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Senate Committee Votes To Fingerprint Lenders
tjstork recommends a blog post up at Openmarket.org on the passage by a Senate committee of a fingerprinting provision in a foreclosure assistance bill. The provision would require thousands of people connected with the mortgage industry, even tangentially — possibly including part-time and seasonal real estate agents — to send fingerprints to the feds for storage in a database. No explanation is in evidence as to how this would help the problem of loan fraud. The measure passed the Senate Banking Committee by a bipartisan majority of 19 to 2. "The measure the committee passed states that 'an individual may not engage in the business of a loan originator without first... obtaining a unique identifier.' To obtain this 'identifier,' an individual is required to 'furnish to the newly created Nationwide Mortgage Licensing System and Registry 'information concerning the applicant's identity, including fingerprints for submission' to the FBI and other government agencies."
haven't you heard? when you can't find a way to solve the problem, you do the second best thing. Solve some other problem instead, and market it as a solution to the first problem.
I work for the Department of Redundancy Department.
Yes, Americans run out and throw away your privacy as fast as you can without thinking about it! The mortgage crisis was caused by a lack of fingerprints? Right!
.... enact regulations that require a loan company to ensure:
... driven by easily obtained mortgages ... that your banks could make a killing by intentionally handing out mortgages to people who couldn't make the payments, forclosing on the mortgages and reselling the houses at a higher price to the next sucker!
... No Income, No Job Applicants!!!
You should have done what Canada and many other countries did DECADES ago to protect your citizens from the banks, protect your banks from your citizens, and to ensure the market could not be manipulated into such a crisis
- that mortgage applicants actually have the income needed to support paying back the mortgage! DUHHH!
- that a large enough down payment is made that if a small drop in the home's value happens, it won't eliminate the collateral the mortgage was secured on. (currently minimum 5% downpayment)
- that if a downpayment is not significant (under 25%), the mortgage applicant must have mortgage insurance.
Too many Americans still ignorantly believe that the mortgage crisis was accidental!
It was entirely predictable and preventable. It was entirely based on the greed of your unregulated banks!
Your housing market had prices that were rising so fast
I spoke to a young up-and-coming American mortgage broker recently who was not just entirely blind to the damage his industry had caused to the American (and world) economy for a short term again, he was dumbstruck with adoration and respect for the professors of American business schools that had come up with the idea and was going to attend a conference hosted by them soon after! He referred to his favourite mortgage applicants as NINJA's
Once the market turned, and prices stopped increasing, the mortgage pyrimid scam became unprofitable. Suddenly your banks couldn't resell all their stolen houses, suddenly your banks were stuck with huge amounts of debt that they couldnt carry.
But instead of stopping and minimizing the losses, and preventing the ruin of the American economy, they kept going! They intentionally carried the scam so far that not only could they not be punished for it lest it destroy your banking system, you as taxpayers were forced to bail them out for your own protection!
So you got scammed into mortages you couldnt afford, got your houses stolen back by the scammer, and are now paying off the debts through your taxes! It's the great American way! Life, Liberty, and the pursuit of being a victim of fraud perpetrated by other Americans!
So go out and submit those fingerprints. It will solve EVERYTHING!
George Bush + Linux = "I will not let information get in the way of the fight against Windows"
..from New York to Philadelphia. One of them keeps throwing pieces of bananas out the window and after a while the second man asks why he does this.
:-)
Why, it keeps the elephants away.
-But there are no elephants here.
See how good this works?
Get the point?
home
A friend of mine is a mortgage broker and explained the problem. The Feds demanded the mortgage industry provide more loans to minorities. All too often, minorities applying for loans did not have sufficient income to qualify. If they turned them down, AS THEY SHOULD HAVE, they would have been accused of discrimination. This whole mortgage crises was created by the Feds forcing the industry to give loans to people who had no chance of paying them back.
A secondary problem was idiots rolling over interest-only loans, hoping the market would keep going up. Interest-only loans aren't much different from gambling.
-- Will program for bandwidth
In order for it to make sense for a bank to assume the same level of risk that would be involved in a direct real estate investment, it would have to charge an interest rate so high that it stood to make at least as much money as it would make from a direct real estate investment. (A "direct real estate investment" here meaning the bank just buying the property in its own name, and probably renting it out while waiting for it to appreciate in value.)
Charging interest rates that high wouldn't just put home ownership out of the reach of a huge fraction of buyers, it would also remove a major incentive for home ownership. You'd be paying interest rates so high that they would, on average, offset any appreciation in the value of your property.
There would be virtually no takers for such loans. As a result, housing prices would probably drop significantly (there would be much less demand), but you'd basically have to pay for a house with cash up front. Financial institutions and those few individuals with hundreds of thousands of dollars or more in liquid assets would end up snapping up all the property at severely reduced rates, and everyone else would simply have to rent, ultimately resulting in a massive ongoing wealth transfer away from the middle class.
Oops.
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Unfortunately 99% of this crisis fits the standard market bubble paradigm. The difference is that this hits people
In fact, we have the opposite problem: investors are spooked. Coming down hard on fraud might help a tiny bit, but primarily investors are spooked by their own collective insanity.
If it makes investors a bit less risk averse, it's worth doing, but I doubt it will. We need to get a bit more momentum going in the credit market. Financial markets have about a ten year memory, so the time to really come down hard on fraud will be in about five years.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
OK, you're (or your friend's) fundamentally confused.
1) Most of the people defaulting on loans are not, in fact, minorities.
2) All the anti-discrimination provisions of federal housing law are public. Try http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm for a start. None of it has anything in it about lowering standards, only prohibiting discrimination.
3) People can accuse of discrimination all they want; if they can't prove it who cares? There's no way defending those cases would be as expensive to mortgage companies as having the loans blow up.
So, sorry, but this problem cannot be blamed on the economic actors in the situation who had the LEAST control over what was happening. Aim Higher!