Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, April 17, 2006

Your Lender, Your Friend

'"We don't believe it is appropriate or possible for the lender to identify or dictate the best mortgage product for individual consumers," said Diane Casey-Landry, America's Community Bankers president and CEO."

Read that again people... Apparently when you go to visit your lender and tell them your financial situation and tell them how much house you would like to buy... and they present some options for you... they are NOT identifying or recommending appropriate options for your individual needs.

"Efforts by regulatory agencies to rein in so-called exotic mortgages have met with opposition from major bankers' organizations. The mortgage bankers object to the guidelines' implication that all alternative mortgages are risky in and of themselves. The community bankers reject the suggestion by regulators that lenders tell borrowers whether a loan is appropriate for them."

"New guidelines were issued because regulators such as John C. Dugan, the comptroller of the currency, were concerned that these nontraditional mortgage products had novel and potentially risky features."

"Rising prices created the market for alternative (exotic) mortgages, which make houses more affordable for less-affluent buyers."

"The term exotic mortgages refers to the interest-only and option adjustable-rate products (known as Alt-A's) that are being used by many first-time buyers, among others, to purchase houses in high-priced markets."

"The concern among housing-industry officials and regulators is that a large concentration of these loans in the highest-priced real estate markets could result in a tidal wave of defaults and foreclosures - and a highly regionalized "bubble."'

"Why did the riskier products catch on so quickly? On the lenders' side, they have sustained loan volume as higher interest rates have ended the refinancing boom. On the borrowers' side, they have made expensive houses more affordable."

"Dugan and other regulators were concerned that the availability of these alternatives not only boosted prices but also created a demand for even more of this kind of financing."

"Both the Mortgage Bankers Association of America and America's Community Bankers say the guidelines proposed in December by the Office of the Comptroller of the Currency and other agencies might limit innovation. Both groups presented comments in letters sent to regulators before a March 29 deadline."

"The letter from America's Community Bankers also maintains that the guidelines aren't necessary, even though the group understands the rationale behind them."

'"The American consumer could suffer greatly from any guidance that imposes unduly restrictive standards on the use of these mortgage products," said Diane Casey-Landry, the group's president and CEO."


At 4/18/2006 10:01:00 AM , Anonymous tom stone said...

that initial quote is just crap.i have a fiduciary duty to my client and part of that is diclosing the risks and benefits of the loan products available.i lose some business but i don't have to wear a kevlar vest,and i can sleep at night.there are plenty of laws and regulations,but if they are not enforced they don't mean a thing.(see "bill of rights")

At 4/18/2006 10:43:00 AM , Blogger Athena said...

I know Tom. It is unbelievable to me. I have seen this quote in no less that 12 articles now, and it is no doubt step one of the CYA parade coming down the pike due to the awareness that your profession has been infested with some with a more parasitical opportunisitic manner of operating.

they are setting the stage for the anticipated lawsuits against those who do not have ethics.

I don't think it is going to work... I can't imagine a single intelligent person who doesn't fully believe that when they are giving all that information to their lender that their lender isn't taking the information into consideration when recommending options. They ARE in a position of trust and it should be in the interest of the powers that be in the industry to set the bar high regarding who they let into the profession simply for that reason alone.


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