red states rule
01-23-2008, 07:09 AM
I have to admit, Mr Williams is correct. There is no reason for the government to get involved with the mortage industry. The government will only make the situation worse
Subprime bailout
Walter E. Williams
A subprime lender is one who makes loans to borrowers who do not qualify for loans from mainstream lenders. It's a market that has evolved to permit borrowers with poor credit history and an unstable financial situation the opportunity to get home mortgages.
The catch is they pay a higher and typically an adjustable rate mortgage (ARM). Encouraged by the housing bubble, easy credit, along with the expectation housing prices would continue to appreciate, many subprime borrowers took out mortgages they could not afford in the long run, particularly if interest rates rose and housing prices depreciated.
As with most economic problems, we find the hand of government. The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that mandates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers.
According to an article in the Atlanta Journal-Constitution (Nov. 4, 2007) titled "Black Atlantans often snared by subprime loans," by Carrie Teegardin, a national study of credit scores, not just mortgage loan applicants, found 52 percent of blacks have credit scores that would classify them as subprime borrowers compared with 16 percent of whites.
Many lenders did make loans to people who had no realistic ability to repay them. But that doesn't qualify as fraud, though there might have been a bit of exuberance in the repackaging of the mortgages into securities and selling them to investors. Some argue that many borrowers defrauded the banks by misrepresenting their income, the so-called "no doc" loans or "liar's loans."
President Bush's plan to deal with the subprime crisis is to freeze interest rates on adjustable rate mortgages. Freezing interest rates would stop people's mortgage payments from increasing. That is a gross violation of basic contract rights and would appear to be a Fifth Amendment violation. If a contractual agreement is willingly entered into and agreed upon by a borrower and lender, it is binding and if broken by one party or the other, harsh penalties should ensue.
for the complete article
http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20080123/COMMENTARY/212999887/1012
Subprime bailout
Walter E. Williams
A subprime lender is one who makes loans to borrowers who do not qualify for loans from mainstream lenders. It's a market that has evolved to permit borrowers with poor credit history and an unstable financial situation the opportunity to get home mortgages.
The catch is they pay a higher and typically an adjustable rate mortgage (ARM). Encouraged by the housing bubble, easy credit, along with the expectation housing prices would continue to appreciate, many subprime borrowers took out mortgages they could not afford in the long run, particularly if interest rates rose and housing prices depreciated.
As with most economic problems, we find the hand of government. The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that mandates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers.
According to an article in the Atlanta Journal-Constitution (Nov. 4, 2007) titled "Black Atlantans often snared by subprime loans," by Carrie Teegardin, a national study of credit scores, not just mortgage loan applicants, found 52 percent of blacks have credit scores that would classify them as subprime borrowers compared with 16 percent of whites.
Many lenders did make loans to people who had no realistic ability to repay them. But that doesn't qualify as fraud, though there might have been a bit of exuberance in the repackaging of the mortgages into securities and selling them to investors. Some argue that many borrowers defrauded the banks by misrepresenting their income, the so-called "no doc" loans or "liar's loans."
President Bush's plan to deal with the subprime crisis is to freeze interest rates on adjustable rate mortgages. Freezing interest rates would stop people's mortgage payments from increasing. That is a gross violation of basic contract rights and would appear to be a Fifth Amendment violation. If a contractual agreement is willingly entered into and agreed upon by a borrower and lender, it is binding and if broken by one party or the other, harsh penalties should ensue.
for the complete article
http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20080123/COMMENTARY/212999887/1012