2012 conventions 2012 election 2013 session arts arts and culture author ballot measures basketball bomb books boy scouts budget bullying business charlie hales children clackamas climate change coal college courts crime culture culture club democrats drugs economy education environment family film fluoride food gay rights guns handguns health health care health insurance high school history housing immigration internet kitzhaber law legislature lgbt literary arts living marijuana marriage media medicine mental health military minor parties mohamed mohamud movies music native americans news newspaper obama olympics oregon our town parenting pers photography police politcs politics port portland portland business journal president prevention public safety religion republicans rnc romney rural salem sam adams sandy hook schools science shooting sports suicide supreme court taxes technology terrorism theater third parties transportation union university of oregon washington wildfire women

I'd like to respectfully respond to a few of your comments.
2) The variable rate mortgage is clarly abusive and preditory practice.
What would you say in the case where interest rates are falling? Shall you be mandated to lock in a high rate for 30 years?
3 and 4) How do you respond to banks who lend money for 30 year terms and pay depositors based on those rates, when rates are falling and all the borrowers want to refinance? Shall the bank be locked in to that rate without any assurance by the borrower?
When banks sell loans to Wall St., in order to raise money to make more loans, shall the investors have no protection against prepayment?
6) What cost is assumed by your auditors? Who pays that cost? What is your recourse if an auditor tells you you can't afford a loan, but you want it anyway?

posted 5 years, 2 months ago
view in context

Without responding directly to the question of who should decide if one can afford a particular mortgage, I will pose a similar question. Who should decide if one can afford that which is accumulated on a credit card? a car? a college loan?
While none of these are as large a debt to the consumer, similar decision components apply, i.e., can the payments be made? what rate is charged? what is the maximum rate that can be charged? what is the maximum payment?
The assumption that allowed "no" or "low" (less than 20%) down payment loans to be made at initial "teaser" rates which adjust upward after a certain period, is that the housing prices will always go up. Is that a reasonable assumption?
Certainly, in retrospect it is not. But it is never a reasonable assumption that the price of anything will always go up. High tech investors in the late 1990's can tell you that.
Do you want someone to tell you whether you can afford payments? Who shall that be? What recourse shall you have if you don't agree? The question is 'who makes the decisions that effect your financial life?'
Shall it be regulators?
Or shall it be you?

posted 5 years, 2 months ago
view in context

While it appears that Chuck has his heart in the right place, many of his suggestions are fundamentally flawed.
1. Require banks to keep the loans they make on their own books, not sell them off as part of a financial instrument for investors.
The money raised from sales of these loans are invested in new loans, enabling liquidity in the market. With funding sources drying up due to necessity to maintain capitalization standards, this would certainly exacerbate an already difficult problem.
2. Include payment insurance as part of the loan fees. (He pointed out that private mortgage insurance protects lenders, but not borrowers.)
The requirement for payment insurance would mandate a purchase that may not be legitimately needed by many borrowers, diverting discretionary income to an unnecessary purchase. Additionally, as with AMBAC and other insurers, in the case of widespread default, what assurance would be made that the insurer itself would remain solvent?
3. If a home is foreclosed, Chuck suggests any equity should go to the borrower, not to the bank.
What motivation would a lender have to take the risk of extending credit? If Chuck were to offer private financing to a purchaser of his home, would he be willing to give up his right to equity? This would cause an increase in rate by lenders that would price many out of the market.
Perhaps a more viable solution would be to adhere to more traditional underwriting standards - those which do not include the assumption of ever increasing property values. Such standards may be as simple as 20% down required and housing costs no more that 30% of pre-tax income.

posted 5 years, 2 months ago
view in context