Foreclosure Fiasco

Talking to a lot of my contacts from “Thriving in the New Economy” as well as in my Rolodex about the put-backs and foreclosure fiasco and a topic came up that sent chills up and down my spine. Some are telling me another credit crisis is already underway.

Sources are telling me because of the “moratorium” it has lenders swinging to the extremes of only offering loans that only a small % can successfully qualify for. They tell me the industry is following the same pattern as it did after the fall of the financial system.

With job creation slow and our economy fragile, can the United States withstand another credit crisis?

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5 Comments

Filed under Business, crisis management, Mortgage fiasco

5 responses to “Foreclosure Fiasco

  1. It’s too far the other way now. If we can just go back to common sense lending we can at least bring some form of law and order.

    20% down with good FICO score. Documentation showing your work history, all the requirements that makes one a good candidate, good debt to income ratio.

    No more shortcuts….

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  2. John T. from the Banning Bunker.

    [Found this. FWIW]
    Source: http://yrah53.wordpress.com/2010/10/18/grossrepost/

    Notes From The Underground: Bill Gross calls for “full nationalization”of the mortgage finance system (REPOST)
    By Yra

    In the wake of the recent housing foreclosure issues, we bring you this piece from August about Bill Gross and his call to fully nationalize the mortgage finance system.

    The housing confab was the big story Tuesday as the Obama administration was trying to figure out how to put the biggest slush fund to work. Last Christmas Eve, the U.S.Treasury–under the spell of eggnog and mistletoe–nationalized Fannie Mae and Freddie Mac by removing the caps on the losses that the two GSEs would be allowed to absorb.We don’t know where “PIMCO’s” Bill Gross was but we had assumed that the removal of loss caps was nationaliztion by stealth. Now as the largest holders of MBSs next to the FED, he is openly calling for outight government control of the mortgage market because Gross doesn’t believe there is room for the private sector. Yes, he is correct if the mortgage market reverts to NINJA loans and other zero-down types of nonsense. However, if the originate-to-distribute model were to be restructured so that only deserving loans were made, private lenders would be lining up to get into that business. We caution our readers to understand that today’s conference on GSEs was meant to give some type of cover to an already conceived plan of how Fannie and Freddie can absorb more losses and for the Obama team to gain some political advantage.

    Our conjecture is that the two behemoth GSEs are going to force a rewrite of existing mortgages so that as many borrowers as possible will be locked in at much lower rates than their credit ratings would allow. A 30-year fixed rate that was close to the Treasury’s borrowing rate would be similar to a giant tax cut for all of those eligible. This, we believe, will be the October surprise and the result will be that the Democrats are working for Main Street. The result will be positive for the housing market because it will stem foreclosures in the near term and the government will absorb the hit as will some bond holders will be forced to accept a lower rate of interest (see GM and Chrysler for bond holders rights). The Obama administration has not gotten the bump in employment and they know that they will lose control of Congress if they do not appear to be doing something dynamic for Main Street. The biggest problem is who is going to absorb the haircut on the lowered rates besides Treasury. Hmm … it may be the Chinese who also hold a great deal of GSE paper. Wow, lifting the spirits of Main Street while causing mild pain to the Chinese. The only question is how it will affect the U.S. image in global capital markets? Otherwise, we are sure it will play in Peoria.

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  3. Joe Rocca

    I love the U.S. but by the sounds of it it’s time to get out and head down under where the sky is Blue and the economy is strong. Interesting to note that during last week the AUD reached parity for the first time in history against the USD so that is telling you something! Plenty of work down here with real estate still growing, tight monetary policies in effect and unemployment at a just 5.1%.

    Keep up the good work Lori-Ann.

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  4. It only makes sense that we are going to see another credit crunch because the problem was never addressed. It was pushed off to a later date via all that gov money that was designed not to let the market perform correctly by allowing the bad companies and their bad decisions to die. But of course had that occurred the likelihood is that the gov’s own actions which help encourage the problems would have been exposed to the light of day.

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  5. Thought it was a pretty good read and clearly thought provoking. I didn’t go along with everything you had to convey regarding the topic, but on the whole, I think overall you affirmed your own point nicely. Simply reckoned I might chime along with a remark here. Look forward to the next, fascinating article

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