Mortgage law proposals
Interesting news:
http://www.startribune.com/535/story/988284.html Mortgage law proposals get cold shoulder from lenders
The rapid rise in foreclosure rates in Minnesota has lawmakers looking for ways to crack down on abusive lending practices.
But some mortgage brokers argue that the proposed new guidelines, expected to be introduced in the Legislature in several weeks, are overly restrictive. The brokers say measures to tighten rules on subprime loans would cripple efforts by ethical lenders to serve new immigrants, low-income residents or other nontraditional borrowers.
Minnesota has the nation's highest home ownership rate, 78 percent, but its foreclosure rate jumped 46 percent last year, according to RealtyTrac. More than 2,000 homes in Minneapolis and St. Paul went into foreclosure last year, according to sheriff's records. Cities and counties across the state are seeing record increases. In response, Attorney General Lori Swanson has called for legislation that, among other things, would prohibit loans that result in negative amortization, a situation in which the mortgage payment is smaller than the interest due, causing the loan balance to increase. Sometimes the balance can increase beyond the value of the house. Swanson's proposal also would force lenders to verify consumers' ability to pay and would slap those who provide "grossly unsuitable" loans with a penalty of up to $75,000 or two years in prison.
I find myself on the side judging that there's too many mortgages out there given to people without the fianancial means to handle them, along with excessive interest rates, and terms that make them harder to repay.
Mostly I hate feeling exploited, and I imagine people trying to get ahead are desperate enough to accept unreasonable terms on a blind faith that they can get what they want. In the end many fail and banks get rich along the way. The main risks banks face for lost is if the whole system goes down and they can't resell the property that is foreclosed upon.
So I tend to value 'regulation" first to protect people, second to protect the stability of the economy since a a wide scale increase of foreclosures can help knock a regional economy further into trouble.
In principle I support the requirement of 20% down for a mortgage. Of course it protects the banks first, but it also protects consumers to PROVE their means before they sign for debt. A 0% down mortgage is unsound. SURE, you can let "mortgage insurance" cover it, but to me that's just borrowers throwing money down the drain and making it harder for them to successfully pay off their loan.
It is curious banks would have "negative amortization" loans which put their loans at risk, although again perhaps MI is used to cover the risk.
Of course in my little ideal world, everyone is sensible and disciplined, they save their money and live frugally and wait to afford what they need. On big things like mortgages there can be value in long period borrowing, but the system is corrupt in my mind. For one I think being able to deduct mortgage interest from their income is unfair to people who rent. People who can afford to own homes are not the ones who need subsidies.
A coworker from Canada said they don't have this deduction. It's good to know it is not everywhere, since people easily hold up entitlements as rights once they are offered and politically impossible to reverse handouts like that. Of course the real hand-out is to the banks who get more interest on loans they'd not be able to make without the deduction.
I get so annoyed by policitians - "I'm not going to raise taxes. I'm going to lower taxes for the middle class." If they told such tall tales in exchange for cutting entitlement expenses I might believe them.
I mostly appreciate AG Swanson's efforts, however much I'm unsure what's best. Yes to regulation. Yes also to debate on reducing the entitlements that subsides risky behavior and by comparison punish prudent fiscal conservatism.
http://www.startribune.com/535/story/988284.html Mortgage law proposals get cold shoulder from lenders
The rapid rise in foreclosure rates in Minnesota has lawmakers looking for ways to crack down on abusive lending practices.
But some mortgage brokers argue that the proposed new guidelines, expected to be introduced in the Legislature in several weeks, are overly restrictive. The brokers say measures to tighten rules on subprime loans would cripple efforts by ethical lenders to serve new immigrants, low-income residents or other nontraditional borrowers.
Minnesota has the nation's highest home ownership rate, 78 percent, but its foreclosure rate jumped 46 percent last year, according to RealtyTrac. More than 2,000 homes in Minneapolis and St. Paul went into foreclosure last year, according to sheriff's records. Cities and counties across the state are seeing record increases. In response, Attorney General Lori Swanson has called for legislation that, among other things, would prohibit loans that result in negative amortization, a situation in which the mortgage payment is smaller than the interest due, causing the loan balance to increase. Sometimes the balance can increase beyond the value of the house. Swanson's proposal also would force lenders to verify consumers' ability to pay and would slap those who provide "grossly unsuitable" loans with a penalty of up to $75,000 or two years in prison.
I find myself on the side judging that there's too many mortgages out there given to people without the fianancial means to handle them, along with excessive interest rates, and terms that make them harder to repay.
Mostly I hate feeling exploited, and I imagine people trying to get ahead are desperate enough to accept unreasonable terms on a blind faith that they can get what they want. In the end many fail and banks get rich along the way. The main risks banks face for lost is if the whole system goes down and they can't resell the property that is foreclosed upon.
So I tend to value 'regulation" first to protect people, second to protect the stability of the economy since a a wide scale increase of foreclosures can help knock a regional economy further into trouble.
In principle I support the requirement of 20% down for a mortgage. Of course it protects the banks first, but it also protects consumers to PROVE their means before they sign for debt. A 0% down mortgage is unsound. SURE, you can let "mortgage insurance" cover it, but to me that's just borrowers throwing money down the drain and making it harder for them to successfully pay off their loan.
It is curious banks would have "negative amortization" loans which put their loans at risk, although again perhaps MI is used to cover the risk.
Of course in my little ideal world, everyone is sensible and disciplined, they save their money and live frugally and wait to afford what they need. On big things like mortgages there can be value in long period borrowing, but the system is corrupt in my mind. For one I think being able to deduct mortgage interest from their income is unfair to people who rent. People who can afford to own homes are not the ones who need subsidies.
A coworker from Canada said they don't have this deduction. It's good to know it is not everywhere, since people easily hold up entitlements as rights once they are offered and politically impossible to reverse handouts like that. Of course the real hand-out is to the banks who get more interest on loans they'd not be able to make without the deduction.
I get so annoyed by policitians - "I'm not going to raise taxes. I'm going to lower taxes for the middle class." If they told such tall tales in exchange for cutting entitlement expenses I might believe them.
I mostly appreciate AG Swanson's efforts, however much I'm unsure what's best. Yes to regulation. Yes also to debate on reducing the entitlements that subsides risky behavior and by comparison punish prudent fiscal conservatism.
posted by Ares Olympus at 8:59 PM
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