING UP INVENTORY IN SOCAL???

brokersleaveyoubroke said...

require any mortgage lender to verify that the borrower has a “reasonable ability to repay” based on documented income, credit history and debt level.

If we need to pass a law that requires that a borrower has a “reasonable ability to repay” then the de-regulation of the banking industry is a dismal failure and should never be attempted again. A lot of regulation is a pain and makes it more expensive to do business but these crooks have demonstrated beyond any doubt that they need a ton of regulation to keep them straight. Some of the earlier attempts by congress to fix things were pretty stupid but this one makes sense.

Anonymous said...

Keith,
You need to post something about the New CW Home Preservation Program!


What a joke!

Anonymous said...

It gets worse:

Countrywide to Refinance Up to $16 Billion of Loans (Update2)

By David Mildenberg and Sebastian Boyd

Oct. 23 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, plans to refinance or restructure as much as $16 billion of debt for home buyers facing higher payments on adjustable-rate mortgages before the end of 2008.

Countrywide has already refinanced $5 billion of loans and plans to contact 52,000 subprime borrowers with $10 billion of debt to offer new loans, the Calabasas, California-based company said today in a statement. It may modify terms on as much as $6.2 billion of mortgages for borrowers ineligible for refinancing.

Countrywide's stock has fallen 63 percent this year amid the worst housing slump in 16 years, which left the mortgage lender short of cash in August. Homeowners with poor credit risk losing their homes as payments on adjustable-rate loans jump.

``This is a big step. Countrywide sets the standard for servicing and how lending gets done,'' said Bruce Marks, chief executive officer of Neighborhood Assistance Corporation of America. The Boston-based advocacy group has demanded Countrywide make loan modifications easier. The company's willingness to cut interest rates without penalty payments is a welcome move, Marks said.

Countrywide rose 47 cents, or 3 percent, to $16.15 at 9:46 a.m. in New York Stock Exchange composite trading. The stock has declined 62 percent this year.

``Countrywide believes that none of our subprime borrowers that have demonstrated the ability to make payments should lose their home to foreclosure solely as a result of a rate reset,'' David Sambol, the company's president and chief operating officer, said in the statement.

Pretax Charge

Last week, Countrywide said it will take a pretax restructuring charge of as much as $150 million to cut operations and as many as 12,000 jobs because of slower lending. About $57 million of the expense will be booked in the third quarter with the remainder in the fourth.

Treasury Secretary Henry Paulson last week called the housing slump ``the most significant current risk to our economy'' and urged lenders to modify and refinance more loans.

Subprime mortgages are available to borrowers with bad or incomplete credit histories. They made up about 20 percent of home loans issued last year and about 11 percent in the first half of this year, according to Inside Mortgage Finance, an industry newsletter.

To contact the reporters on this story: David Mildenberg in Charlotte, North Carolina, at dmildenberg@bloomberg.net ; Sebastian Boyd in London on sboyd9@bloomberg.net

Anonymous said...

I want Congress to consider new legislation that would make it illegal for a senator to run a bisexual prostitution service out of his apartment.....

Anonymous said...

oh, this could cause the banks to really really clamp down on lending until the figure out to show that a borrower can really repay. The other side of the coin is that it could raise borrowing costs because the banks will want to make more to compensate for the additional risk...

I wonder if this will cause a new type of "PMI" insurance that borrows will have to pay for...

Boom2Bust.com said...

Utter nonsense. Just more pandering for votes...

sheep said...

Stupid laws cost them nothing but look good to the masses. Imagine taking a case to court where you lied on the application. By the time it was all over you would still loose your house plus have fines and community service.

shtove said...

I think that bill provides an exclusion from liability of the bagholders, the people who bought the MBS. So, if the mortgage providers who sold on the mortgages have gone bust (170 and counting), there's really nobody to sue - no 'mark' as litigators call it.

I'm not certain about that, because it's all a bit wordy and complex. We'll have to see if this is just window dressing - like CFC's refinancing proposals.

Anonymous said...

It's a great idea.

Now, bums, greedy flippers, 30k millis, and tax cheaters won't be able to screw things up for the rest of us.

This is just going back to exactly how it used to be---and was for a reason. If this isn't classic conservatism I don't know what is.

Mortgages are supposed to be safe for banks and bankers, and are what normal, prudent and sensible people do at reasonable prices. And the bankers sure did check them on that. And why not? a 50K mortgage was a lot of money! (!)

And in this "horrible era" single wage earners could afford a reasonable home in a reasonable place if they were sensible, moderate and prudent savers.

Isn't that what conservatives idealize? Working hard and being decent and virtuous saving (and not being paid under the table!) == house at good price and long-term security.

Working & saving and telling the truth == good.

Cheating & flipping & lying == bad. Whether on a loan application or an airport restroom.

Unfortuantely it seems a certain crowd have been captured by the radical Bolshevik-capitalists, who worship maximum deregulation to extract maximum industry profit through transaction-based fees, disragarding any consequences past 6 months out.

Wasn't being foolish and short-sighted for immediate gratification a reason conservatives hated the hippies?

And now we have a gay liberal senator proposing the most honestly conservative legislation I've heard in a long time.

Guess the children of the 60's have turned really boring and normal after all.

Hey Republicans: Morality does *not* begin, and end, with the penis.

Twilight Zone said...

Does anyone else feel like they're in the freaking twilight zone?

Wow, just wow. Unbelievable. I think I may be questioning my own sanity here.

Maybe I'm the one who's insane for thinking that people shouldn't sue people for giving them mortgages. And that congress shouldn't try to set up a new GSE known as Gambler's Mae.

sam said...

As dumb and corrupt as this is, it will extend the bust by limiting credit.

Anonymous said...

Keith,

If this goes through it will actually be a good thing.

Keep in mind there is no way the law will go through "retroactively" and allow consumers to sue based on past toxic loans. As someone who is involved with introducing legislation, I can tell you that it is common to ask for way more than you need/want and then negotiate back to what you really want. They will easily trade away the ability to sue retroactively and get the bill passed to sue based on bad loans going forward.

Furthermore there could be no retroactive suing especially when there is no definitive guideline between what is toxic and not. Who says that 4X income and a 650 fico is ok but 4X income and 620 is a bad loan? Once the legislation passes there will need to be exacting guidelines that define the difference between a good loan and bad loan.

So considering this will not affect existing loans, all this will do is prevent banks and other mortgage lenders from making loans that created the housing bubble and prices will revert back to the mean that much faster.

And that will definitely be a good thing. 'Cept for those who gambled in the hot spots over the last few years. But you do reap what you sow.....

borkafatty said...

Don't get your Grass skirt out yet and start doing the hula dance cause Apple is up..big deal.

Does this mean we are in for a 400 point gain cause Apple sold their Commie ATT Look how pretty I am But useless Phone.

I should say not.

Anonymous said...

>> ...allow...

WTF? Anybody can sue anyone at anytime for anything. Why does a law need to be passed?

resisting husband said...

I am all for it....with one minor change, the plaintiff should be the INVESTOR who buys the loan.

Making the plaintiff the idiot who causes the problem in the first place makes absolutely no damn sense.

But making banks (who sell the loan about .3 seconds after the papers are signed, open to suit to investors for selling crappy loans, now that makes sense.

Anonymous said...

Keep voting Democrat everyone.

PrinceHarry said...

If we need to pass a law that requires that a borrower has a “reasonable ability to repay” then the de-regulation of the banking industry is a dismal failure and should never be attempted again.
_______________________________

This is what I've been saying all along. After the Depression, various banking laws were passed to keep the banking industry honest. Well, those laws have been completely thrown out in the last 15 years and guess what. Now we're staring Depression II in the face. You are correct--the de-regulation of the banking industry should NEVER be attempted again. We need to reinstitute the laws passed in the 1930s and NEVER repeal them!

Anonymous said...

If people can get over their knee-jerk, one dimensional "personal responsibility" kick, they'll see, as "Anonymous at 4:31 PM" notes, this is a good bill.

The mantra of "personal responsibility" is all well and good, but it's an idea, not a solution. Saying "personal responsibility" doesn't get from A to B. It establishes that people fucked up (A), but doesn't get to the solution (B).

Keith and others would be more than happy if everything fell apart and don't really seem to give a shit about solving the problems in the housing market, but there are solutions between abdicating any responsibility to minimize the impact and complete bailout (as every solution is portrayed as).

Repeating "personal responsibility" is a intellectually lazy cop-out.

As for the bill, it does two things that are helpful. First, it recognizes the unequal bargaining position between the lender and the party seeking the mortgage. I know we're all uber-sophisticated folks here, but trusting that every person that seeks out a mortgage will understand the intricacies of their mortgage is the kind of irresponsible foolishness that got us into this situation.

It's a fact that the lenders are far more savvy than many of the buyers and are able to prey on their inability to comprehend the financial structure that they are signing onto (i.e., "predatory lending").

It is further unrealistic to assume that every borrower is going to have the mortgage analyzed by someone that understands the intricacies so that the borrower goes into the agreement from an equal position.

In every situation like this, there's a degree of trust between the "ignorant" party and the sophisticated service provider (lawyers, doctors, etc.). So, secondly, this bill provides a strong incentive for the lenders to police themselves and not give out mortgages that the borrower can't afford.

And, in the end, isn't that what we all want? Don't we want a system where nobody is taking advantage of anyone else and we don't have thousands, and millions of mortgages being defaulted on?

In the short term, it will chill lending, but again, isn't that what we want? Isn't a chill on the outrageous housing market a good thing?

"I wonder if he'll also introduce legislation that would allow mortgage companies to sue housing gamblers who lie on their mortgage applications?"

They can already do that. It's called, among many things, "fraud."

A_B

Frank@Scottsdale-Sucks.com said...

This is ridiculous. So if I were, say, Mr. Happy Homedebtor who got a loan by lying on his application, *I* would sue *them* because *I* lied in order to screw *them*?

Wow, this is a shyster lawyer-controlled democrat scam if I ever saw one.

It used to be that you sued someone who legitimately hurt you.

Now they're setting it up so you get to be the badguy, and then sue because they let you be the badguy!

Give me a break. How about shutting down the courts for all civil suits and making them criminal-only. Then people will stop using the legal system like an atm and the corrupt trial laywers will be forced to make an honest living for once.

On the bright side, this will really tighten things up and accelerate the crash for us bubble-sitters who would like to buy eventually but realize it's just stupid right now.

Peter T said...

I endorse the bill, too. It is useless now that the market has already rejected no-docs, stated-incomes, and similar exotic mortgages, but it might come in handy to deaccelerate the next housing bubble in ten years.

Anonymous said...

The economy will sustain us through this housing crash! iPhones are selling like hotcakes!

DOPES!

*zing*

Anonymous said...

Anonymous said...
How about that stock market crash? Oopsie. Keefer why no reporting on Apple's blowout numbers.

Oh look some new idiotic law will be passed by congress. Wow. Like that's news. Yet you ignore the fact the bull is back. Look for Dow 14K by next week. Keep buying those 5% CDs everyone!!

October 23, 2007 12:30 PM

Wait till Merill drops a bomb on Wall Street tomorrow. 5 Billion write down. Probably another down 300+ day. Dow 14,000 might not be as close as you think.

Ed said...

Idiotic.

Peter T said...

A_B, you wrote:
> Keith and others would be more than happy if everything fell apart and don't really seem to give a shit about solving the problems in the housing market

I cannot speak for Keith, but any solution that I would support would not artificially try to prop up housing prices, like Japan did. A faster correction is better than one over 14 years.

My solution would include:
- Bubbles cover frauds, busts expose them: Give prosecutors enough resources to prosecute, and don't give ANY fraudster support to keep the house.
- If an honest borrower defaults on a mortgage, let the FHA offer a special refinancing, see below. If lender(servier) or borrower disagree, the foreclosure proceeds as normal. The offer would be a 30-year fixed senior mortgage, insured by the FHA, with a value of the maximum of 80% of the current house value and what the borrower could afford under FHA guidelines, and a 30-year fixed junior mortgage for the rest of the old mortgage that stays with the lender. The rate of the junior mortgage is higher than the senior mortgage by 1% or another small amount. The monthly payment for both mortgages are not higher than 50% of the borrower's income at the time of housebuying. Any unpaid interest for the junior mortgage is added to its principal. Any later short sale is treated as such. If accepted, the borrower keeps the house, pays a high monthly rent and has no expectations on cashing in on later appreciation. The lender speculates on later appreciation, like in ten years, to get his pound of flesh.
- Bank regulators pressure banks to clean their books from off-balance transactions and non-performing assets. Many banks will fail, the FDIC probably has to spend even some tax money to cover losses, and people at the Fed are fired or demoted for sleeping at the job and generating those federal expenses.

Which suggestions do you have, A_B, to "solve" the problems, without putting too much tax money on the line and without violating contract law?

Anonymous said...

Regulations worked perfectly well in the 70's & 80's when I was purchasing homes. Yes, it could be a hassle and it took about 6-weeks to be approved, but I had a decent fixed rate, and a mortgage with no surprises. We had to show and prove all income and all liabilities. We had to be on the job at least two years. If you were ever late on a phone or light bill most lenders would turn you down.

Whole lot of different today, with shyster loans that young people really didn't understand. Also the realtors bare some of the blame. Letting people think they were getting a good deal on overpriced homes. There is a lot of blame to throw around, but remember with strict lending polices this would have never happened. Checks AND balances.