"Easing
of Mortgage Curb Weighed," July 23, 2013, Wall Street Journal
"Concerned that tougher mortgage rules could hamper the
housing recovery, regulators are preparing to relax a key plank of the rules
proposed after the financial crisis. The watchdogs, which include the Federal
Reserve and Federal Deposit Insurance Corp., want to loosen a proposed
requirement that banks retain a portion of the mortgage securities they sell to
investors, according to people familiar with the situation. The plan, which
hasn't been finalized and could still change, would be a major U-turn for the
regulators charged with fleshing out the Dodd-Frank
financial-overhaul law passed three years ago.... 'My sense is that Washington
has lost its political will for serious reform of the securitization market,'
said Sheila Bair,
who served as FDIC chairman until 2011.
"In addition to the Fed and the FDIC, other agencies involved
in drafting the rules include the Office of the Comptroller of the Currency,
the Securities and Exchange Commission, the Department of Housing and Urban
Development, and the Federal Housing Finance Agency.
"Americans Gambling on Rates With Most ARMs Since 2008,"
July 24, 2013, Bloomberg,
"Jung Lim plans to offset the cost of rising mortgage
rates by using an adjustable-rate loan to buy a home for his
expanding family....Lim, 38, whose wife is expecting a second child in
December, is leaving a two-bedroom condo in Los Angeles's Hancock Park to buy a
four-bedroom house in the city's Sherman Oaks
neighborhood for $1.12 million. His lender offered him a rate for an adjustable
mortgage that is about a percentage point cheaper than a fixed loan.
"In the second year of the U.S. housing recovery, the loans that
helped trigger the housing bust are making a comeback. Applications in late
June rose to the highest level since 2008 after the Federal Reserve
sent fixed rates surging by signaling it may curtail bond buying credited with
pushing borrowing costs to the cheapest on record. The average 30-year
fixed-rate mortgage jumped 1.2 percentage points in mid-July from May to the
highest level in two years, adding about $200 a month to payments on a $300,000
mortgage.
"'When you give unqualified buyers a rate they won't be
able to afford based solely on the presumption that home prices
will always go up, it's not going to end well,' said Keith Gumbinger,
vice president of HSH.com, a Riverdale, New Jersey-based mortgage
website."
"A
Hands-Off Policy on Mortgage Loans," July 14, 2005 by Edmund L. Andrews, New
York Times
"For two months now, federal banking regulators have signaled
their discomfort about the explosive rise in risky mortgage loans.... First
they issued new 'guidance' to banks about home-equity loans, warning against
letting homeowners borrow too much against their houses. Then they expressed
worry about the surge in no-money-down mortgages, interest only [mortgages] and
'liar's loans' that require no proof of a borrower's income. The impact so far?
Almost nil."
"Loose
Reins on Galloping Loans," July 15, 2005 by Edmund L. Andrews, New York
Times
It has become easier "to get these loans than...two months
ago." Steve Fritts, associate director for risk management policy at the
Federal Deposit Insurance Corporation [FDIC] explained: "We don't want to
stifle financial innovation. We have the most vibrant housing and
housing-finance market in the world, and there is a lot of innovation."
"Housing Boom Echoes
in All Corners of the City," August 4, 2005, by Jennifer Steinhauer,
New York Times
"[N]ew homes are going up faster now than they have in more
than 30 years....Large tracts of Queens, once home to factories and power
plants, are being readied for apartment complexes."
Christopher
Wood, October 2005, CLSA, Greed & fear
"[T]he Office of Inspector General of the Department of
Housing & Urban Development reported to Congress in October 2004 that it
had 450 open criminal single-family investigations related to fraud claims
covered by federal mortgage insurance, while arrests have increased by 800%
over the past four years."
Wood: "Wall Street is now encumbered with layers of
compliance clutter.... As the obsessive focus has grown on 'insider traders'
and the like, it remains ludicrous that there is so little regulatory focus on
sales practices in residential property."
L.A.
Times Housing Blog, under a story about California house prices being down 35%
year-over-year, June 8, 2008
"I'm loving all this. I sold a bunch of idiots big, big,
ARM's. I knew exactly how to appeal to their big ego's. Got big commissions and
have no guilt. Many losers I got loans for are now losing their houses. Ask me
baby, do I care! Hey, I just wanna fill my bag, screw you." Posted by: Cheri
Ratino
"In
Reversal, Fed Approves Plan to Curb Risky Lending," December 19, 2007, by
Edmund L. Andrews, New York Times
The Federal Reserve, acknowledging that home mortgage lenders
aggressively sold deceptive loans to borrowers who had little chance of
repaying them, proposed a broad set of restrictions Tuesday on exotic mortgages
and high-cost loans for people with weak credit. The new rules would force mortgage
companies to show that customers can realistically afford their mortgages. They
would also require lenders to disclose the hidden sales fees often rolled into
interest payments, and they would prohibit certain types of advertising.
Borrowers would be able to sue their lenders if they violated the new rules,
though home buyers would be allowed to seek only a limited amount in
compensation. "Unfair and deceptive acts and practices hurt not just
borrowers and their families," said Ben S. Bernanke, chairman of the Federal
Reserve, "but entire communities, and, indeed, the economy as a
whole."
"A
Crisis Long Foretold," December 17, 2007, Editorial, New York Times,
"An article in The Times on Tuesday by Edmund L.
Andrews leaves no doubt that the twin crises of the subprime lending mess -
mass foreclosures at one end of the economic scale and a credit squeeze
afflicting the financial system - are rooted in the willful failure of federal
regulators to heed numerous warnings. The Federal Reserve is especially
blameworthy. Starting as early as 2000, former Fed Chairman Alan Greenspan
brushed aside warnings from another Fed governor, Edward M. Gramlich, about
subprime lenders who were luring borrowers into risky loans. Mr. Greenspan's
insistence, to this day, that the Fed did not have the power to rein in such
lending is nonsense. In 1994, Congress passed a law requiring the Fed to
regulate all mortgage lending. The language is crystal clear: the Fed
"by regulation or order, shall prohibit acts or practices in connection
with A) mortgage loans that the board finds to be unfair, deceptive, or
designed to evade the provisions of this section; and B) refinancing of
mortgage loans that the board finds to be associated with abusive lending
practices, or that are otherwise not in the interest of the borrower."
Yet, the Fed did nothing as junk lending proliferated - including loans that
were unsustainable unless house prices rose in perpetuity, riddled with hidden
fees and made to borrowers who could not repay. Mr. Greenspan has said that
the law was too vague about the meaning of "unfair" and
"deceptive" to warrant action.
"The Fed has also disappointed since the current chairman,
Ben Bernanke, took over in early 2006. It was not until the end of June 2007 - after the damage was done - that the Fed
and other federal regulators issued official subprime guidance. On Tuesday, the
Fed issued another set of proposals.... [T]he proposal is weaker than earlier
Fed guidance.
"The Office of the Comptroller of the Currency, for
example, blocked states from investigating local affiliates of national banks
for abusive lending. If the regulators had done their jobs, there might have
been no lending boom and no extraordinary riches for the lenders and investors
who profited from unfettered subprime lending. Neither would there be mass
foreclosures, a credit crunch and a looming recession. This crisis didn't
appear unexpectedly. And it won't go quickly away. Congress and the next
administration will have a lot of work ahead to clean up the subprime mess -
once and for all."
Ben S.
Bernanke, May 17, 2007 "The Subprime Mortgage Meltdown," at the
Federal Reserve Bank of Chicago's 43rd Annual Conference on Bank Structure and
Competition, Chicago, Illinois:
"[W]e believe the effect of the troubles in the subprime
sector on the broader housing market will likely be limited, and we do not
expect significant spillovers from the subprime market to the rest of the
economy or to the financial system."
Ben S.
Bernanke, April 4, 2013, "Financial and Economic Education," at the
13th Annual Redefining Investment Strategy Education (Rise) Forum,
Dayton, Ohio (via video)
"Hello. I'm Ben Bernanke, Chairman of the Board of Governors
of the Federal Reserve System.... Among the lessons of the recent financial
crisis is the need for virtually everyone - both young and old - to acquire a
basic knowledge of finance and economics."
Ben
S. Bernanke, May 10, 2013, "Monitoring the Financial System," at the
49th Annual conference on Bank Structure and Competition sponsored
by the federal Reserve Bank of Chicago, Chicago, Illinois
"Not since the Great Depression have we seen such extensive
changes in financial regulation as those codified in the Dodd-Frank Wall Street
Reform..."
"The step-up in our monitoring is motivated importantly by a
shift in financial regulation and supervision toward a more macroprudential, or
systemic, approach..."
"Ongoing monitoring of the financial system is vital to the
macroprudential approach to regulation. Systemic risks can only be defused if
they are first identified. That said, it is reasonable to ask whether systemic
risks can in fact be reliably identified in advance; after all, neither the
Federal Reserve nor economists in general predicted the past crisis."
Then get rid of Bernanke and the rest of the economists! Every
taxi driver, florist, and zen counselor saw years in advance the biggest, best
advertised, most anticipated, bubble to burst in the history of the world.
Ben S.
Bernanke, Testimony Before the Financial Crisis Inquiry Commission, November
17, 2009 ***CONFIDENTIAL*** (Don't tell a
soul.)
CHAIRMAN BERNANKE: "[S]hould monetary policy be used to try
to knock down bubbles or not? Just for the record, my view is that it can be a
backup, but that the first line of defense ought to be supervision/regulation."
CHAIRMAN BERNANKE: "[U]nder the heading "too big to
fail," you're going to look at that, I'm sure, in great deal. You know,
why did the firms become so big? Why did they become so interconnected?"
CHAIRMAN BERNANKE: "We are, to some
extent, culpable for not doing the subprime mortgage regulation."
CHAIRMAN BERNANKE: "So financial
innovation we all thought was a great thing -- or maybe we didn't think it, but
most people thought it was a great thing. But it obviously had a downside,
which like any other invention, it can blow up if it hasn't been safety-tested
sufficiently. And that clearly turned out to be an issue in the consumer level,
for example. You know, there was a lot of -- there are a lot of people who
argued that subprime mortgages were a big innovation, that they allowed
people who couldn't otherwise afford homes, to get homes; and, you know,
it was a wonderful thing. So clearly, you know, people didn't understand the
vulnerability of, say, 3/27 ARMs to a
downturn in house prices, for example."
Ben S. Bernanke, July 17, 2013, Semiannual Monetary Policy Report
to the Congress, Before the Committee on Financial Services, U.S. House of
Representatives, Washington D.C.
"Housing has contributed significantly to
recent gains in economic activity. Home sales, house prices, and residential
construction have moved up over the past year, supported by low mortgage rates
and improved confidence in both the housing market and the economy. Rising
housing construction and home sales are adding to job growth, and substantial
increases in home prices are bolstering household finances and consumer
spending while reducing the number of homeowners with underwater mortgages.
Housing activity and prices seem likely to continue to recover, notwithstanding
the recent increases in mortgage rates, but it will be important to monitor
developments in this sector carefully."
"Quicken Pitches ARMs as Borrowers Balk at Higher
Rates," August 9, 2013, Bloomberg
"Quicken Loans Inc., the online home lender that jumped last
year to No. 3 in U.S. originations, is pitching more adjustable mortgages as
rising rates put an end to the
refinancing boom. About 20 percent of Quicken applications are for adjustable
rates, up from 5 percent earlier this year.... Nationally, rates on 30-year
fixed mortgages have climbed to 4.4 percent, from a near-record low 3.35
percent in early May.... That gap is where Quicken sees an opportunity.....
[T]his week [Quicken] was offering 5-year ARMs at 2.88 percent and 30-year
fixed loans for 4.25 percent, according to its website. The pitch for the ARMs,
which it calls "Amazing
5 Mortgages," was anchored in the center of the lender's home
page."
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