[Rhodes22-list] Economics

[Michael D. Weisner]

Hank,

Unfortunately, the situation stretches to all home buyers.  Senator Chuck 
Schumer recently pleaded for tougher regulation of lenders here in NY 
(http://www.newsday.com/news/local/wire/newyork/ny-bc-ny--schumer-mortgager0325mar25,0,6895247.story?coll=ny-region-apnewyork). 
No group of borrowers is immune to this kind of scheme.  There are terrible 
stories of recent retirees who were persuaded to "buy up" to luxurious 
townhomes using loans that were "too good to be true" and indeed were!  They 
have now lost valuable equity at a time when they cannot really afford to. 
Many are forced to return to work just to keep their homes!

Although I am a believer in "less government is better," I realize that 
these promoters are so unethical and the "marks" are so gullible that if we 
can't educate "the people," we may actually need to regulate the industry 
further.

How much is that new sailboat?  And the loan is how affordable?  No thanks, 
I'll keep my R22 not only because of its great sailing characteristics but 
also because IT IS PAID FOR!

Mike
s/v Shanghai'd Summer ('81)
Nissequogue River, NY


From: "Hank" <hnw555 at gmail.com> Tuesday, March 27, 2007 10:01 AM
You'll love this story from the Wahington Post that highlights a woman who
is in tears, but she is losing her $410,000 home that she bought with an
income of 28,800 a year.  Obviously, she was pretty foolish to think she
could afford it, but the realtor and the mortgage broker should both go to
jail for fraud in my opinion for cinvincing her that she could swing it.

I really believe there should be some form of civil or criminal penalties
for brokers who act this way.  People go to them expecting sound advice,
which many do give.  However, there are some that will say anything to
ensure that they get their commission check and while it may be technically
legal, it shouldn't be.

Hank

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/25/AR2007032501323.html


*Foreclosure Wave Bears Down on Immigrants*

Economic Success Story Turns Sour as Thousands May Face Losing Homes

*By Kirstin 
Downey<http://projects.washingtonpost.com/staff/email/kirstin+downey/>
*

Washington Post Staff Writer
Monday, March 26, 2007; Page A01

Immigrants are emerging as among the first victims of a growing wave of home
foreclosures in the Washington area as mortgage lending problems multiply
locally and across the country.

Nationally, 375,000 high-interest-rate loans were made to Hispanics in 2005,
and nearly 73,000 of them are likely to go into foreclosure, said Aracely
Paname?o, director of Latino affairs for the Center for Responsible Lending.
About 1.1 million homes in the United States are expected to go into
foreclosure in the next six years, and many native-born Americans are likely
to be stuck with burdensome loans. But immigrants are getting hit first in
part because their incomes tend to be lower and many have lost construction
jobs.

Homeownership rates among immigrants surged in the first half of the decade,
making their prosperity an economic success story. Now it is becoming
apparent that many people managed to buy homes in an inflated real estate
market by turning to unusual new mortgages only now receiving scrutiny from
regulators and legislators. Many of these loans start with attractive low
"teaser" rates but feature payments that can suddenly increase.

Unfamiliar with the U.S. mortgage market, unable to speak or read English
well and vulnerable to the blandishments of real estate professionals who
told them property values always rise, many immigrants are struggling to
deal with high mortgage payments as their homes sag in value, making it
harder to escape the loans by selling.

Tysons Corner mortgage broker Jose Luis Semidey, who has a popular
Spanish-language real estate talk show on Radio Universal, is being deluged
with calls from desperate homeowners who are falling behind on their
mortgages. The calls started in late 2005 and have steadily risen; he now
receives 40 to 50 calls a day from throughout the area.

"I see more coming," Semidey said.

Paname?o agreed. "I'm being flooded by phone calls from throughout the
country from people begging for help," he said. "The best I can do is refer
people to attorneys to get assistance."

Nahid Azimi, who immigrated to the United States from Afghanistan 22 years
ago, recently stood in the upstairs hallway of her home in Loudoun County,
silently sobbing as she removed the last of her personal items from the
$410,000 townhouse in South Riding she bought with pride last summer. She
said she was persuaded to buy the house by an Afghan real estate agent she
considered a friend and by an Afghan mortgage broker who promised to get her
a good loan.

Instead, Azimi, a cashier at Giant who makes $2,400 a month, found herself
strapped into a no-down-payment loan with payments of $3,800 a month. She
knew it would be impossible to make the payments, but the mortgage broker
promised to refinance her loan to make it more affordable. Azimi couldn't
qualify for the refinance, however, so she got a second job to try to cover
the costs, borrowed money from her friends and tried unsuccessfully to sell
the house. Then one day in November, she collapsed at work, in part because
of the stress.

Today, she will call the loan servicing company and offer to give back the
keys.

"I can't do it anymore," said Azimi, 44, a U.S. citizen. "I cannot afford
it, and I don't want them to come one day and put my stuff on the street."

Some lenders allowed people to take out loans without verifying their income
or their ability to repay. Traditionally, lenders have made loans only to
people they thought could pay them back. Banking regulations forced lenders
to adhere to strict lending policies, not just for the protection of
borrowers but also to protect bank depositors, who would be hurt if the
banks collapsed. But in recent years, lenders have found alternative sources
of financing for the loans by turning to investors who bought the loans as
packaged securities. These kinds of loans are not supervised in the same
ways as loans made by banks and held in their portfolios.

Laissez-faire regulatory policies made other government agencies reluctant
to intervene.

"The market changed so investors were setting the standards for qualifying
people for mortgage lending," said Allen Fishbein, director of housing and
credit policy at the Consumer Federation of America. "They had a higher
appetite for risk, which led to the lax standards that are resulting in
delinquencies. The regulators should have been more concerned about
protecting consumers than about protecting financial institutions."

Officials at the Mortgage Bankers Association were unavailable for comment.
In previous interviews, they have said that loosened credit policies allowed
more families to become homeowners and that reputable lenders do not make
loans that cannot be repaid.

Many immigrants initially welcomed the lending changes as the only way they
could afford to buy.

Places where immigrants cluster have been particularly hard-hit. Semidey
said that the most calls are coming from Manassas, Woodbridge and Dale 
Cityin
Virginia and Gaithersburg, Germantown, Capitol Heights and Langley Park in
Maryland. But one recent caller was the owner of a $1.5 million home in
McLean, a restaurateur who has seen her business slide in recent months as
the slowdown in the construction industry pinches the pocketbooks of her
Latino patrons. Another was an illiterate carpenter who bought a $750,000
house in Ashburn Village, Semidey said.

Francisco Santos, 31, who lays tile, makes $60,000 a year by working seven
days a week. He became convinced that real estate was a can't-lose
proposition after the value of the townhouse he had bought in Woodbridge in
2002 for $95,000 climbed to $230,000. He and his wife, Linda, a homemaker,
traded up to another house and banked part of their profits. The
Spanish-speaking real estate agents with whom he negotiated the purchase
persuaded him to borrow against his equity to move up again.

"They called me every day; they said we can do more business, that it's a
good time to do it," he said in a mixture of English and Spanish. "They
talked very sweet into my ear. I believed. I believed these people, and I
did this business."

So Francisco and Linda went to visit a spacious red-brick house on Lord
Culpeper Drive in Woodbridge, with its master bedroom suite and
well-equipped kitchen, priced at $540,000. Linda nearly swooned with
pleasure as she looked around the interior. She thought: Here was her dream
house.

They decided to buy the house, which was fairly easy because the Santoses
had excellent credit, equity in the other house and money in the bank. The
mortgage broker made things even easier by doing the settlement in their
home, something many Hispanic families find more comfortable. That also made
Francisco's life easier because he typically works until 8 at night, making
it hard to get places during normal business hours.

He tried to rent out their former house, but the tenants didn't pay their
rent, so the Santoses used up their savings to keep up payments on the two
houses. They put the houses on the market but found no buyers. When they
couldn't make payments, their credit rating deteriorated.

The stress on the family mounted as collection agencies began calling, over
and over. With two small children and another one on the way, the pressures
grew. The couple quarreled, and Francisco Santos said he sometimes yelled at
the kids for little provocation.

"I feel terrible," said Santos, a legal immigrant. "I'm trying to keep
control because my wife is pregnant, and I don't want her to feel bad. It's
difficult. I was thinking about my kids, and their opportunity to have a
good life. My wife, she says, 'Why? Why?' "

The loan servicing company, American Home Services, will foreclose on the
new house Saturday. The Santoses will move back to their old house and hope
that they will be able to leave the problems of the new house behind them.







On 3/27/07, TN Rhodey <tnrhodey at hotmail.com> wrote:
>
> Dave,
>
> Although I think Bush has been a terrible President I can't begin to blame
> him for the looming housing mess.  Plus they couldn't do anything to cool
> down real estate because that was driving the economy. Most of the
> sub-prime
> lending was well within the law. There were a few exceptions and these
> were
> huge. You may remember Ameriquest running SuperBowl ads a couple of years
> ago.. At one point they actually were the "Official Lender of the Rolling
> Stones"....pretty funny when you think about it. They suffered their
> second
> huge loss in a class action lawsuit (over $500 million) and shut down
> their
> retail division over a year ago. Basically loan fraud. Although this is
> part
> of the problem now it is not the real problem. Dumb ass consumers are the
> problem.
>
> The laws that cover lending costs for the most part are HOEPA and RESPA.
> RESPA is the good faith disclosure stuff that includes the "Good Faith
> Estimate" and "Truth in Lending" that every mortgage lender is required to
> send within 72 hours of application. HOEPA covers predatory costs and APR.
> Many states have their own laws that go beyond the Federal standards. I
> don't think we need new laws. People should read their closing documents.
> All loan details are disclosed. If the loan has an adjustable rate,
> balloon
> payment, or negative amortization it is fully disclosed. People are in
> denial and greedy for a home they can't afford.  For the right person in
> the
> right market these loans make sense. For some they mean
> foreclosure…..buyer
> beware but we should have the choice.
>
> Admittedly pushy lenders "sell" these loans but it wasn't like they had to
> break any legs to get people at the closing table. Let the chips fall and
> .no bailout! For those with cash and good credit there is going to be a
> booming real estate market in a few years.
>
> Wally
>
> >From: "Brad Haslett" <flybrad at gmail.com>
> >Reply-To: The Rhodes 22 mail list <rhodes22-list at rhodes22.org>
> >To: "The Rhodes 22 mail list" <rhodes22-list at rhodes22.org>
> >Subject: Re: [Rhodes22-list] Economics
> >Date: Mon, 26 Mar 2007 18:54:53 -0600
> >
> >Dave,
> >
> >Our rental apartment in Beijing is currently rented, but, perhaps we
> could
> >kick the current tenant out so you can live in a socialistic fantasy
> land.
> >On the other hand, we demand the rent on time and we don't care about
> your
> >whiney ass excuses.  The Chinese are adapting to capitalism and have quit
> >trying to control every little nit-noy detail of  life.  That's probably
> a
> >good approach when you have 1.3 billion (billion with a B) to worry
> about.
> >You amaze me with your ability to discern every little persons needs in
> >this
> >country and what they need to protect themselves from themselves.  Dave,
> I
> >feel a need for a bowel movement.  Should I wipe tonight or will the
> >gubment
> >take care of that for me tomorrow? If I do need to wipe, could you give
> me
> >a
> >heads up on the density level of paper to use?
> >
> >Brad
> >
> >On 3/26/07, DCLewis1 at aol.com <DCLewis1 at aol.com> wrote:
> > >
> > >
> > > Wally,
> > >
> > > While there are times I'm tempted to agree with your assessment that
> >both
> > > political parties suck, I  think it's worthwhile to try  to identify
> the
> > > problem
> > > - and from my perspective, that leads straight to  Bush.
> > >
> > > I think there are at least 2 offices in the Dept of Treasury that have
> > > cognizance over mortgage lending practices: the Office of Thrift
> > > Supervision
> > > (OTS), and the Office of the Comptroller of the Currency (OCC).
> > > Additionally,
> > > there may be offices in HUD and the Federal Reserve that are  supposed
> >to
> > > regulate/oversee banks, lending,  and especially mortgage  lending ( I
> > > think the Fed
> > > has an Office of Bank Regulation).  I believe OTS  and OCC issue bank
> >and
> > > credit union  lending guidelines, renew charters,  request
> legislation,
> > > inspect as
> > > needed, and act as a bully pulpit to be sure the  financial
> institutions
> > > don'
> > > t get too far out of line as they try to make a  buck.  Either office
> > > could
> > > have called a conference with lending  institutions and made it clear
> >that
> > > if
> > > lending practices weren't tightened  bank/credit union renewal
> charters
> > > were at
> > > risk - it's that simple.    The public (you and I), and hence I assume
> >OTS
> > > and
> > > OCC,  have known of  NoDoc, NINA, negative amortization, etc  loans
> for
> >a
> > > long time.  The  OTS and OCC choose to do nothing about the sub-prime
> > > lending
> > > abuses - this is  not why they get paid.  I think Dept of Treasury
> >screwed
> > > up -
> > > surely they  saw the problem evolving, to my knowledge they did
> nothing
> >to
> > > stop
> > > it.  The  Directors of the OTS and OCC, and the Sec of the Treasury
> are
> > > political  appointees.
> > >
> > > Also, if the current sub-prime/ARM mortgage issue came out of nowhere,
> >you
> > > might excuse the current administration and it's appointees for being
> > > blind-sided by it, but that's not the case.  The NoDoc/NINA issue
> > > has  developed in an
> > > industry that is prone to problems.  You may recall the  S&L mortgage
> >mess
> > > (I
> > > think in the 80s?) - that cost the taxpayer many  billions of
> > > dollars.  Given
> > > the history of problems in the mortgage  industry, I'd expect a
> >competent
> > > administration to be alert and actively  monitoring the mortgage
> >industry
> > > to be
> > > sure it was following sound lending  practices - but clearly that is
> not
> > > the
> > > case. The current mortgage mess is  different from the S&L mess, but
> it
> >is
> > > about
> > > mortgages, mortgage companies  that are chasing profits as hard as
> they
> > > can
> > > with "innovative" products, and  oversight agencies that are asleep at
> >the
> > > wheel.  There's really no excuse  for the Bush administration not to
> >have
> > > been
> > > aware of the developing problem,  the issues were well publicized and
> >the
> > > industry has a history of  problems.
> > >
> > > I think the Bush administration should have been aware of the evolving
> > > problem and taken clear positive action to prevent excesses - that's
> >part
> > > of  what
> > > the OTS and OCC directors get paid to do and it's what Sec Treas gets
> > > paid  to
> > > do.  I think this is just another example highlighting the lack of
> core
> > > competency in the Bush administration.
> > >
> > > As I recall, the S&L bail out cost we taxpayers many 10's of billions
> >of
> > > dollars.  Let's see what the sub-prime/ARM fiasco is going to cost us
> > > -  it may
> > > cost us nothing from the Treasury, it may just tank our net worth
> > > and  trigger
> > > a recession.
> > >
> > > JMO
> > >
> > > Dave
> > >
> > >
> > >
> > >
> > >
> > >
> > > ************************************** AOL now offers free email to
> > > everyone.
> > > Find out more about what's free from AOL at http://www.aol.com.
> > > __________________________________________________
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