Second mortgage meltdown coming?

[Old Panda]

Originally Posted by gusfraga

I send my request to the Feds to bail me out . I am expecting bettween 1 or 2 million in euros if possible.
I will let you know when I get the money
Gus

Great job Gus. Let us know how that works out for you.......

[vwW12]

Originally Posted by Woody14619

Wonderful opinion piece you link to there

Yes! Attack the messenger, not the crude reality that it was the Community Reinvestment Act that forced banks to accept welfare, child support, and unemployment benefits as evidence of ability to get a mortgage.

I quote from Closing the Gap - A guide to equal opportunity lending, by the Federal Reserve Bank of Boston:

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: [...] child support [...] welfare payments, and unemployment benefits

Page 15.

Like another poster said before:

Originally Posted by MPrice2984
Remember when qualifying for a mortgage was hard? The inventors of this kind of economic nonsense need to be put on trial for crimes against humanity.

- * -


credit: I found the link to the Federal Reserve website and document on this enlightening page on CNBC.

[Woody14619]

Originally Posted by vwW12

Yes! Attack the messenger

I will when the messenger distorts the truth.

I wasn't taking issue with the pseudo-fact you were saying, but rather the lack of context, the implications made and the conclusion that was reached based on that false implication. I also was taking exception to the fact that the article (and as a result, you) grossly mis-represented what was going on.

The implication (in the post, and in the Fox editorial) is that the Fed made rules that forced banks everywhere to accept welfare as proof of income. In reality, the only bodies required to do that were Fannie and Freddie, not all banks. (This is conveniently pointed out in the quote and link you posted.) Reality is that both bodies were actively asking permission to take this into account. So this didn't "force" them to do anything. This was on their wish-list, not some mandate being rammed down their throats.

The other implication is a little trickier to understand. The CRA rules were not trying to get people that were actively living on welfare a mortgage. Welfare had already been cut to a 5 year lifetime benefit, with 32 weeks a calendar year cap years before this was passed. Banks were also giving people with no income history loans at this point (self-employed and other folks with no direct employer, SMC merchants for example.) This change was to allow FM² to consider unemployment and other income sources when looking at the income history of a prospective mortgagee.

Typically one thing banks look at when considering a mortgage is the average income for the past 5 to 10 years . When you average in 6 months to a year of $0, it can cut your average income down quick, even if it happened 4 or 5 years ago. Throw that block of $0 in and it means people that were out of work years in the past that have recovered and are doing well now financially still can't get a mortgage. This rule change allows them to consider all sources of income considered taxable (and yes, welfare benefits are considered taxable income) to help drive up the average. It could be argued that this was a bogus way to do it, but it's what was voted in by both political parties at the time. And again, this is something FM was asking for, not something being forced on them.

The final thing the Fox article implied was that this was all one parties fault, when in reality the opposing party was in control of both the house and senate at the time, and both parties voted it through. While you didn't mention that part specifically, the fact that you're linking to it implies you at least somewhat agree with their opinion. Otherwise, why would you link to an opinion piece, as opposed to a news piece...

[Dunerunner]

How is the "CRA Rating" determined? What are examples of "CRA Ratings?"
The Community Reinvestment Act (CRA) requires the federal financial institution supervisory agencies, in connection with their examinations of certain depository institutions, to assess the institutions' CRA performance. A financial institution's performance in helping to meet the credit needs of its community is evaluated in the context of information about the institution (capacity, constraints and business strategies), its community (demographic and economic data, lending, investment, and service opportunities), and its competitors and peers. Upon completion of a CRA examination, an overall CRA Rating is assigned using a four-tiered rating system. These ratings are: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance.
In the case of an interstate bank, the federal bank supervisory agencies are required by law to evaluate an institution's CRA performance in each state and metropolitan statistical area (MSA) in which it has a branch in addition to providing an overall rating for the bank's performance. The assessment of the bank's performance in these individual areas are appropriately weighted and considered in determining the overall rating.

Want to know more? FFIEC Community Reinvestment Act

[NCC1701]

Too verbose, y'all get deep. The drift I capture is, "looks like a buyer's market". That is, IF you can finance the purchase. Horrible time to be a seller though. I soon will be (a seller) and am fortunate enough to already have a buyer.
I may also be a buyer within 12 months, if I can swing financing.

[Dunerunner]

The good part is that the effect is nation wide and where ever you choose to re-locate, prices are down there also.

[grwhitaker]

Just a minor correction to a post above about self-employed and RE loans. Almost every lender requires 2 prior years of complete tax returns [not just the summary sheet provided by your CPA] and the current years bank statements. This is a whole lot of information that has to be provided- a lot more than most hourly/salaried employees with a W-2 would have to provide.

[cablvr]

Originally Posted by vwW12

But have you ever wondered who is it that made it legally mandatory for banks to give people whose income evidence consisted of welfare checks and unemployment checks?

A liberal.............

[jwight]

The giant thread lock is approaching...

[BobDiaz]

Be careful, some comments are getting a little too political here.


While some did see the first wave coming, the majority were caught off guard.

According to the 60 minutes report, first wave passes around mid 2009 and the second wave starts to ramp up around mid to late 2009. The advantage to being pro-active, rather than reactive, is that things can be done before the bottom drops out again for a second time.

In the case of the ARMs (Adjustable Rate Mortgages), a program could be set up to re-finance the ARMs to a low fixed rate mortgage.



Bob Diaz