So who’s to blame for the number of foreclosures, the number of families whose mortgage costs keep rising, and the housing bubble that seems to have popped?
As I read the following article, I was admittedly shocked to see that a mortgage broker is being partially blamed for the mess we seem to have gotten ourselves in. The basis for the article is preventing the yield spread premium from being a part of the loan delivery. These are used to limit the amount of money a person would need in order to pay for closing costs, etc. At the end of the day though, the consumer will pay those costs in one form or another. These cost are real (just disguised) and we all know that nothing is free.
Since we have all been sold the American Dream of Homeownership, we have been brainwashed into thinking that we need to own our own home at all costs. In the end, the consumer (educated and uneducated) is ultimately responsible for their own situation because they will be the ones paying for it in the long run. Yet, I understand how a person or family can get caught up in the emotional process of buying a home and securing a mortgage. Mortgages, with the variety of forms that they are available, have to be only slightly less confusing than health insurance plans. And to expect that an ordinary individual would have the time to truly understand the broad diversity of mortgages, well I believe that is just wishful thinking. Maybe the legislators should simply work on clarifying the types of loans so that consumers can directly compare loans.
SO, I place the blame on the companies who actually underwrite the mortgages. Where else in the world would an individual be able to get a mortgage with:
- mediocre credit (they used to be called renters)
- an initial adjustable rate that is well below market (all the while the mortgage company knows that this payment, the lowest possible payment, is the most the applicant can afford.
- 100% financing (A 30 year loan fixed rate required a larger down payment and interest rate is higher)
Tell me, I’d love to know. Here is the article…
___________________________________________________________________________________
Legislation Takes Aim at Mortgage Brokers
Several pieces of legislation that address problems in the mortgage industry are expected to be introduced soon in the U.S. House and Senate, and many of the proposals will target mortgage brokers.
Bills being drafted by House Financial Services Committee Chairman Barney Frank (D-Mass.), and Senate Banking Committee Chairman Christopher Dodd (D-Conn.), could ban yield spread premiums, which brokers earn for getting borrowers to accept higher interest rates.
Other proposals call for the creation of a registry of licensed brokers and the appointment of a czar by President Bush to oversee foreclosure-prevention efforts, as well as the easing of Fannie Mae and Freddie Mac’s mortgage portfolio limits.
Brokers worry that banning yield spread premiums will boost closing costs, as some borrowers opt to lower upfront costs by accepting higher interest rates, and insist that licensing and registry requirements also should be imposed on banks and mortgage lenders.
It remains to be seen whether the bills will include provisions making the investment firms that securitize mortgages accountable for problem loans.
Source: Los Angeles Times, Jonathan Peterson (10/04/07)
© Copyright 2007 Information Inc.
