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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (58931)	4/20/2006 6:30:30 PM
From: shades	Respond to of 110194

My immediate moderate libertarian response would be to say that liberty to contract is a fundamental right, and that people should be able to enter into whatever loan agreement they want. Well from that useless link anarchist doesn't like. en.wikipedia.org The primary ethical argument in defense of usury has been the argument of liberty against the "restraint of trade" (since the borrower has voluntarily entered into the usury contract). Cramer is on TV right now saying to buy lottery card companies cause they are gonna suck the dummies dry with thier math tax - HAHA! But the bankers and other financial gatekeepers have to be willing to teach good financial practice. Right it is mutually beneficial over the long term for everyone to be smarter and make better use of the tools. You have these liars and crooks milking dumb suckers today however for a bonus or stock option. My friend knew who could pay the loan back and who couldn't - the oversight was left to the individual lender - GREED turned many to the darkside. I think the person making the loan has a moral responsibility to advise the customer of what is in his/her interests. The loan officer would have experience working with many people with respect to debt management, and could give candid advice. Right. Again though, from what I see - ben jones keeps writing about loan officers doing things they know are going to be ultimately very destructive for many people just to make a little short term gain - where is the oversight? We are not all born financial geniuses like anarchist - we need help getting through tuff times. I know this isn't happening very much in this age of securitized loans, where the lender sells the loans and they bundle them with many other loans by credit quality. HAHA! The credit scoring models are scarily accurate (I used to develop them), But if you go around the models and give people loans anyways - what good are they? managed banking institutions will be able to weather the economic storms to come. They won't make it if they give large loans to broke people with low credit scores eh? But as long as that loan officer makes his next paycheck - screw the longterm survival of the bank eh? US Regulators Review Proposed Guidelines On Exotic Mtges . WASHINGTON (Dow Jones)--U.S. regulators will review public comments to decide if changes are needed to recently proposed guidelines for exotic home mortgage products, the comptroller of the currency said Thursday. In December, the Office of the Comptroller of the Currency and other federal regulators proposed guidelines addressing unique risks from loan products such as "interest only" and "payment option" mortgages. Compared with traditional loans, these mortgages typically reduce monthly loan payments in the first five years of repayment but sharply increase payments afterwards. "Our proposed guidance makes clear that these products are perfectly appropriate if underwritten properly with meaningful disclosures - indeed, the essential purpose of the proposed guidance is to help lenders achieve this goal," Comptroller John Dugan said in speech prepared for delivery to a community development conference in Los Angeles. Many industry commenters objected to the specificity of the proposed guidance, claiming regulators were encroaching on underwriting decisions traditionally left to lenders, Dugan said. Another concern was that the proposal assumes a worst-case scenario for all borrowers, rather than allowing appropriate assessment of individual borrowers, he said. But the comptroller defended a cautious regulatory approach to exotic mortgages. "It is in neither the bank's nor the borrower's best interest to have a mortgage amount, or a payment structure, that a borrower is unlikely to be able to afford in the long run," he said. The guidance tries to ensure that lenders address these issues at the inception of the loan, taking account of "any reasonable foreseeable payment requirements possible under the terms of the loan," Dugan said. Federal regulators looked at actual marketing material for payment-option adjustable-rate mortgages, and they found in many cases that sales pitches focused mainly on low initial monthly payments, with relatively little discussion of much higher payments due later on, he said. The comptroller noted monthly payments for a typical payment-option adjustable-rate mortgage can double after the initial five-year repayment period if interest rates rise two percentage points during that period. Dugan used California as an example of a market where soaring home prices can compel low- and medium-income buyers to use exotic mortgages. From 2000 to 2005, the median price for an existing home in California increased 117% to $524,000, while over the same period household income rose only about 10%, he noted. -By Campion Walsh; Dow Jones Newswires; 202 862 9249; campion.walsh@dowjones.com (END) Dow Jones Newswires April 20, 2006 17:10 ET (21:10 GMT) Copyright (c) 2006 Dow Jones & Company, Inc.- - 05 10 PM EDT 04-20-06