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View Diary: Predatory Lending doesn't have to be Bankruptcy sequel (80 comments)

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  •  As a mortgage loan originator... (3.80)
    I hope that the proposed "predatory lending laws" don't choke off credit for people that were not able to obtain a mortgage in the past. Regulation can be a good thing or it can be a bar to free enterprise and access to credit by those with low credit scores; let us hope it is the former, not the latter. Most of us in the industry feel that RESPA and other current laws go quite far enough in watching out for the consumer, and perhaps more enforcement of existing laws and rules would be sufficient.  
    •  WHAT? Are you in the sub-prime market? (3.88)
      Because believe me, that market has nothing to do with providing a "service" to people with poor credit. That's bull. Every practice in the industry is designed to destroy the lives of people with poor credit.

      Telemarketers hide disclosures under other paperwork. They regularly fail to read required disclosures over the phone. They pull applications on people who did not actually request one. They disguise the fact that these are home equity lines. They sell loans to husbands and help them hide them from their lives.

      It gets worse. They constantly try to get people to refinance and roll over old home equity debt plus credit card debt. The only thing they talk about is "monthly payments"--never revealing their exhorbitant interest rates or the hidden fees or the gargantuan total interest payments over the life of the loan. They suck people dry, and these people keep coming back because they can't make monthly payments, so they refinance again and again.

      The subprime market is the road to disaster. It's not a "service." That's a Republican-style barstool one-liner that ignores reality.

      •  Sometimes that happens (4.00)
        and that's why we need strong consumer protection laws, such as anti-predatory lending legislation.

        But not all subprime lending is bad.  It offers people with blemished credit a chance to own their own homes or to put the equity in their homes to good use.

        Don't paint the whole industry with the same brush.  I've gone to a lot of subprime shops that are genuinely concerned with complying with the law and ensuring that the loans that they originate benefit the borrower.

        Get rid of all subprime lending, and you deny a whole lot of people their shot at the American Dream.

        •  It doesn't work that way (none)
          I could give you the name rank and serial number of the big subprime places in the US, and they all do these things--and worse.

          Trust me.

          •  We'll have to agree to disagree (none)
            Suffice it to say that I've seen and reviewed the compliance policies and procedures for many of these big subprime shops and enormous effort is being put into complying with the law.

            When good shops go wrong, I find it's often because of an inability to monitor the behavior of mortgage brokers or because loan originators and salespeople have incentives to approve as many loans as possible (obviously, this should be discouraged).

            But I can't say that I've yet seen an institutionalized commitment to screw the borrower, not among the reputable subprime lenders.

            •  Yes, that's why they've had (none)
              CLASS ACTION SUITS successfully filed against them.

              Their "compliance procedures" are a sham. The message is: Don't get caught. Management actively encourages--scratch that--requires telemarketers to violate their procedures and mischaracterize their products in order to make their high sales quotas.

              •  I don't deny (none)
                that bad things happen and that some lenders break the law, take advantage of borrowers, and harass debtors.  

                But you overstate your case if you claim that all subprime lenders are evil.

                •  Predatory, not evil (none)
                  Your target market is high risk borrowers with few options and little financial knowledge.  That on its face is predatory. Your profit margin increases with the customer's risk, which gets jacked up and around with bad "good faith estimates" and "mandatory" add-ons like life insurance.  

                  The lender's ass is covered while the borrower loses everything.  Nice...

                  •  Why not evil? (none)
                    Lending someone money they can't afford to pay back is like giving a child a gun or an alcoholic a bottle of vodka.
                    Not only is it predatory and exploitative, it externalizes to the rest of society the costs of supporting the families that are driven into destitution by taking such loans.  

                    Even if the victims of predatory lending don't default and loose their homes, resulting in homelessness and abandoned buildings that contribute to urban blight- just making the excessive payments (including that scam PMI- I thought the high interest was to make up for the credit risk?) means borrower househgolds may have to work extra jobs or go without essentials like good nutrtion- resulting in kids that are in all likelihood going to have problems at school.

                    Usury is a leech that sucks the life out of communities, no less than crack cocaine or gambling.

                    Might and Right are always fighting In our youth it seems exciting. Right is always nearly winning. Might can hardly keep from grinning. -Clarence D

                    by Myrkury on Sat May 07, 2005 at 06:22:50 AM PDT

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            •  Needless to say... (none)
              Your conflict of interest is clouding your reasoning abilities. "An enormous effort is being put into complying with the law"? How about "a very large number of Americans are getting robbed blind by predatory lenders"? How come every time we ask the gov't for protection from these sharks (for example when we ask for environmental protection) we get people who say "but complying with the law is expensive?" You're killing us softly with that song...

              For those who want the facts on predetory lending here are some resources:
              The Center for Responsible Lending
              The National Consumer Law Center

              •  Conflict of interest? (none)
                Them's fightin' words for an attorney.

                I'm afraid I don't see the "conflict of interest" that you're referring to.

                I just happen to be a progressive Democrat working in the mortgage industry.  My inside experience allows me to recognize the compelling need to balance the competing interests involved.

                I'm a passionate advocate for consumer protection.  I believe that current law needs to be strengthened, but it needs to be done at the federal level.  I also believe that unchecked assignee liability in anti-predatory lending laws ultimately harms consumers by hobbling the secondary market for mortgages and increasing the cost of credit.

                This is a view I have arrived at after a lot of unclouded thought.

                •  Forgot to mention (none)
                  that I also believe that subprime lending, properly regulated (for example, by a strong, preemptive, federal anti-predatory lending law) benefits consumers who would not otherwise qualify for mortgage credit.
                  •  If it weren't for subprime lending... (none)
                    If it weren't for subprime lending, I wouldn't be a homeowner.

                    Now I own my home free and clear, no mortgage at all, and I'm not about to take out another one, prime or subprime. But the way I got there was via subprime lending. Five years ago, my late husband and I, who had just completed a Chapter 13, bought a house. Our interest rate was 11% on a 3-year fixed, turning to an ARM after those three years. We anticipated refinancing.

                    Instead, he died, and left me with just sufficient funds to pay off the house. I did so.

                    But if that loan hadn't been available, we wouldn't have been able to buy the house in the first place, and I wouldn't be a homeowner with a paid-off house today.

                    They should all be judged soaking wet.

                    by Kitsap River on Fri May 06, 2005 at 07:07:51 PM PDT

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                •  No clouds in sight? (none)
                  Then you try and tell me how you can square this: The Feds are DEREGULATING the industry, not making it more fair. And yet you support it happening on the Fed. level? Either you're living in a dream world (after all I'm sure we'd all love to see Fed. level reform but is it likely?) or (IMO) you are exhibiting a conflict of interest. As Medical experts would say "first do no harm" and Ney-Kanjorski does a whole-lotta harm and almost no good, esp. in the area of stopping states who want to protect their consituants even when Congress sells them to MBNA and the like.

                  We definitely need to create strong and consistant federal regulations, but until we controll the federal government we're going to have to fight on the state and local levels and at the same time make sure that the feds (and Dems with conflicts of interests, not you, more like the good Senator from MBNA Biden) from preempting the states.

                  Either stand with consumers or stand with your business interests, but don't pretend that you're fighting for one while working for the other.

                  And I'm not saying sub-prime lending is bad, hell half of my generation or more will most likely find themselves in that position at some point, but we need the gov't to protect us from the sharks...

      •  You make my point for me... (none)
        If someone did the things you talk about they are violating already existing laws. I do all types of mortgages; prime, sub-prime, HELOCs, seconds, etc... If I can help convert high interest credit card debt into a much lower interest mortgage, how is that "predatory?" If I can help someone keep their home or buy a new one, how is that "predatory?" Don't buy everything that ACORN is selling.
        •  No, they're not (4.00)
          Your credit card company can't take your home. Your mortgage company can.

          And they focus on monthly payments only. Never mind that your debt is vastly increased, that your interest rates are double-digit, that you'll never be able to pay off your new loan. Your sub-prime shark will never explain it to you.

          And when these companies do "comply with the law," they do so with obscure disclosures that even Harvard Law professors have publicly admitted they don't understand.

          Are you really not sure how this market works, or are you shilling for it?

          •  I have been originating loans since April 2001.... (none)
            ...and have yet to do a "double digit" mortgage. I started with one of the subprime shops that another blogger is probably referring to (the one that sponsored the Superbowl halftime show) but got tired of their "one size fits all" 2/28 loans and slapping a prepayment penalty on everyone, and left just before 9/11(great timing, huh?). I work for a small indy shop and we don't do those kind of things, and most small brokers are fairly honest, in my experience. Yes, the "big boys" use "telemarketers" and it's all a numbers game, but the local and regional brokers play by the rules, by and large. Don't paint the whole industry with the same brush, okay? I'm sure that whatever your occupation, there are good and bad apples in the barrel, right?  
    •  Predatory lending (4.00)
      Is pretty self-explanatory.  Loans to borrowers who don't otherwise qualify for good reasons.  Interest-only loans to people who don't understand that there is a balloon in 5 years and they are going to lose their home.

      I am in CA and all we hear here are interest-only and other gimmicky low initial interest loans that are designed to get people who really aren't qualified.

      If you really want to see those folks helped, how about more government programs for first-time homebuyers.  Finance them by lowering the cap on deductibility of home mortgage interest so it doesn't subsidize McMansions for people who already have too much.  More subsidies for low-income housing that is a house not a project.

      Property ownership builds citizenship.  It promotes social stability.  We need more programs that will expand housing stock and homeownership.  Unregulated predatory lending isn't the answer.

      Washing one's hands of the conflict between the powerful and the powerless means to side with the powerful, not to be neutral. ---Paulo Friere

      by Mimikatz on Fri May 06, 2005 at 03:05:41 PM PDT

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