Saturday, June 11, 2011

Minority Mortgage Meltdowns Unlimited! Feds Try to Bring Back Underwriting Sanity, to Prevent a New MMM: Wall Street/Marxist Empire Strikes Back,

Playing Race Card, with Help from MSNBC
By Nicholas Stix

According to the Bizarro World press releases of the “Obama” Administration and its MSM gunsels we’re in the second year of the “recovery.” In the real world of the New Great Depression, however, we have yet to hit bottom. But that’s not bad enough for the political marriage of plutocrats and communists, which is analogous in its perversity to a gay bedding down with a lesbian, and the two finding that they are having the time of their lives.

Worse is better! On to the next minority mortgage meltdown!

Throughout the following article, I give a running, bracketed commentary.

“Proposed rules could shut many out of housing market; Bankers, community advocates protest tough down payment requirements”

By John W. Schoen
June 8, 2011

Proposed rules sparked by the financial industry meltdown of 2008 could have the effect of clamping down credit so hard that lower-income buyers and many others would be shut out of the mortgage market, critics say.

[Lower-income buyers—better known as “poor people”—are supposed to be shut out of the mortgage market. That’s because if you’re poor, you can’t afford to buy a home. It’s too expensive. Home-ownership is not a “right” or, more accurately, an entitlement. If you cannot afford a traditional 20 percent down payment, you are a risky bet. If you cannot even afford 10 percent down, you will also likely fail to keep up with your mortgage payments, and default. These guidelines didn’t come from out of left field, just to be mean to people. People who don’t have sufficient down payments—i.e., “skin in the game”—tend to walk away from their obligations, because there is no cost to them in doing so. Underwriters developed their rules over the course of generations, in order to prevent just that. Another essential rule is the one-third rule: That one not spend more than one-third of one’s take-home income on one’s mortgage. Keep in mind that above and beyond one’s monthly mortgage payment come property taxes, heating costs, and home repairs, all of which are already part of the rent that apartment dwellers pay.]

The critics, including an unlikely coalition of mortgage lenders, consumer advocates, housing industry officials and lawmakers, say regulators have gone too far in their effort to prevent a repeat of the reckless and fraudulent lending that brought the nation's economy to its knees.

[This is the exact same coalition that caused the minority mortgage meltdown in the first place, now demanding that they be permitted to act in the identical greedy, irresponsible manner to that which launched possibly the worst depression in American history.]

Opponents argue that the new rules, proposed by a bevy of federal regulators, could have the unintended consequence of restricting the American dream of homeownership to the wealthy, leaving behind many creditworthy buyers and shrinking the pool of home buyers just as the housing market is struggling to regain its footing.

[If you can’t afford a reasonable down payment, you are the very definition of a non-creditworthy buyer.]

"If this rule goes through as it stands, the demographic of borrowers who get (favorable rates) will be white and wealthy," said David Stevens, chief executive officer of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration. "African-American, Latino and first-time home buyers will be charged higher prices."

[Race card! This is the same card that caused the MMM! David Stevens: Remember that name!

The MMM was caused by mortgage lenders giving black and Hispanic deadbeats with lousy credit and, in many cases, little or no legal or labor-derived income (including welfare clients) no-money-down mortgage loans, to be ultimately paid for by the predominantly white tax base. Meanwhile, the criminally irresponsible lenders, who were huge political campaign donors, were deemed too big to fail, and bailed out by their cronies in the Bush and “Obama” organizations, and evidently expect to be bailed out yet again.]

Stevens was commenting on 376 pages of proposed rules for "Qualified Residential Mortgages," which would require a 20 percent down payment and limit a borrower's debt payments to no more than about one-third of income.

[That one-third rule is essential. Otherwise, even otherwise frugal people will fail to keep up with their mortgage payments. But these are people who also have little or no skin in the game, and thus have little incentive to keep up on their mortgage payments. And 3. They are deadbeats to begin with, whose lousy credit ratings are due to the fact that blacks of all economic statuses are notoriously profligate spending on everything but their debts, and for their lack of any feeling of obligation to pay off those debts. Hispanics are not much better. Note that the MMM alliance takes for granted the validity of “disparate impact theory,” which says that all spoils must go to blacks and Hispanics in numbers at least matching their proportion of the population, their actions be damned.]

Critics say the rules would force up the borrowing costs for lower-income and younger borrowers because lenders would charge higher rates for loans that do not qualify for QRM status. They say that could sideline millions of potential first-time buyers who haven't saved the full 20 percent — and hurt the prospects of the 11 million current homeowners who owe more than their home is worth.

[This is a re-run of the pre-MMM rhetoric, as if nothing bad had happened in the meantime.]

The rules are intended to reduce the number of risky loans by requiring that lenders hold onto 5 percent of any loans that do not qualify for QRM standards. Loans that meet the standards could be sold fully into the secondary market, which is normal practice for most mortgage lenders.

It was this lack of "risk retention" that led to the surge of risky lending that has helped trigger millions of foreclosures and sent home prices tumbling, according to Sheila Bair, head of the Federal Deposit Insurance Corp.

"The fact that securitizers did not have skin in the game with these loans, by and large, or meaningful skin in the game, led to a lot of the lax underwriting and abuses that we saw in the mortgage markets," Bair told the House Financial Services Committee last month.

But others say the regulators are swinging the pendulum too far.

"I think everyone in the industry agrees that you've got to have some skin in the game," said Cameron Findley, chief economist at "The what question is: How much skin in the game do you want to have? And how do you balance that with the size of the hole so many homeowners are in today?"

[This sophistry rears its ugly head in every diversity issue today. ‘It’s unfair to use reason, experience, and morality where blacks and Hispanics are concerned.’ You get the same special pleading where the criminal justice system is concerned. When black four-time loser Mychal Bell (with three convictions for violent felonies, and one for a property crime) committed attempted murder against white classmate Justin Barker, Bell’s black and white supporters insisted that Bell should somehow be “punished,” but without going to jail (whether juvi or adult). But since Bell had been on probation since his first conviction, that was just a dishonest way of saying that he ought not to be punished. Once you already on probation or parole, the only punishment option left is jail. Anything else is nothing. Likewise, these pushers of affirmative action in lending are saying that every black and Hispanic has a right to a free home, to be paid for by whites and Asians. Whites: are now 63.5 percent of America’s “residents,” while blacks and Hispanics are at least 30 percent. When blacks rioted during the 1960s, they comprised 10 percent of the American people, while whites comprised 88 percent. The arrangement America’s white ruling class then imposed on the rest of us, whereby black America got a free ride at white America’s expense was a moral outrage, but it was economically feasible, at least to the white middle and upper classes. Today, with the 8.8:1 ratio of productive to unproductive races shrunk to 2:1, it remains a moral outrage, but is now completely unfeasible economically.]

The proposed rules are opposed by a long list of groups that don't often align on financial regulation matters, including the Mortgage Bankers Association, the Center for Responsible Lending and the National Community Reinvestment Coalition.

Critics fear the new standards will create a two-tiered mortgage market in which a borrower with enough money to afford the higher down payment would pay less, compared with an equally creditworthy borrower with a smaller savings account. [But of course, someone who can afford a higher down payment should pay less! What is the point of paying more, if you get nothing for it? This is a snow job. They are misrepresenting someone who is less creditworthy—“an equally creditworthy borrower”—as if he weren’t.] A recent report by J.P. Morgan estimates the gap could amount to as much as 3 percentage points, which could mean the difference between an affordable monthly mortgage payment and continuing to rent.

The new rules also would hit families harder in high-cost markets. Based on current average prices, for example, buyers in the Northeast would have to come up with $53,000 for a 20 percent down payment on a typical existing home, compared with $33,000 for a typical home in the Midwest. [All other things being equal, marginal borrowers in “high-cost markets” are more likely to default because … they’re in a high-cost market, for cryin’ out loud! The solution then is to move to a cheaper area, not for the government to cheat on behalf of impecunious members of groups whose race or ethnicity it favors, and confiscate the difference from members of racial and ethnic groups it hates.]

The rules have also focused renewed attention on the fate of government-controlled mortgage entities, including Fannie Mae and Freddie Mac, and the FHA.

The proposed QRM guidelines would not apply to those agencies, which currently back some 90 percent of all new mortgages. [I.e., the system will be rigged, yet again, on behalf of black and Hispanic deadbeats.] That could further complicate the shared goal of Congress and the White House to wind down government-backed mortgage finance and restore the flow of private capital.

"It's going to force FHA to get huge, because all small down payment loans will go to FHA; there won't be any low down payment finance other than them," said Stevens, the former FHA commissioner. "So they'll still be a huge source of funds for all low down payment loans, 100 percent-backed by the government with no private capital competing."

[“Obama,” with his desire expressed since Day One of his administration to nationalize all economic sectors, must love this possibility.]

The new rules are being proposed jointly by six federal regulators: the Federal Reserve, the Department of Housing and Urban Development, the FDIC, the Federal Housing Finance Authority, the Office of the Controller of the Currency, and the Securities and Exchange Commission. The regulators all declined to comment on the widespread opposition [opposition among those who raped the tax base before, but not opposition among the 70 percent or so of the American people—citizens, not “residents”—who got raped], saying they were unable to do so while the official rulemaking comment process is still under way.

But in a sign the regulators have heard the protests, the agencies issued a joint statement Tuesday extending the comment period — originally set to end this Friday — until Aug. 1 "to allow interested persons more time to analyze the issues and prepare their comments."

An analysis by the [communist] National Community Reinvestment Coalition found little correlation between size of down payment and default rates. [Bull!] Based on a review of 1 million loans written for the most creditworthy borrowers in 2006 and 2007,the default rate ranged from 0.14 percent for those with a 20 percent down payment to 0.26 percent for those who put just 3 percent down.

[So, where did all the defaults come from? Martians, who have since returned?]

"It's still a very acceptable level of default," said John Taylor, president of the NCRC, which advocates for access [“access” = a free ride for black and Hispanic deadbeats] to banking services. "The industry would be very happy with it."

The default rate for all mortgages outstanding was 8.32 percent at the end of the first quarter of 2011, according to the Mortgage Bankers Association.

[First of all, they are looking to return to giving no-down-payment mortgage loans to blacks and Hispanics. Second, how does one get from rates of 0.14 and 0.26 percent to 8.32 percent?]

Another analysis by found that of mortgage loans written from 1997 through 2009, roughly 80 percent would not have met the QRM standards. [If that is true, it’s your fault for dropping all underwriting standards.]

Critics of the new standards argue that the current high default rate was mostly the result of a wave of predatory lending and exotic loans — from artificially low "interest only" payments to "no documentation" loans that relied entirely on a credit score to assess the risk of default. [The high default rate was the result of giving no-down-payment mortgage loans to black and Hispanic deadbeats.]

There's widespread agreement on the need to better assess the risk of default. But opponents of the new standards say they pose an even bigger risk. [Sentence two contradicts sentence one, meaning these people adamantly oppose better assessment of the risk of default, and are just paying lip-service to it.] If too many borrowers are denied mortgages, the already weak housing market would be further crippled by a dearth of new buyers. [And how does lending to deadbeats help the housing market? It will help builders and mortgage bankers if the predominantly white tax base picks up the tab … again.]

"The concern is they decide to rent for the next five years," said Findley. "So they're not buying, and home prices are going to continue to fall." [So let them fall. I believe that is called a “correction.”]

Falling home prices have already cut deeply into a key segment of the housing market — the "move-up" buyer that includes growing households who have accumulated equity in their first home. Falling home prices have already erased trillions of dollars of home equity, making it harder to come up with a down payment of any size. The proposed 20 percent down requirement could further shrink that pool of buyers, sending house prices falling further. [That is what happens when terrible policy distorts the market, flushing generations of hard-won wisdom down the toilet, and institutionalizing disastrous incentives. But they want to repeat the disastrous policy!]

"If we exacerbate that by having credit restricted, and the private sector is wary about jumping in, and house prices continue to fall, more homeowners are underwater, putting more pressure on bank balance sheets, it really could tip the scales in a way that would be very dangerous," said Christopher Hebert, research director at the Joint Center for Housing Studies at Harvard University.

[Hebert & Co. are saying that the cure for bad finance policy is worse finance policy.]


LBD said...

Nicholas, I don't think you understand the meaning of the Yiddish word "gunsel". It does not mean gangster. It means a "receptive" homosexual (pillow biter rather than shirt lifer, if you know what I mean). Many people picked this word up from "The Maltese Falcon"and mistakenly thought it was a reference to a criminal or a gunslinger. Dashiell Hammett used it correctly when Marlowe expressed contempt for Joel Cairo, played by Peter Lorre. He was not expressing contempt for his lawbreaking, he was manifesting his distaste for homosexuals.

Nicholas said...

I never read the book, but in the movie I thought Bogey's Sam Spade used the term against Elisha Cook Jr., as a compound of "gunman" and "damsel."

Anonymous said...

John Huston pretty much took the The Maltese Falcon book and put it on film. The 1941 film with Humphrey Bogart is true to its literary source in my opinion.

David In TN

Anonymous said...

No, "gunsel" has nothing to do with "gun". It is also transliterated from Yiddish as "gonsel".