Tuesday, March 27, 2007

'I Don't Think the Legislature Should Get Involved in Bailing People Out'

From the SF Chronicle:

Although Congress is also moving to rein in subprime lenders, [Paul] Leonard [director of the Center for Responsible Lending] called on California legislators to take action including regulations that would prohibit lenders from making offers that buyers cannot eventually afford. "We wouldn't allow consumers to buy a toaster or some other product that had a 20 percent chance of failing on them," he said.
...
[L]awmakers in Sacramento seemed uncertain whether consumers need new protections from loan products that have also allowed millions of buyers into a market that previously was not open to them.

"A borrower comes into a lender's office and is interested in the American dream," said Sen. Lou Correa, D-Santa Ana. "And as long as real estate is going through the roof, can you honestly say that they shouldn't (take out a subprime loan)? That's a tough one."
...
Sen. Dave Cox, R-Fair Oaks (Sacramento County), pointed out that homes are lost for a variety of reasons including a loss of employment, divorce or failing health.

"I hope we don't move into a direction of calling people who default on their loans victims," he said. "I believe that there are some risks that the borrower assumes and the lender assumes on a loan that gets people into houses.

"I don't think the Legislature should get involved in bailing people out."

12 comments:

anon1137 said...

But, this from http://news.yahoo.com:

The Ohio Housing Finance Agency intends to launch a refinance program on April 2 to accept applications from lenders. That program would be funded by taxable bonds issued probably later that same month in an amount likely around $100 million, said Bob Connell, director of debt management for the agency.

The aim is to allow low- to moderate-income mortgage holders who have not entered the foreclosure process to refinance their mortgages at a fixed rate likely around 6.75 percent, Connell said.

. . . . .

Other states are implementing, drafting or considering similar measures.


A taxpayer bailout to keep real estate prices high.

Westside Bubble said...
This comment has been removed by the author.
Westside Bubble said...

"A borrower comes into a lender's office and is interested in the American dream," said Sen. Lou Correa, D-Santa Ana. "And as long as real estate is going through the roof, can you honestly say that they shouldn't (take out a subprime loan)? That's a tough one."

No, Sen. Correa, easy financing is the CAUSE of prices going through the roof, not a solution.

Per Ohio, if a borrower only could qualify at a teaser rate, how would a fixed 6.75% refinance solve their problem?

Patient Renter said...

"We wouldn't allow consumers to buy a toaster or some other product that had a 20 percent chance of failing on them,"

This is a stupid analogy. It's not the product (the loan) that is failing, it's the consumer's ability to pay for the product that is failing.

ralphk said...

"The aim is to allow low- to moderate-income mortgage holders..."

Once again I'm screwed. Too rich to be considered poor and too poor to be considered rich. Just tax me baby, tax me til I bleed.

Rant off.

lexi said...

Hey, I don't think there should
be any bailout for anyone!! Lenders
or homeowners. The lenders should
of known better and common sense
should of kicked in for home buyers. I saw it coming and have
been stuck renting. Why should
my tax dollars bail everyone out
that didn't use common sense. No
one bailed me out in the early nineties when the market tanked.
I had to keep paying on my house
for 7 years as I watched the price
contine to drop untill it finally
came back up and I could sell and
get the heck out. No bailouts is
my vote.

cba said...

Diggin

Source for the 14,600,000 new households is a oft cited Joint Center for Housing Studies of Harvard University report titled The state of the Nation's Housing 2006.

Another oft cited number - annual demand equals 1,900,000-2,000,000 new housing units needed per year. Why - 500,000 housing units our of current total of 115,000,000 are taken out of service each year. 100,000 second home market each year. 1,400,000 new households each year.

A friend of mines simple view of things - easy credit allowed approximately one full year of demand to come into the market early, therefore prices ran up chasing under supply. Now, normal 1,000,000 vacant homes equals 2,000,000 vacant homes. Things are out of whack by about one year, but the market may take 2-3 years to take this excess out of the market, unless builders cut back further.

Perfect Storm said...

Hey CBA the Joint Center for Housing Studies of Harvard University is just a bulshxx front propganda machine for the housing industry. Check out their board memebers, when you get a credible source please post it.

Policy Advisory Board- Member Companies

--------------------------------------------------------------------------------

84 Lumber Company

Andersen Windows

Armstrong Holdings, Inc.

Beazer Homes USA

Boise Cascade, LLC

Boral Industries

The Bozzuto Group

Bradco Supply Corporation

Builders FirstSource

Building Materials Holding Corporation

Canfor Corporation

Centex Corporation

CertainTeed Corporation

Champion Enterprises

Countrywide Financial Corporation

Crosswinds Communities

Fannie Mae

Fannie Mae Foundation

Federal Home Loan Bank of Boston

Fortune Brands - Home and Hardware

Freddie Mac

GAF Materials Corporation

Georgia-Pacific Corporation

Gibraltar Industries

Hanley Wood, LLC

Hearthstone

The Home Depot

Hovnanian Enterprises

Huttig Building Products

Jeld-Wen

Johns Manville Corporation

KB Home

Kimball Hill Homes

Kohler Company

Lafarge North America

Lennar Corporation

Louisiana-Pacific Corporation

Marvin Windows and Doors

Masco Corporation

Masonite International Corporation

McGraw-Hill Construction

Meritage Homes Corporation

MI Windows and Doors, Inc.

Moulding and Millwork, Inc.

Move, Inc.

National Gypsum Company

Oldcastle Building Products, Inc.

Owens Corning

Pacific Coast Building Products

Pella Corporation

Pro-Build Holdings, Inc.

Pulte Homes

Realogy Corporation

Reed Business Information

Rinker Materials

The Ryland Group

S&B Industrial Materials S.A.

The Sherwin-Williams Company

Stock Building Supply

Temple-Inland

UBS Investment Bank

Weyerhaeuser

Whirlpool Corporation


No Title
Member List

Policy Advisory Board

PAB Mission Statement

Sittin' Out This One said...

It may be time to get the people and companies who created this mess to pay the price....

http://biz.yahoo.com/ap/070327/beazer_homes_investigation.html?.v=5

Beazer homes mortgage division is under investigation for fraud. Hmmm, that can not be happening in Sacramento can it?

anon1137 said...

> Per Ohio, if a borrower only could qualify at a teaser rate, how would a fixed 6.75% refinance solve their problem?

Could be refi'd over 30, 35, 40 years, and unlike most legitimate lenders, the govt would probably loan more than 100% of the current value. In 5-10 years, when the house is worth 75% or less of the mortgage value and the owner walks, the taxpayers take the loss.

Sippn said...

Perfect storm - you do make a relly good point but who else would fund a study on housing needs?

Not the Sierra Club.

Perhaps this should be funded by a govt grant.

Diggin Deeper said...

$100 Million is chump change when you consider over $2 Trillion was loaned (2004-2006) as resetting hybrids, arms, no money down, and "pick your poison" loans. But the fact that a state government agency is willing to bail out their constituents sets a dangerous precedence. anon1137 is right on. These people wouldn't qualify at the 6%+, can't pay, and will walk on the government as easily as they walk on the lender. You might as well help them payoff their equity lines, car loans, and credit cards at the same time. Hell, throw in food stamps and cheese chits for a year just to make sure. Its sad that so many people... prime, subprime, you name the prime...got themselves into this mess. It's not the governments' responsibility to pick up after those that made decisions on their own.

cba...thanks for the data, but unfortunately to me and imho its irrelevent compared to present and past issues that have created the overhang we face today. It becomes relevent when the market sifts through all the BS, inventories stablize, buyers start buying, and sellers quit leaving the keys under the mat.