[Rhodes22-list] Economics

[DCLewis1 at aol.com]

Wally,
 
If you take the average person and stand him up against a team of high  
pressure sales people, the sales people will sometimes win.  If you’ve been  
through a time-share sales experience you know what I mean.  So to say it’s  the 
purchasers “fault” (as per Brad in his rare lucid moments) is not enough, I  
think there needs to be some regulation.  I don’t think the existing  lending 
disclosures I’m aware of begin to address the issue - they just give you  a lot 
of numbers when what’s needed is advice on what you, the purchaser, can  
afford.  I suspect a lot of home purchasers have taken the position - if I  can’t 
afford this house they won’t give me a loan - which of course is wrong;  
mortgage originators will give anyone a loan and then promptly sell it to  someone 
else who will be left holding the bag.  I think lenders and  borrowers both need 
some protection from originators who have originated  clearly bad loans, 
mis-represented them when they were sold, and then moved on  down the road.
 
What I’m trying to say is that there are 2 losers in this melt-down: the  
borrower and the loan holder.  The only winner is the loan originator who  can 
pack up and get out of town ahead. From my perspective this is not a  
constructive arrangement. 
 
With regards to your point that what was done was perfectly legal: I’m sure  
that for the most part you’re right.  But I think the financial system has  
good ways to deal with legal but overly risky things that appear to be getting  
out of hand.  There’s no reason why Treas, HUD, or the Fed - or all of them  
together - couldn’t have called a meeting with the principal lending  
institutions - which are all subject to state and federal regulation - to  publicly 
convey their concern and ask/require that lending standards be  tightened.  There 
is precedence for this, the Fed did it with the  derivatives market and it 
worked, I think it could have worked with mortgage  originators.   This doesn't 
take new laws, just call a meeting -  again, it's worked with derivatives.
 
Finally, as a nation we’ve been down this mortgage fiasco road before in  our 
lifetime.  There’s no good reason why the people paid to regulate the  
mortgage markets shouldn’t have been on top of  NoDoc, NINA, and negative  
amortization loans from their start.  I do blame the regulators.  If I  saw this coming 
and you saw it coming, they should have seen it coming, and I  think they 
should have tried to do something about it.
 
Dave



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