Comments on: California Lawmakers Reject Mortgage Reforms

By: aba23

aba23 — Thu, 19 Jun 2008 15:07:41 +0000

It is truly a perfect storm of interest confluence. Sellers, buyers, lenders, collateralized obligation brokers, Home Depot, government regulators–they all want easy credit to sell a house, buy a home, or just keep the housing market robust. Let's hope the credit card companies have protected themselves better than Bear Stearns et al.

By: superdestroyer

superdestroyer — Thu, 19 Jun 2008 13:40:49 +0000

This was tried a couple of years ago in Montgomery County Maryland. Montgomery County wanted to make the lenders responsible for ensuring that the borrowers did not do anything stupid. Virtually all home mortgage companies quickly announced that they would pull out of the Montgomery County Market is the ordinances were passed. The county quickly backed off.

Home mortgages are hard to regulate because making it harder to borrow means that it is harder to sell. It is almost impossible for legislatures to overcome the special interest group of homeowners.

By: aba23

aba23 — Thu, 19 Jun 2008 12:55:26 +0000

“… there are many problems in the current lending process (the most notable being to give loans to people who cannot afford them in the name of ‘fairness’)…”

I'm perfectly willing to allow that borrowers share blame for buying houses they could not afford, but somehow I don't think some egalitarian ethic motivated lenders to make subprime loans, if that's what you're suggesting.

The lenders didn't “GIVE loans to people who cannot afford them.” These loans (naturally and rightly) compensated the lenders with higher interest payments than good-risk borrowers paid, and–perhaps more to the point these days–the lenders likely intended to unload the loans on the secondary market well before any default. Either way, we're not talking about gratuitous behavior.