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Old 07-20-2008, 12:44 PM
 
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,248 posts, read 21,890,782 times
Reputation: 3587

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many people are not going to like this because it is going to reduce demand for housing but it MUST be done anyway. The government needs to step in with new regulations stating what kind of loans that the FHA, Fannie, Freddie and other backed institutions will buy or allow to be be made. This should include the complete outlawing of any sub prime or smoke and mirror adjustable rate loans and the requirement of at least a 5% cash down payment and a credit rating that is decent. All income should be verified using 12 month averaging of bank statements.
All loans should also come with no pre payment penalties so that owners can refiance them at anytime. Many of the people that got into smoke and mirror sub prime loans had such still pre payment penalties that it was impossible for them to refi even if they had made every payment on time! They had no choice but to walk away because they could not refi or sell the house.
In other words it should be made more difficult to buy a home. There was a time in this country that people did save money- and even paid 10 or 20% down for a house! I don't think 5% cash from a verified source is too much to ask. If all these investment banks are not going to be taxpayer insured by the Fed, we have every right to set standards.
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Old 07-20-2008, 12:51 PM
 
Location: San Diego California
6,797 posts, read 6,481,717 times
Reputation: 5180
While those are good standards for lending, it was the Fed's lowering of interest rates and flooding the markets with liquidity that caused the problem. No matter what kind of regulations you write, if you flood the market with cheap money and low rates the lenders will devise some way to lend it. Last time they got around the regulations by simply lying.
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Old 07-20-2008, 12:51 PM
 
Location: Pennsylvania
5,674 posts, read 10,252,858 times
Reputation: 9528
It was up to the lenders and buyers to do their due diligence towards each other. Lenders can (and probably should) self-impose all the limits you mention, but I think government regulation to that extent could affect markets in unintended and negative ways.
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Old 07-20-2008, 12:53 PM
 
Location: Texas
4,933 posts, read 6,971,315 times
Reputation: 5506
markets regulate themselves if you let them. instead we don't let anyone fail in this country anymore and home ownership is an entitlement. isn't socialism great?
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Old 07-20-2008, 03:41 PM
 
2,197 posts, read 6,814,842 times
Reputation: 1687
Am I the only person who wants less government meddling in my life? Our elected officials have done such a stellar job managing the economy and spending my tax dollars that I would rather regulate myself. And if you can't regulate yourself, the market will do it for you... if the government would just STOP meddling and making things worse.

People who make poor decisions should be allowed to learn from the consequences. And if they can't, well, the government shouldn't step in there, either.

I do agree that not everybody is qualified or suited to buy a home. But it's up to lenders to set and enforce standards that prevent borrowers from defaulting. That's a job for private industry, with a little help from Mr. Market.
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Old 07-20-2008, 03:50 PM
 
Location: Houston, Texas
10,425 posts, read 45,476,779 times
Reputation: 10419
Quote:
Originally Posted by goodbyehollywood View Post
Am I the only person who wants less government meddling in my life? Our elected officials have done such a stellar job managing the economy and spending my tax dollars that I would rather regulate myself. And if you can't regulate yourself, the market will do it for you... if the government would just STOP meddling and making things worse.

People who make poor decisions should be allowed to learn from the consequences. And if they can't, well, the government shouldn't step in there, either.
No your not the only one. I want NO government meddling in our lives. But you and I are among a microscopic minority. Face it, most people are Sheep. They follow the brown spot in front of them. There are leaders and there are followers in this world. The followers will always get in line single file behind the next Sheep who gives instructions. They would never be abe to make a decission without some one to tell them what to do.
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Old 07-20-2008, 03:57 PM
 
Location: Heartland Florida
9,324 posts, read 24,260,387 times
Reputation: 4927
This mess was caused by regulation, what we need to do is get rid of government sponsored messes like fannie mae (and stop using such stupid names FNMA) and let the market work. The FED is at fault for conjuring up the money, and the Government is at fault for making home ownership a nightmare through too many regulations.
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Old 07-20-2008, 04:56 PM
f_m
 
2,289 posts, read 7,648,227 times
Reputation: 874
Quote:
Originally Posted by KevK View Post
In other words it should be made more difficult to buy a home. There was a time in this country that people did save money- and even paid 10 or 20% down for a house! I don't think 5% cash from a verified source is too much to ask. If all these investment banks are not going to be taxpayer insured by the Fed, we have every right to set standards.
Well, it depends. Should the government prevent people from doing business? I don't agree that people should have been misled, but maybe that was the problem. If people are educated then they won't agree to crazy loans.

I mean, loan brokers, etc... make money when the transaction goes through, not if it stays out of default. So they will try to figure out what they can to get around regulations anyway. Preventing people from doing something they can't really take on is the only way to deal with it. Kind of like drugs, you tell people to stay away from them if they don't want the bad consequences.

I could have made a good buy a while ago, but my senses told me not to get involved with the brokers and loan people because at the time I did not feel comfortable about it (although I lost the chance at buying and selling for a good profit). But at least I had a sense that kept me out of something uncomfortable.
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Old 07-20-2008, 07:10 PM
 
Location: Cary, NC
1,036 posts, read 3,725,976 times
Reputation: 505
While we are at it, why don't we impose a limit on the rate lenders can charge.... is 5% fair enough or should we make it 4%? How about regulations for loan amounts too.... Congress decrees that no loan shall be for >$250,000.

Lets keep going... how about government makes all the loans to homeowners and cut out capitalism all together? Government housing for all! It worked so well with government sponsored apartment projects.


All of the items that the OP mentioned have already taken place in the private sector. Sub-prime is pretty much over, income documentation is required, 3-5% down payment is a minimum and PPP and Option ARMs are virtually gone. Of course no one told Congress this (they wouldn't beat a dead horse to win votes would they?) so they continue to pass legislation to "ban" programs that do not even exist.

The government should protect consumers from lenders and brokers that lie, cheat and steal from consumers. Many consumers did not receive proper disclosures or were unknowingly drawn into loan fraud (while some borrowes actively participated) and that needs to be dealt with by government. However, the role of the government is not to tell a lender what programs they can offer or a borrower what they buy as long as there is full disclosure and the two parties agree to the terms. It is for the lender and the buyer to judge the risks/rewards and act accordingly.
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Old 07-20-2008, 07:18 PM
 
Location: Charleston, SC
5,615 posts, read 13,146,603 times
Reputation: 2539
Couldn't happen. It'd be a matter of minutes before someone came along and said that it would be racist and unfair to those with low income.
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