Bush to expand housing bailout, Baltimore to sue mortgage lenders
Hey, who needs a Democrat in the White House? President Bush continues to push wildly expansive Hillarycare for the housing market. Now, the administration has moved beyond the subprime crisis–and is touting government help for borrowers of mortages at prime rates. And that’s not all. In addition to bailing out subprime and prime rate borrowers, the Treasury Department is putting heat on Congress to increase the availability of jumbo mortgages and lift the $417,000 loan cap:
Treasury Secretary Henry Paulson said Tuesday the administration was exploring what would be a significant expansion of the program to help at-risk mortgage holders.
Paulson, in an interview on CNBC, said the administration was involved in discussions with the mortgage industry to expand a current program to freeze adjustable rate mortgages for five years to include borrowers of loans at prime rates. Currently, the rate freeze only covers a much smaller segment of adjustable rate loans, those made to subprime borrowers. Those are borrowers with weak credit histories. “One thing we will consider with the HOPE NOW alliance is … maybe expanding this beyond subprime borrowers to other borrowers,” Paulson said in the CNBC interview.
Paulson did not provide any details on when this expansion might go forward. The HOPE NOW alliance is a coalition of mortgage industry companies which are seeking to reach at-risk borrowers to help them avoid foreclosures. The administration last month unveiled its most significant move to date to deal with the mortgage crisis when it brokered an agreement with the mortgage industry to freeze rates on certain subprime mortgages for five years in an effort to help homeowners in danger of losing their homes when their lower introductory rates reset to sharply higher levels in the coming two years.
There are 1.8 million subprime mortgages that are scheduled to reset to higher rates this year and in 2009.
Paulson in the CNBC interview also called on Congress to quickly pass pending legislation that would reform the Federal Housing Administration, which he said would help 250,000 at-risk homeowners who have adjustable rate subprime mortgages refinance to more affordable loans and another piece of legislation that would expand the availability of so-called “jumbo” mortgages, loans higher than $417,000.
The two giant government-sponsored mortgage companies, Fannie Mae and Freddie Mac, cannot presently back these jumbo loans, which restricts their availability.
I told you this was the camel’s nose under the tent.
Meanwhile, Baltimore’s mayor is milking the subprime meltdown and doing her best Jesse Jackson imitation. Sheila Dixon announced that Charm City is suing Wells Fargo over alleged racial discrimination in lending:
Hundreds of foreclosed homes in black neighborhoods resulting in millions of dollars of tax losses are the result of predatory lending, argues a federal lawsuit to be filed today by Baltimore City against one of the country’s largest mortgage lenders.
The lawsuit accuses Wells Fargo Bank of targeting black homeowners in Baltimore with high-interest loans and deceptive lending practices, costing the city millions in tax dollars and resulting in one of the highest foreclosure rates of any lender in the city.
“We can make the case that African-American homeowners were targeted by Wells Fargo with inferior mortgage products, and we have evidence that some of this practice may be illegal,” Sterling Clifford, spokesman for Mayor Sheila Dixon, said Monday.
Citing “reverse redlining,” the suit alleges the bank targets black neighborhoods. The practice resulted in a foreclosure rate for the bank four times higher in the city’s predominantly black neighborhoods compared to white neighborhoods, the suit alleges.
As I’ve said before, the subprime mess isn’t a result of ruthless discrimination. If anything, it’s the result of too little discrimination by lenders too willing and eager to sign on people who had no business taking on mortgages.
Propping up bad loan prospects will only yield more bad loan prospects.
You know my solution:
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Personal accountability…… When my wife and I bought our first house 4 years ago, we knew our limitations and were careful not to make ourselves “house-poor”. Now because of this stupid bailout, we will have to pay the price the next time we buy and/or through taxation. Socialistic practices are never the answer.
Give a man a house, he has a place to sleep for a few years….. Teach a man to buy a house, he will have a home for a lifetime.
no, banks target people who don’t pay their bills. pay your bills, and you aren’t targeted.
Sigh.
Thats right - and even if you are close to foreclosing on your house, if you go to the bank and talk to them they will work with you. The want you to be able to make your payments….. they don’t want to have to take on foreclosed houses and resell them.
So you give out loans to people who don’t deserve them and your a racist, you don’t give loans to people who don’t deserve them and you’re also a racist. HMMMMM.
If you don’t bail them out you are a racist too.
Those of us who conduct our lives according to the principles of hard work and responsible behavior are the ones being targeted. We are the cash machine for the lazy and stupid. If we don’t find a way to restrict the franchise in this country, the well will run dry soon, and then what?
30 you hit the nail right on the head. As always…..
Whine not for what your country can do for you, get off your lazy butt and stop being irresponsible.
President Bush is not only bailing out the irresponsible, he’s also helping out his central bank pals.
Okay–we pull their head above water one more time. It gives irresponsible people a little breathing room.
Then what happens a year or two down the road when they start going under the waves for a second time because they still can’t afford the house payments for the house they overbought into in the first place. That brings up the questions:
Is there going to be another bailout to help them again?
Who will be blamed the second time around?
Will the government be called racist at that time because they “knowingly bailed out people that shouldn’t have been bailed out in the first place“?
It’s a never-ending cycle of government dependency.
As always I get screwed again.
Why doesn’t the FED WAKE UP and drop the rates a full point BEFORE the recession hits.
Why o why didn’t I buy that house I couldn’t afford?????????
No, they won’t all work with you Raging Repub. Bush’s initial foray encouraged lenders to work with borrowers. They don’t have to and many won’t. Fannie and Freddie Mac can’t because they are loaded with their own bad loans and bad accounting practices. The lending institution were pushed by Congress to “help” out people with less than stellar credit several years ago, well, they did and this is the result. We are in for something pretty bad in the next few years (that’s right, plural) and there is no way out. If you own a home today, it’s worth less and it’s tough to sell. Buyers can’t buy unless they have sterling credit. There are no world-wide investors buying up any loans, good or bad. The seller/buyer/realtor/loan officer/lender/brokerage houses and investors are to blame for this, they all got greedy….see money, get money any way you can.
Shar, i disagree. banks work with you because they lose more money if they don’t. the last thing banks want is for a house to be foreclosed on. any borrower who makes sincere efforts with their bank will find that a bank is amenable. they are, however, only willing to go so far.
the victimhood is getting old. these banks actually put OUT money with the expectation of getting paid back. and based on your credit worthiness, a borrower was offered what a bank was winning to give. NO ONE HAD TO BUY A HOME UNDER THESE CIRCUMSTANCES. there was no force. in fact, the consumer had all rights to shop around for mortgages, and well as educate themselves to them. for the first time in HISTORY people were able to buy a home with no cash saved. THIS helped a great number of people get into their first home.
the greed here is from the borrower thinking they were getting something with no strings attached (which i must tie to our entitlement culture).
these people aren’t victims. the banks who shelled out money for high prices homes, are the victims.
I have but 6 words - “Aw geez, not this <expletive deleted> again.”
Guess my first instinct when I heard “compassionate ‘conservative’” back in 1999 was right. Worse, the Pubbies are at best going to make that same mistake this year.
Borrow-and-spend liberals like Bush are more liberal than tax-and-spend liberals.
#10 Nail meet hammer. Compassion, while still the wrong reason, never even crossed his mind as rationale for pulling this stunt. If he had any compassion, he would show it to those doing the right thing.
IMHO the banks should be sued by their investor owners for being stupid enough to write these mortgages let alone buy these fairy tales by the bushel full.
Taking my money to pay somebody elses falsely obtained mortgage is criminal.
Notice to socialist Americans: Suck it up! Pay your own mortgage like the rest of us. If you can’t, sell the house and live some place you can afford.
Thanks For the insightful analysis.
Just speaking from personal experience, some of them couldn’t care less, especially if the loan is insured by the gov’t. I was foreclosed many years ago after trying fruitlessly to work with VA and the mortgage lender for more than a year before the loan went deliquent. Neither showed any interest in working anything out.
The real issue is the health of the finance/banking industry and its impact on the overall economy. Right now, banks are suffering large losses from CDO (mortgage, particularly subprime) holdings that were mispriced (by the banks). Even the super-senior tranches (least risky parts) of CDOs held by Money market funds are defaulting. Banks are using their own capital to bail out money market funds, and suffering for it.
But just as you might say boo hoo to borrowers behind on payments, I might say boo hoo to bankers. The bigger problem is that banks can (and are) bring down the overall economy. Bailing out banks by bailing out borrowers is a way to prevent a recession. That what makes even conservative economists aware of moral hazard issues think about bailouts in this case.
You can agree or disagree with this analysis, but please don’t accuse Bush of being overly concerned with the down trodden.
When my wife and I bought our home 5 years ago, the lender and the agent were pushing us to get an adjustible. Luckily, I have a memory of Jimmy Carter’s and Regan’s inflation nightmare where mortgate rates were in the mid teens. I took the 30 year fixed amd am very thankful I did. I also resisted the urging of my wife and other family members to buy and sell homes for a profit. Some of those people were got into that are now having these properties forclosed because they can’t make the payments and they can’t sell over priced properties. Yes-I am very fiscally conservative, I drive an old Jeep, don’t take vacations so my daughters can go to college and I try to not spend more money than I have. Sometimes I feel out of touch, but then, I still have a home to live in and I never have to beg the government to take care of me or my family. I hope for the sake of our country that there are more people like me than those who want cradle to grave care from the government.
I am in the business and there is a growing debate as to whether or not the sub prime mess will spread into prime. On one side, there are folks like me who believe that the subprime mess was caused by banks loosening restrictions too much in sub prime.
On the other side, are folks that believe that Adjustable rate mortgages became so popular that the mess hit when they all adjusted. Those folks think that the mess will hit prime as soon as those loans adjust as well.
The problem is that the folks that Bush wants to help are beyond help. They are in a situation that no one can bail them out of. Their mortgage is now well beyond what the value of the house is and values are falling. Here is how I wrote about it.
I am SICK of Bush! In fact, I am sick of REPUBLICANS (Democrats are non-human pond scum)! The American Federal Government SUCKS.
Dammit, when other people make mistakes Bush is always there to take money from me to give to them. Then, when I make a mistake, I can’t find GW for nothin’!
Dr Paint…how do you REALLY feel?
.
Actually I do understand even if I don’t totally agree with your sentiment. Having owned my own businesses for 20+ years, my own home for 20, and having gone thru unbelievably difficult times ( more than once) and yet I never asked for anything from the gov’t.
I don’t think anything was available TO or FOR me tho.
My dad always said; “you made your bed, now sleep in it.”
But what do I know, I’m just a single white guy and last I checked there were no SWG ‘associations’.
Now we know what compassionate conservatism is: a Democrat in Republican’s clothing.
First they said lenders were discriminating against low income borrowers so the lenders loosened their restrictions (and made lots of money); now they are accused of discriminating by giving them those very loans!
Why don’t they sue the lenders if they were defrauded? Because there is no case. Go to Big Daddy Government for a bailout instead.
And I am still getting mail from Countrywide urging me to borrow, borrow, borrow, which I throw away–but Bush and Co. have made fools out of us responsible people.
“We want the world ,and we want it now.”.If we can’t afford it,the government will buy it for us.Can someone teach me how to play the system so I can get everything I want at someone else’s expense?
Tennessee Dave-you should be teaching economics.You defined the results of Socialist policies perfectly.
Why are our young lagging behind the rest of the world intellectually?Because our decision makers reward stupidity,and lack of responsibilty.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.”
“The average age of the world’s great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.”
-Professor Alexander Tyle (circa 2,200 years ago)
I really wish Bush was a true lame duck President and just did absolutely nothing for the next year except to sign into law responsible appropriation laws to operate the Government. I am really sick of this irresponsible industry getting away with their poor business decisions. I agree with Michelle, Suck it Up!
Silver lining… value priced properties coming to the market soon.
Pat,
the irony is that for most folks, they are the ones that could be sued.
Most of the troubled loans are so called stated loans in which income is stated but not proven. Well, you aren’t technically supposed to lie in those loans, however the reality is quite different. Now that those folks have gone bad, that is when banks can turn around and sue for fraud.
So true, Mike. That’s why we hear nothing about a consumer lawsuit–they do not come into the court with clean hands.
This will spread to the prime market. I know a lot of people who jumped head first into the the tail end housing boom with ARM and interest only loans believing that if they got into any trouble they could just flip it and retire. Many of them hadn’t even sold their old homes before they closed on their new ones. Now many of them can’t sell their old homes because they were asking too much. They were greedy like everyone else and now the shoe is fixing to fall off the other foot. I can’t afford a home right now because they are out of reach and Bush isn’t helping by keeping prices artificially high for a little longer making the problem even worse in the long term.
Democracy - REPUBLIC what did our Founders know that we’ve forgotten and for which we are no longer willing to battle?
They knew that aristocratic (royalty) governments and democracy (socialism) were the same. Just as the aristocracy of old could come and take your money and land (they owned most of it anyway) the democratic socialists could do the same.
Thus, the Founders formed a REPUBLIC.
The sooner we demand that that form form be retuned to us, the better we we be.
…that that form be returned to us…
Someday I’ll get the hang of editing via the screen.
Sounds like a good time to buy in Baltimore.
Wait, that’s Baltimore - never mind…
*sighs* This is not what homeowners need. Raising the jumbo loan amount will only add to the chaos. It may help with second mortgages but if the buyer can’t afford the payments, it matters little what the limit is. I agree with Michelle 100%+ on this - there wasn’t enough financial discrimination on the part of the lenders themselves. ANY subprime loan should have been outright refused if the borrower couldn’t provide full documentation of employment, income and debt. Suck it up? Damn right.
I bought a home with a low interest fixed mortgage in 2001. I never missed a payment. But when I lost my job, I put my home up for sale so I could move to a more affordable location. After 6 months, I have yet to get a serious offer. The market is very depressed in my area right now because of the subprime mess and all the houses on the market.
It is easy to say “suck it up” until it happens to you. If the situation continues to get worse, it will affect many of you and many other innocent bystanders. If President Bush can help some families stay in their homes and prevent an additional flood on the market without using tax money, what’s wrong with that?
Before condemning his efforts, at least provide some estimate of how much tax payer money he is proposing to spend. So far he has been working to secure voluntary agreements with mortgage companies to help some families stay in their homes. I haven’t seen any evidence, yet, that he has spent a dime of your money.