Zogby Poll April 12, 2007
I smell a full court press for a federal bailout program in the wind. Two days ago I participated in the latest Zogby poll that included several questions on sub-prime mortgages.
After taking this survey I also read a Reuters report that mentions “three consumer groups urging lawmakers to change the federal bankruptcy law to help buyers who signed up for risky subprime mortgages.” The story goes on to say that upward of 2.2 million families may lose their homes over the next few years.
“A 1978 provision of the bankruptcy code means bankruptcy courts are powerless to provide relief for major debts such as mortgages.”
Allen Fishbein, Consumer Federation of America’s Director of housing and credit policy, stated that “for many families bankruptcy may be the only viable option to save their home.”
Following is my Readers Digest version of the Zogby questionnaire.
Note: Each of their polls start with basic profile questions about where you live, party registration, who you voted for in the last presidential election, personal finances, church affiliations, etc.
You are given several options for your response i.e. yes, no, not sure, or a scale such as grading from a one to a five as to your concerns to multiple answers.
Do you agree or disagree that home ownership represents the American Dream?
Which of the following statements best represents your view of the “American Dream” of home ownership?
Statement A: The American Dream of home ownership should be an opportunity that is made available to as many people as possible, including those with low income or poor credit. Giving people the chance to purchase a home is the most important thing, even though some people may eventually default on their mortgage.
Statement B: Home ownership is an example of the American Dream, but it is not for everyone and loans should not be given to those who have not proven they can afford a mortgage and who are likely to default.
How do you expect home prices to change where you live over the next year?
Are you concerned or unconcerned that an increase in mortgage defaults could cause the U.S. economy to go into a recession?
How do think mortgage interest rates a year from now will compare to today’s rates?
Should the government place increased regulations on the mortgage lending industry when it comes to “subprime” mortgages which often require no down payment and no proof of income and are targeted to high-risk borrowers?
Some people have suggested that all mortgage applicants be required to take a class/complete a course on lending practices before they can be approved for a loan so they will be more informed about the lending process. Would you agree or disagree with this type of requirement for borrowers?
Who bears most of the blame for the current problems in the subprime mortgage market?
The lenders are to blame because they knowingly enticed less educated borrowers or those with poor credit into taking on loans they don’t understand and can’t really afford.
The borrowers are to blame because they didn’t not ask enough questions before signing on for a loan or weren’t honest about what they could afford.
Both are equally to blame
Do you agree or disagree that the federal government should provide financial assistance to people who are facing foreclosure on their mortgages?
Some people say that some of those people who now face foreclosure on their homes lied about their income or didn’t fully read the terms of their loans. Do you agree or disagree that the people who lied about their income or didn’t read the terms of their loans should be eligible for federal assistance, if it were made available?
Subprime mortgages often finance the entire cost of a home and require no down payment. Some people say these alternative loans are beneficial because they allow people who could not afford to make a substantial down payment the means to buy a home. Others say that everyone should be required to save for a down payment before they apply for a mortgage. Which of the following best reflects your opinion?
Loans that require no down payment make the possibility of owning a home available to the most people and should continue to be an option for people who cannot afford a down payment.
Borrowers should be required to have at least some down payment before applying for a mortgage
Borrowers should have to have a substantial down payment of at least 10% to 20% before applying for a mortgage
Some lenders give loans, such as automobile or unsecured loans, to people who only state their income but are not required to provide any proof or documentation. Should borrowers always be required to provide proof of income as part of the loan application process?
Should mortgage applicants always have to provide proof of income?
Should borrowers be required to show proof they can qualify to make payments at the upper tier of various alternative mortgage products, not just that they qualify for the payments based on the introductory rates?
When you applied for your current mortgage, did you fully understand the details of the loan, including the current and possible future interest rates and payments?
Did you question the lender about parts of the loan you didn’t understand?
Have you ever increased the amount of your current mortgage payment or made an additional payment or payments to pay off your mortgage earlier?
Does your current mortgage have a prepayment penalty?
How does your current mortgage payment compare with what you expected it to be when you originally applied for your mortgage?
Thinking about how housing prices have changed, would you be able to purchase your house its current valuation?
Have you taken out a second mortgage, a home equity loan or a home equity line of credit (HELOC) on your current primary residence?
Due to recent concerns in the “subprime” lending market, some lenders may increase requirements for applicants including stronger credit and more documentation proving income. Subprime loans refer to loans often made to applicants with a credit history that would make them unable to qualify for traditional mortgages. How concerned are you about how the potential of more strict lending standards in the mortgage industry could affect your ability to secure a mortgage?
Juice readers. What’s your opinion on this topic.
Is the lender responsible for improperly qualifying the applicant?
Were the loan officers to eager to “close the sale” without regard for the future earnings and payment ability of the homeowner?
Did the borrower bite off more than he or she could handle?
Should the government now become the crutch for these troubled loans?
Do you believe that these foreclosures will hurt the U.S.economy?
The Savings & Loan debachle…
the Aircraft Industry….now the
Sub-Slime Lending Agents..looking
to rip off the poor and the disadvantaged? Home Sweet Home…
really meant paying Nothing Down with Interest Only payments for two years and hoping upon hope the the price of the property will double and you can sell it quick and then take your winnings and
do it again. Face it – it was a sweet deal. A lot of people made money. Ask John Moorlach…Ask Webster Guillory..they will tell you or could tell you the numbers of “lucky people” who made the gamble on the way up of the Real Estate market game.
Well, the Roosters have come home to Roost and guess what..2 million
or 10 million foreclosures may be
the result. Considering this market “was gamed the entire time”
and that the Big Banks and their
Associates are going to get lots
of “Real Property” back into their
portfolios….goes without saying!
Of course, we shouldn’t bail out
people with 20 houses…..or don’t
have just one house to worry about.
The problem is: Politicians are
being paid off and sadly those that
were “just stupid”..was a lot less
than those that were “just greedy”!
The answer: If you have a net worth of more than $100,000 which
would include any real property other than your basic home..NO Federal Assistance! Less than?..
a two year moratorium….so they
can keep their low payments until
they have time to either sell or
borrow more.
I hate to sound callous, but I believe that the buyers are responsible. They ultimately signed statements claiming that the income they stated was accuratae. You have to pay for your haouse, period. Someone making $50k/yr CANNOT afford anything over $150K yet they were buying much more than that. Would they give the money back if it appreciated? No. This is a wake up call and has happened before. NO BAIL OUT.
Why is this a question? Yes, it is sad when folks buy something they cannot afford. Yes, it is unfortunate when loan companies make bad loans. What about this situation merits a federal bailout?
Who is trying to make this into an issue? Is the money behind the effort to make this an issue really “consumer groups”, or is it the loan companies? My bet is on the folk who bought the risky loans, and now are worried about their investment.
Rollercoaster ride thru real estate history. Enjoy!
http://video.google.com/videoplay?docid=-2757699799528285056
Mortgage fraud may be an undercurrent in the RE market:
http://news.yahoo.com/s/nm/20070412/lf_nm/usa_subprime_fraud_dc
Mortgage backed securities.
That is the backbone of the pension funds, private and public.
When are the banks and brokers companies going to be required to write down the value of the assets to market and take the lost? (OC bankruptcy repete) .
Fully fund pensions will then have short falls and the under funded pensions, may just be closed.
Should the government bailout the money changers? I wish they wouldn’t, but I think they will.
For the regular people who can lose their homes, etc. The government should bring back usury, that one little change would do the most good for the base foundation of US society.
E-mail response from a broker/friend:
Larry,
The bottom line is this problem began with the regulatory agencies that allowed lending institutions to lower their qualifying standards for negative amortization loans.
With the major increase of housing prices over the past ten years, fix loans became more difficult to close; so to keep from starving the mortgage industry lowered its qualifying standards. But the housing market is known to be cyclical, and everyone knew foreclosures would be inevitable. Having entered the mortgage side of the Real Estate industry in 2004, I was totally amazed at some of the new qualifying standards: i.e., SISA (stated income, stated assets), NINA (no income stated or verified, no assets stated or verified). You can actually get a loan today with literally no application verification except for a credit report.
Does this hurt the economy? I think that’s obvious. Raising the bar of qualifications for a loan would initially hurt the mortgage industry, but it would help to slow down or reverse housing prices and equalize the market, and eventually mortgages would pick up again. Someone has to sacrifice to change the tide. Who will it be, our governing officials or the public?
Larry and others,
I believe your broker friend is mostly correct, but I would veer towards another aspect of the mortgage industry where we need to take responsibility as mortgage brokers. Your friend failed to mention, many of us in this industry, sell negative amortization loans under the pretext it is a 5 year ARM with a very low payment. At no point was the borrower informed if they made that minumum payment, there balance is actually increasing.
Lack of accountability, in my mind, is the reason for this disaster and possibly need for bail out.
I, as a mortgage broker, we would conduct ourselves in a professional and honest manner, however when the boom hit, mortgage companies were salivating for loan officers to keep up with the boom, so ethics were thrown out the window.
Whether Govt. decides to intervene or not, I believe the victim is the borrowers, regardless of whether or not they should have read the billions of pages which make up loan docs. We have a duty as mortgage brokers to sell a product which will benefit the borrower.