Look, the working poor pay taxes too, so they should get govt regulated loans as well...

[Blackhatjack]

Some people believe that only those who have excellent credit and have saved money for a downpayment should be 'allowed' to get a mortgage loan in this country.

That is wrong.

The government sets the rules which make it possible for mortgage companies to make loans to consumers. And to insinuate that working poor should be denied the right to own a home because they are not rich enough or have enough assets is a form of discrimination.

At one time in this country, the government backed a program known as the farmer's home administration which made loans available to people with little income and less than perfect credit. The homes built to qualify for the program that I remember were very small by today's standards, but large enough for a family of four --and the families who purchased them were very proud of them, and used them to build equity and eventually move up into larger homes.

When people say mortgage companies made 'bad loans' to people who should have never gotten a mortgage to start with they are placing the blame on the wrong party. The people who got loans should have received their loans, but THE TERMS OF THOSE LOANS should have been favorable to them rather than set them up to fail as the payments adjusted up. The truth is the mortage companies pushed the limits not to help people own a home but rather to pad their bottom line.

IT is true that many people will try to qualify for more house than they can easily pay for, and there do need to be guidelines as to how large a loan the borrower can qualify to receive. But that has nothing to do with the fact they deserve to participate in this economy which they are supporting with their taxes as well.

And I would imagine if poor people in this country could borrow money from their government at the same rates as the mortgage companies and banks, a lot of them would qualify for a loan they could repay. The same goes for the loan terms the richest 1% in this country receive.

[MadMaddie]

1. Agreed...

[MadLinguist]

2. I been fuming and making the same point to whoever would listen

ever since this whole sub-prime is a dirty word meme began circulating. The terms of those damn loans would crush anyone. And now that the damn gig is up, everybody but the stench-laden lenders is going to have to pay more for credit of any kind. Oh, some of those lenders will fall out of sight, but they'll regroup, get funding and pop back up again. Not so those who had to default. Back to renter's prison, without a hope of saving a nickel, to you sir, and to you madame! Same rose-tinted mentality collapsing into a heap of debt encrusted lies that brought us to the quagmire on the Mesopotamia.

[Blackhatjack]

3. You are so right, and not once has a tv financial pundit said a kind word about the families...

... except to mention that the default and loss of their homes might impact their ability to repay other creditors, like their credit card companies.

It is wrong for the government to extend financial assistance lenders to help them minimize their losses, but to deny assistance to the families impacted by the onerous terms of the mortages they were sold.

I think it is admirable for people here to have worked hard to save up their money for a down payment, and to have borrowed within their means. However it is callous and coldhearted to paint all the families who will lose their homes as having 'brought this on themselves.'

It kind of reminds me of the payday lenders who charge over a 1000% interest who advertise on tv saying 'we want you to borrow only the amounts you feel comfortable paying back when it is due.'
That shows you they are thinking only of themselves, and there is no attempt to improve the communities in which we live by extending help to those less fortunate.

I am guessing that if it came down to any parent having to decide whether to buy food, keep the electricity on, or pay for medical care for a child, they would borrow whatever amount they could at whatever terms they could get. No matter how the payday lenders frame it, they are taking advantage of people facing difficulties who have few options.... except for them.

[DaveJ]

9. Sorry for being callous. I'm just fed up with this.

I guess the simple solution, as you imply, is not to base home loan on the credit rating derived by all the SCAMS out there. For God's sake, my wife ignorantly signed up for a Bally's membership just because I did and she wanted to be with me, not thinking about the fact that it was a 2 year commitment. A few months later, she could not afford the $40 per month payment, now owes over $3k, and therefore we will never have a home.

Some simpleton who does not care about a god dam thing gets a home loan. It's hard to feel sorry for them. But you are right in that nobody should suffer the loss of what should be a God given right -- a piece of the Earth they can call their own.

I'm not saying that people losing their homes deserve to suffer. Nobody does. But in a way, I'm happy about it. It proves my point. Credit score is not an indicator of something that important.

[DaveJ]

4. Creditors are greasy scumbags

You beat me to it. I was about to start a post with this title but you summed up my point, partially. The full fact is that "creditors are greasy scumbags" as my subject iterates.

I love the DU but sometimes in the effort to be smart, PC, or polite, we miss the point. Creditors are greasy scumbags. As a result many of the people who got home loans are like them, greasy scumbags. Naturally, they are now defaulting now that the rate has increased, which any intelligent person would have seen coming.

I don't know if I'm "working poor." I get paid ok, but only now after years, decades really, of hard work educating myself, raising stepkids, learning about the world, and getting married to a sweet woman in need, at a time at which the greasy scumbags creditors would have disapproved.

The truth is I owe about 4k to corporate interests and therefore I will never be able to get a loan for a home. My life is ruined. I will never have a small plot of land on the planet Earth. Greasy headed scumbags have claimed every plot for themselves. Loans are given to other greasy scumbags so that they can call a piece of the Earth for themselves, but I, since I spent time educating myself, am denied a piece of the planet which really, if you believe in any God or just have common sense, should not be denied to anyone.

Something needs to happen for this to change. Creditors will continue to offer cards to kids who are 18 going to college. Those kids will continue to be stupid, no matter how motivated they are to excel in life. People who are slackers will continue to surpass kids who want to educate themselves, credit wise. Greasy scumbags will naturally prefer them at their core. It won't change unless something is done to make it change.

[RB TexLa]

5. You can be working poor and still have good credit

There are people with high incomes that have to get "D" paper as well.

[DaveJ]

6. That would be me....

I owe 4K and will never, ever get a loan for a home unless I do something extraordinary. Meanwhile people who don't do shit with their lives get everything. A credit score is not a reflection of the quality of a human being. People make mistakes or stick their necks out for others, or run into an endless variety of situations, and can end up with a low credit score. Meanwhile people who don't do anything get home loans. They are, of course, too dumb to realize the rates will rise in a few years and eventually default.

As I said early, this system won't work. It will continue to be screwed up unless something significant is done to change it.

[Blackhatjack]

7. So you think the distribution of good credit is about equal to both groups?

Sure there are exceptions to the rule.

Most high income people find it substantially easier to get a mortgage than a family which meets the definition of the working poor.

In some cases, the working poor find that their insurance premiums increase because of where they live, and their credit card rates are raised because the credit card company 'thinks' they might miss a payment even though they have not.

The credit game is stacked against the working poor, exceptions are not the rule.

[rucky]

8. FHA has not changed their underwriting guidelines...

yet.

they still don't use FICO to score. You could have a bankrupcy on your record (2 years old or more). With down-payment assistance, you could do it with 100% LTV. Rural Development loans are still in existence - and even better than FHA, if you're in that kind of community. and there's no beating a VA loan.

FHAs were completely underutilized during the subprime era. (not as profitable). Brokers were too lazy to recommend FHA and still are. They don't want to do the paperwork, there's limitation on the fees and YSP they can take, and they can't work with "their" appraisers.

[rucky]

10. btw, Aunt Fannie and Uncle Freddie have total control of their

underwriting guidelines. They are a government chartered organization, but run independently. I suppose the government could put the brakes on them (and probably should've put a stop to the abuse of stated loans and Alt-A, simply because of all the fraud it brought).

[Blackhatjack]

12. Fannie Mae and Freddie Mac are being investigated right now and have volume caps....

both have petitioned the government to extend the lending caps so that they can help refinance lots of ARMS about to reset, but so far the government has said no.

My understanding is that Fannie Mae and Freddie Mac suffered from some internal controls in making loans according to their own guidelines, so the problems associated with that should not be blamed on borrowers. Also many of the loans were based on appraisals that were inaccurate.

[Blackhatjack]

11. You make some good points, but all these programs have limitations...

... which tend to shoot down a lot of folks.

I agree with you that many brokers do not recommend the FHA option because complying with their requirements is usually more difficult. Yet those very requirements which must be met for a home to qualify as acceptable to FHA usually ensure that the home meets livability requirements that preserve the value of the home for the borrower.

Rural development loans and VA loans do not apply to most folks.

And the FHA does its own credit evaluation from the credit reports available. And often this trips up many families.

[SammyWinstonJack]

13. I think you rock... but do you ever feel that you are pissing against the wind?

:shrug: This Country doesn't give a flying rat's a$$ about the middle class. much less the working poor and even less about the poor. We are a very selfish country. Especially in light of the fact that there is now more millionaires in this country than in the whole of Europe! Something about that is just wrong.

[The Backlash Cometh]

14. Can someone please explain something to me.

Did Kramer mislead us when he threw that temper-tantrum calling for a bailout from Berneke when he said that if he didn't, there were going to be millions of Americans who will lose homes and more who wouldn't be able to get credit? Did this bailout have anything to do with that at all? Or was that thrown in to quiet our criticism while they greased us?

[ryanus]

15. Kramer's right; and the Fed hasn't done what he asked

The Fed took some action that prevented a faster stock slide, but all the risk that Kramer mentioned are still there.

[Blackhatjack]

16. Without govt intervention and/or easing of credit to mortgage borrowers, he is right....

As many as 7 million homeowners could lose their homes.

Why?
Reset rates and end of teaser rates means the payments are too high for the borrower to make.

Add in the fact that the properties purchased with mortgage funds are worth less than what the borrowers paid for them. So unless the mortgage holder agrees to release the lien for the entire amount it is owed, the borrower cannot sell their home because the mortgage holder prevents them from delivering clear title to the buyer.

The more homes slip into default and then foreclosure, the more home prices drop overall --making it even more difficult to sell the properties for what is owed against them.

And as time passes, penalties and fees continue to accumulate along with higher interest rates.

Cramer was right.