The Loan Shark Lobby (The Nation)

[marmar]

comment | posted March 22, 2007 (April 9, 2007 issue)
The Loan Shark Lobby
Garrett Ordower


The mid-March collapse of the nation's second-largest subprime mortgage lender caused a panic in the financial markets and sparked calls for regulating the high-interest predatory loans given to those with bad credit. But much of the damage has already been done, with millions of homeowners facing foreclosure at the hands of an industry allowed to run wild.

As its business has exploded--last year subprime loans grew into a $600 billion industry, more than triple the 2002 volume and accounting for one-fifth of all mortgages--the predatory mortgage industry has done its best to make sure Congress wouldn't rein it in, spreading its largesse to Democrats and Republicans: Nearly half of House Financial Services Committee members, including chairman Barney Frank, have received money from New Century Financial Corp., the subprime lender that recently collapsed. Democratic presidential candidates Hillary Clinton and Chris Dodd, head of the Senate Banking Committee, have been some of the largest beneficiaries of the mortgage banking industry, whose dollars have provided a strong incentive for Congress to sit tight and hope the subprime bubble wouldn't burst.

But it has. According to the Center for Responsible Lending, one out of five subprime mortgages inked in the past two years will end in foreclosure. The losses are staggering: It is estimated that homeowners will collectively be out $164 billion, with millions of families stripped of their most valuable asset.

This was not an unavoidable tragedy. Subprime mortgages prey on the poor, the uninformed and minorities. They offer high-credit-risk clients homeownership at interest rates well above the going rate--above what many can pay. Common sense suggests mortgages shouldn't be sold to those who can't afford them, certainly not in such massive numbers. On March 13 Representative Frank acknowledged as much, saying that "we plan to legislate to restrict those kinds of mortgages going forward." ....(more)

The complete piece is at: http://www.thenation.com/doc/20070409/ordower

[Possumpoint]

1. What Action Are You Requesting?

How do you propose to redress the situation. Under qualified and unqualified borrowers applied for and were given loans. Now they can't pay them and are losing their homes. Subprime lenders are going bankrupt. If the mortgage companies committed criminal acts, prosecute. On the other hand, I would expect that people with poorer credit histories be asked to pay higher interest rates.

The only solution I see is to restore the market to it's previous methods. That is, the borrower must come up with 5 or more percent down before even being considered for a loan. Outlaw ARM's, outlaw mandatory arbitration. This will have the effect of stabilizing the market and will somewhat depress the explosion of house prices. It has however, the unfortunate effect of restricting house ownership to those who can save or scratch up the down payment plus closing costs.

[marmar]

2. Umm, I'm not requesting anything - I just posted an article.....

:think:

[Solo_in_MD]

4. Not sure I agree with all of your comments

I almost thing a mandatory education seminar might be a better approach. If its truly informed consent, I am not sure I would interfere.

ARMs are common all over the world. Try buying property in western Europe.

[Laughing Mirror]

3. The top recipient, Clinton, took in $108,100

There's a lot of money to be made loan sharking, even if you're not the investor or the shark.

Give us your money poor people, uninformed people, minority people, and when you can't make these absurd & unconscionable "MORTGAGE" payments anymore you're out on the street. They say 2.2 million stand to lose the roofs over their heads very soon because of this scandal thanks largely to those slobs in Congress who love the money the loan shark lobbies give them. Where will those 2.2 million unsheltered go? Debtors prison? There's already 2.2 million poor people in prison. Better act quick and build more prisons to house them all.

This is just about the sickest meanest cruelest thing I can imagine, treating people who aren't able to do any better this way.

What a country, USA. The old plantation is rotten to the core.

[Joanne98]

7. That figures!

[Laughing Mirror]

8. Can you believe it?

And people actually want to campaign and get other people to vote for these worthless predator slobs. Can people be that ignorant or so uninformed? Or do they just not care so long as they got theirs.

[leftofthedial]

5. quick! Call Joe Biden!

Before any more of those poor loan sharks go out of business.

[Joanne98]

6. The vulture lobby is a better description...

We need to pass laws against bloodsucking.

[Joe Bacon]

9. Folks, you ain't seen NOTHING yet!

Just wait till these massive defaults torpedo the banking system. You're going to have a banking collapse that will make the Great Depression look like a Disco Party!