Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, April 06, 2006

Lenders & Brokers Beware...

The Fed has its eye on you...

The federal agencies that regulate banks have been evaluating the risks to lenders and examining banks' lending policies. Federal regulators are paying close attention to increasingly popular high-risk mortgages and the credit risks they pose for banks, the government's top thrift regulator said Thursday.

The remarks by John Reich, director of the Office of Thrift Supervision, were in line with expressions of concern by several bank regulators in recent months over the popularity of so-called interest-only or pay-option adjustable-rate mortgages. The regulators do not seek to stanch innovation by banks, but to encourage sound banking principles, Reich said.

Consumers increasingly have been using them to buy homes they otherwise could not afford. And banks and thrifts have been turning to them to maintain their loan volume and profits in a competitive market, sometimes lowering standards for extending credit, Reich said.

"We are increasing our vigilance. ... We are asking our examiners to dig deeper into loan portfolios to understand the risks individual institutions are assuming," he said in a speech to the New York Bankers Association.

"One of the risks we are closely monitoring involves the proliferation of alternative or nontraditional mortgage lending products," Reich said.

Copies of his speech were distributed in Washington by the thrift agency, which is part of the Treasury Department.


At 4/07/2006 10:23:00 AM , Blogger Bubble-X said...

Good info.

I'd like to see them actually do something. It would be good. Hoewver, I'm sure the real estate empire will put pressure on the gov't to do nothing- which seems to be all the gov't does these days anyway.

At 4/07/2006 02:30:00 PM , Blogger Athena said...

Don't you think they should have done something a while ago before exotic financing became the biggest enabler of buying ovepriced houses in the first place?

But for these products prices would NOT have been able to take leave of economic sense.

People who bought at prices they definitely couldn't afford hence they HAD to use these products, probably couldn't have afforded to buy BEFORE the prices ballooned anyway...

so but for these products we would not have seen the prices rise... these products created a false buyer society...there never was a market for these houses at these prices... the prices were not reflective of a market demand that existed... the ability to unload crap box houses at overinflated prices was created by the willingness of lenders to falsely create purchase power... this doesn't pass the smell test to me.

At 4/07/2006 02:31:00 PM , Blogger Athena said...

Moonvalley... you around? did you see this?

At 4/07/2006 06:22:00 PM , Anonymous tom stone said...

stated income and interest only loans are valuable and useful tools for a small percentage of borrowers,and arms can be a good deal in a stable or declining interest environment.however the way they have been promoted the last few years is criminal,or should brokers have a fiduciary responsibility to their clients,and no matter how the lenders teach the brokers in "free training seminars" it does not absolve the loan brokers of their duty.i had this conversation with a fellow mortgage broker today and we would both be VERY glad to see some enforcement of the existing laws...i'd like to see a nice mix of lenders reps,brokers,and appraisers in is hard to compete with people who are willing to"cut a few corners" and "be flexible" to "help a client out"

At 4/08/2006 12:36:00 AM , Blogger moonvalley said...

Athena...yeah, we saw the headlines in the papers this evening. We just made a donation to the No campaign yesterday. So what does this all mean, and why now? I was called by a polling service the other night. Diddy Vella told me that one of the Leveronis was also called the other night. The polling service is an outfit from Ohio, and when he casually asked the pollster how it was going he said it was 70% against.

At 4/08/2006 10:42:00 AM , Blogger Athena said...

I wish I knew what it all means. I am baffled too. I did post a comment over there though... Dr. Caselli had a post about rattlesnakes and I can't say I entirely disagree with his premise.

It just seems so odd to go from the scare tactic rhetoric to this. This person offering the land says he and Marioni came up with this just the other night over a glass of wine. Well, the proponents have been telling everyone that they checked into every alternative before selecting Leveroni and now it is either go along with them or they will close the hospital.

Now that sounds unreasonable all by itself, but now it turns out they DIDN't investigate all alternatives and apparently they COULD have done this themselves... so why didnt' they?

I think we deserve an answer.

anyway... I did notice they didn't really call off the election... and they can't really call off the election so it is still on as far as I am concerned. Get the ballots in so they KNOW they lost and when they go to put together their next bond measure they will remember who they are dealing with.


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