Downey Savings Paid Brokers up to $50k Commission ON EACH LOAN!
Posted on July 16th, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research
Downey Savings is widely rumored to be the next ‘IndyMac’ due to their heavy Pay Option ARM exposure.
Did you know that they paid their mortgage broker clients up to $50k PER LOAN in rebate-based commission? They allowed this up until last week!
The rate sheet below clearly shows they are advertising this fact. Yes, that is a $50k commission for one loan! This goes to show how easy it was to sell one of these loans, even with high enough margins for some unscrupulous brokers to earn a $50k commission, and how hungry the banks were for these loans.
Offering a $50k maximum commission that can be earned by putting the borrower into the highest margin and longest pre-payment penalty loan available is essentially a green light to take advantage of the consumer. Even if all loan fees were built into a $1.5M loan amount, the net commission would probably be near $43k.
For the record, I am the biggest broker advocate around. Without brokers, banks have a monopoly and the mortgage/real estate sectors will suffer. Many may deserve to make $50k on a deal. It is just when the banks structure programs such as this with high margins and long prepays in order to achieve a yield spread premium that would pay a $50k commission, you can destroy the borrower and that is what we are seeing right now.
Below is Downey’s Pay Option ARM rate sheet. This may be some of your first time actually looking a this monster called a Pay Option ARM, so I advise you to put the children out of the room and be careful. This program has torn banks to shreds and made their CEO’s act like whimpering children. Click to enlarge and then hit (’control and +) to enlarge.
To be fair, most other lenders paid amounts such as this and more during the bubble years. I just didn’t think anyone was still allowing broker rebate levels this large nowadays.
THE PAY OPTION IMPLOSION
As you know the ‘Pay Option ARM Implosion’ is upon us. These toxic loans have taken down nearly everyone who has ever touched them, beginning with American Home Loans last year.
The largest Pay Option lenders in the nation are a who’s who of leading troubled lenders such as Wamu, Wachovia, Countrywide, IndyMac, American Home, Downey Savings, First Federal, Bank United and even Bear Stearns, Deutsche Bank and Lehman to some degree. However, the latter three served mostly in the ‘investor’ or ‘conduit capacity during the bubble years. The Pay Option ARMs they have left are the ones they were unable to dump when that market seized up in mid 2007. They could still be liable for damages caused to bond holders when these loans go really bad in the future.
The banks mentioned made a conscious decision to keep these loans due to their much higher yields for ‘Prime’ borrowers than the typical 30-yr fixed loan or other ARMs.
Downey was the last to offer Pay Option ARMs. They just recently stopped abruptly last week. When lenders stop doing certain loans it is not because they are making a fortune on them…just the opposite. You have seen lenders cut out loan programs since early last year, starting with subprime. The Pay Option was Downey’s top program for years.
Don’t ya think they would have done this earlier? Perhaps, sometime BEFORE the stock price fell from $75 a year ago to $2.06 today? Perhaps Cramer telling everyone in July of 2007 it was going to $100 and writing ‘DSL’ across his knuckles kept the hope going beyond all reason. Heck, the stock price was at $38 on Feb 1st 2008! Everyone knew Pay Option ARMs would take down any company that owned them. I don’t understand why banks did this to themselves.
I saw Notice-of-Default rates on Pay Option ARMs begin to surge in Q4 2007. A kid in a high-school investment club could have figured this one out last year, but the smartest analyst in the room, the banks and the OTS couldn’t. Don’t you understand that surging income off of Capitalized Interest from Negative Amortization (CINA) is phantom income that most likely will never be collected? What a shame.
PHANTOM EARNINGS USING PAY OPTION ARMS
Remember, all of these banks will have significant earnings restatements in the future due to CINA. CINA, sometimes referred to as deferred interest income, is booked as revenue and based upon the highest possible monthly payment even though 80% of borrowers only pay the minimum amount and the differential (negative amortization) is never actually collected.
CINA will most likely never be realized, even in the case of foreclosure. Regardless, it may never be realized due to housing prices crashing 30% on the median in California in the past 12-months. Roughly 55% of all Pay Option ARMs are in California, which was the most popular state for these loans.
Most cannot sell or refinance because of the negative equity in their homes, and homes are not selling in foreclosure other than back to the banks who took back 96.8% of all homes that went to auction in California last month. Please see my June Foreclosure Report for more detail.
One thing is for sure, Pay Option ARMs were absolutely the most toxic loan program ever created, even worse than subprime 2/28’s and 3/27’s. -Best, Mr Mortgage <>
July 16th, 2008 11:40 am
Hurray! Another Mortgage Nerd that knows the perils of CINA…I’ve been talking about the impending accounting nightmare for a couple of years when I noticed that WAMU was counting CINA as earnings and it was comprising over 30% of their quarterly earnings! Trillions will be lost after this whole mess bottoms out. How many freakin’ zero’s are in a trillion anyway?
July 16th, 2008 11:44 am
In Dec 2006 I did a white paper on CINA and on how prepayment penalties cannot be collected if triggered from an ARM reset.
July 16th, 2008 11:55 am
If a broker sold a 1.7 million dollar option arm loan why wouldn’t they be entitled to compensation? Most likely a borrower that had a 1.7 mil balance would be sophisticated enough to understand the arm repayment terms.
Enough with the broker blame game it’s tired.
July 16th, 2008 12:00 pm
For the record, I am the biggest broker advocate around. Without brokers, banks have a monopoly and the mortgage/real estate sectors will suffer. Many may deserve to make $50k on a deal. It is just when the banks structure programssuch as this with high margins and long prepays in order to achieve a yield spread premium that would pay a $50k commission, you can destroy the borrower and that is what we are seeing right now.
July 16th, 2008 12:46 pm
I can remember the Countrywide OTC guy talking about making that much on a loan too. I wonder where he is now.
July 16th, 2008 12:51 pm
The other funny thing is that this was for CA and AZ only. Got to wonder why these 2 of the hardest hit areas when it comes to foreclosures…
July 16th, 2008 1:30 pm
The most toxic loan program ever created? World has been doing this loan since they invented it in the 80’s. They were one of the best performing lenders in the US right up until Wachovia bought them out. Why? Because in a normal market, this loan works beautifully.
What you see happening now is since housing prices have fallen 20% or more, people are just walking away from their loans rather than pay back a loan that is worth more than the house. Loan failures are right across the board, not limited to pay options and subprime. Lehman did mostly Alt-A and they are in trouble too.
Fannie/Freddie were not option arm lenders. Yet they are going under too. why aren’t you saying the 30 year fixed rate loan is the worst program ever developed?
July 16th, 2008 1:38 pm
You are right, we have never experienced housing prices dropping 30% in 12 months and never lost all the program availablity year over year. 20-years ago, 10 years ago etc you could just refi out of them. Now you cant. You are stuck. I dont care what World was doing 30-years ago. It means absolutely nothing now.
I did say Fannie and freddie 30-year fixed are horrid.
http://www.youtube.com/watch?v=WzUjccc9eHQ
July 16th, 2008 1:40 pm
Meagherrob – CA represents about 40% of all foreclosure activity in the nation. AZ and NV about 15% combined. FL about 20%. i dont have the data on FL and AZ and NV are moving along like CA.
July 16th, 2008 1:48 pm
Your headline is at best misleading.
July 16th, 2008 1:55 pm
It looks like FDIC had better get another infusion of funds from Congress. They truly will not have enough with what they currently hold to handle this mess. Financials rallying today big time – purely a suckers rally. Good work Mr. M!
July 16th, 2008 2:14 pm
Don’t you think that its time to STOP over-sensationalizing these posts? The general maximum loan amount on a POA was $5,000,000 so a broker making YSP (yield spread) would be making $50,000. Don’t make it seem like a broker would make $50,000 by putting a borrower into a $350,000 Pay Option ARM mortgage. I normally do not respond to these types of comments but this has got to stop. Those in foreclosure need to take some responsibility for their actions and for the most part those were amateur “investors” who watched too much “Flip This House” on television and did not know what they were doing. The solution to all of this – watch the banks that let their greed cloud their judgement fail, wait for the “new players” to emerge, tighten the regulatory guidelines and stop whining about the fallout. This is getting rediculous.
July 16th, 2008 2:34 pm
This does not surprise me in the least. It was greed that got us into this mess in the first place and it will keep us in this mess until all the channels used by the greedy are curtailed enough, or just simply eliminated, to slow things down.
Brokers would not have steered folks into the loans that they did if there was not additional profit by doing so. The more profit the more it will happen. They are basically telling you that the more you can squeeze out of the buyer the more we will pay you. Unlike the traditional pay for performance, this is more like pay for screwing people over.
The products stayed around for so long because of greed as well. They know that they are all screwed in the end because Downey will go under at some point. Well if you knew you were going to go under, then why not steal as much money on your way out the door as possible. They don’t know when they will find another job in their industry and certainly not as good of a paying job when and if they do find one.
There was no oversight, or agencies such as the SEC, FED, or any group for that matter looking over their shoulders after all. Greed makes even good people do bad things and bad people to do even worse things. With no oversight it allows it to run wild and rampant.
Side Note:
I will go out on a limb and suggest that after all that is happening on the floor on the hill today, this “Bail Out” proposal may not make it through to the President. It may not even become a bill at all. There are a lot of folks both Democrat and Republican alike that seem to finally be realizing that if they keep this charade up they will be out of a job next election. They may be anyway, but they will be digging there own graves with passage of this bill in its current form. A very much trimmed down version is highly likely at this point or nothing may get done for quite a while…
July 16th, 2008 2:48 pm
HEY! LETS TAKE THE MOST FAR FETCHED, HYPOTHETICAL, REMOTE POSSIBILITY AND MAKE IT OUR HEADLINE SO PEOPLE WILL THINK IT HAPPENS ALL THE TIME! YEAH.
July 16th, 2008 2:53 pm
I just responded to some who emailed me saying my story is ‘misleading’…
My Response:
I clearly put UP TO $50 max per loan.
Pay Option ARMs are the abolsute largest threat to CA housing. We are seeing them default at a major rate, with a rate of acceleration higher than any other loan program.
When you allow the brokers to take a $50k REBATE you ENCOURAGE them to get the highest margin and longest prepay period. This is almost always bad for the borrower. Especially now sicne most cant sell or refi their home.
Now, borrowers are stuck upside down in their home because they have been neg’ing at a rate of 7% per year due to the 4% margin the broker took to get their massive rebate and are bearing down on a hard reset due to the max neg allowed. When the max neg of 110%, 115% or 125% hits then they lose their home because nobody in their right mind would pay twice the payment in many cases for a home on which they are upside in by 50%. Very few or any can refi.
While not all brokers took massive rebates on Pay Options these were the most abused programs. Thats why middle market mortgage bankers loved them so much, because you did not have to disclose your massive rebate like brokers had to.
There is nothing anyone can tell me that can change my mind that the pay options were mostly sold to the wrong borrowers as a method to buy an expensive home with low payments. Nobody warned the borrower about the ‘what if’s’.
Mark
July 16th, 2008 2:54 pm
LO – You are right, all loans are “bad” – I think the part you are missing: Is for toooo long the masses believed that Real Estate would only go up (and double digits in some markets)And many people where told that, and wanted to believe it (normal markets never go straight up forever), I had friends laughing at me when I even mentioned RE going down…..which is never how anything works in markets. Many who post here knew full well there was a housing bubble, and behaved accordingly. Why the hell stay in a home you put 20% down on and has lost 40% of it’s value with no end to the downside insight….so in those hardest hit markets people even with “30yr fixed” may be tempted to walk. But, as Stu pointed it out – it was mainly driven by greed, pure and simple – I could be wrong on this but I think during the booming years even fannie and freddie execs had pay structures tied to volume – (if I am wrong on that someone please correct me) – that has to be a system just waiting to be pillaged.
July 16th, 2008 2:59 pm
Drudge just posted FBI at Indymac for fraud (no details yet). Wonder if this will incite more bank runs at banks like Downey, WAMU, and Wachovia.
July 16th, 2008 3:01 pm
I heard HUNDREDS OF TIMES brokers asking us why we did not offer pay otpions. They said we should because thats all they could sell and we could not keep up with rebate.
All of you mortgage pro’s here know I went very easy on the mortgage community on this topic.
98% of everyone in this loan never should have been put there.
July 16th, 2008 3:03 pm
Your article is flawed. To make 50k in rebate, the loan amount would have to be 2 mill. based on 2.5 rebate. I highly doubt the majority of foreclosures happening are 2mill+ homes.
July 16th, 2008 3:12 pm
Many homeowners in the largest bubble areas will never see their homes value come back to what they paid for their homes originally… in their lifetime. Think about that for a minute… Why would you possibly stay?
Your say 50-60 years old and you lost 500K – 700K on your home (40%-50%) since you bought. With normal historical 2% -4% gains per year after the markets come back, your looking at maybe never seeing your homes value come back. You will die still owing more on your home than its worth. What a great thing to pass along to your children. How many kids parents are passing on and leaving this scenario to them today? I can see the kids in the lawyers office saying “But I don’t want it” Now that’s a pretty big switch from what typical happens isn’t it? What do you do foreclose on your dead father or on yourself. How does that get dealt with? My will has my home being sold and the profits divided amongst my children, but that is not typical is it? What if your name is on the deed or in the will as being left the property? What do you do? Can you simply refuse to take it?
Scary thought…
July 16th, 2008 3:15 pm
This JUST IN!!!
WASHINGTON — The Associated Press has learned that now-defunct IndyMac Bancorp Inc. is under investigation for possible fraud in connection with home loans made to risky borrowers.
It was not immediately clear how long the FBI’s probe of the bank has been ongoing. The investigation is focused on the company — which was taken over last Friday by the FDIC — and not individuals who ran it, according to a law enforcement official who was not authorized to speak publicly about the investigation.
IndyMac Bank’s assets were seized by federal regulators after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.
July 16th, 2008 3:19 pm
Never mind. And your crooks in Washington that allowed and promoted all this shit. Anyways today is operation “Pump and dump”. How did the acountants, these damn crooks, managed that miracle at Wells Fargo ? Don’t believe the hype. Well the good american bullshit hype is well and alive.
July 16th, 2008 3:20 pm
The continuing BS about borrower greed being responsible for the Housing Mess is disgusting – and deceptive. Those poor devils (poor now or soon) are not totally innocent BUT it’s the easy money and credit policies by the BIG ZIONIST DEVILS Al and Ben (and their masters) which DELIBERATELY set them up for the Fall – and set the entire American economy (and society) up for the Fall! The Fall is coming and the Evil Zionist slimeballs WILL be included, Thank God!
July 16th, 2008 3:24 pm
you guys dont get it. They only recently cut down their rebates I have a rate sheet from a year ago showing rebates twice as high. They just never changed the $50k policy so at the end it would have been hard to achieve $50k granted.
Fact is, the Pay Option was used to lure borrowers. It was the ultimate bait and switch.
I have the data. Pay Option defaults are absolutely surging. I have Downey’s real default figures and they are not too pretty. They are up 1000% since Jan 2007.
I have always said ‘the pay option implosion will make the subprime implosion look like a walk in the park’.
Remember, Pay Options will be devastating to CA because they are going to take down the higher priced areas. It is beginning right now. Get back to me in 6 months on this. Not on Downey because they may not be around but on the Pay Options.
July 16th, 2008 3:30 pm
admin, you are half-right on this (WHAT is happening) but you’re still in the dark about WHO is responsible. In time, you will wake up to the truth (unless you’re one of those ‘died-in-the-wool’ flat-earthers!)
July 16th, 2008 3:36 pm
And you’re right, MA, the Suckers’ Rally is in full swing today – but won’t be for much longer. Remember that there’s a Sucker made every minute (by Zionist propaganda, spelled out in the “Protocols of the Evil Elders of Zion”). I took some poetic license with the title!
July 16th, 2008 3:38 pm
Hey, my comments are still there – admin must be dozing during his afternoon siesta!
July 16th, 2008 5:11 pm
I have had clients come to me and I have seen Final HUD’s from broker deals with total broker comp in excess of $100K. I know WAMU’s max burn on option-arms was $75K a year or two ago. There were slimeball brokers making 3% back on these deals all over the place. Some were even charging a point up front. On a $2 mil deal thats $80k.
Ryan Reynolds should take a drive through Palos Verdes Estates or Malibu and see all of the “for sale”, “short sale” and “foreclosure sale” signs. I have had clients, for example doctors, that were not financially saavy, and I could have jammed them into anything I wanted. I really wanted to stay in this business for the long haul, so I did right by people…but believe me, I’ve seen and heard about some brokers doing some shady stuff to make these fat commissions. And now the business as I’ve known it is out the window anyway. Maybe I should have taken the money and ran, too. I’m getting INCOMING calls from people who need financing, and have no options, except loan mods or loss mitigation. I can make a few bucks here or there referring to Green credit (thanks Mr. M) but it isn’t anywhere close to even 1/2% of loan amounts.
Is it the banks fault for offering these paydays, the brokers fault for jacking the clients and making them, or the borrowers who really thought they could make a $6500 a month payment on a $2 million mortgage? Surely the realtors, who I’m sorry to say SET THE PRICES are more than a little culpable. My point is there is plenty of blame and greed to go around, and until the lobbyists and politicians stop the finger pointing and FIX THE PROBLEMS, the entire economy is screwed. We need to get business people into office, instead of people like Countrywide lap dog Chris Dodd. We need businesspeople with the taxpayers best interest legislating, not a Senate Banking committee chair letting the company that discounted the hell out of his mortgage write the legislation for him. The inmates are running the asylum, and I don’t want to hear any Zionism conspiracy theories, take them somewhere else…they are really getting tires. I am sick of the bipartisanship and corruption in Washinton D.C. Let’s have term limits of 1 term. The day you are elected the clock starts ticking on your congressional legacy. That way your legislators wil be busy legislating, not busy with their re-election campaign the day after they are elected.
July 16th, 2008 5:14 pm
So short sellers are BAD, but its okay to call a short rally “a bounce back in the financials…” – I see WFC made a bit of money buying fannie and freddie bonds – big surprise there….
Too funny.
July 16th, 2008 6:19 pm
Yeah and it’s you who are going to pay the bailout, not Warren Buffett.
July 16th, 2008 6:32 pm
If a Broker falsified documents then they are criminals.
If they made 1 million per loan to sell garbage to idiots then that is the BEAUTY of this great country.
YES it lacks ethics, NO I would not do that to people.
But it is not the job or LEGAL RIGHT for the government to ‘help’ these people…a simple old saying:
Ignorance is no excuse for the Law!
You signed, You pay.
July 16th, 2008 6:48 pm
This is an honest question:
Why not have a situation where after a foreclosure is done, the entire amount that was written off by the lender is then owed by the person that took out the loan?
The government could ‘finance’ a 0% loan so that the individual would at least have a way to get back on track.
The taxpayer would have no bill to pay.
What if homes would have continued to rise? Would we have had a taxpayer bailout to GIVE money to buyers that missed the boat? Perhaps give buyers a couple hundred thousand to get that home due to the fact that home prices went so high? NOPE.
Can we really set a precedent that says we will flip the bill for the ignorance of the masses? I do not think we could be more blatantly socialist with this message.
July 16th, 2008 7:32 pm
Dave, you are 100% correct that the inmates are indeed running the asylum!!!
Vote them ALL out of office next election!!! EVERY single incumbant GONE!!!
Tired of TALKING about change… then MAKE CHANGE HAPPEN!!!
July 16th, 2008 7:43 pm
Dave and Stu -
Right on guys!!!! Dave, I feel what you are saying, you tried to be a good egg, not get caught up in the money frenzy of 2003-2006, and you still are getting screwed, us too, (but in a slightly different way), trying to be financially responsible, it stings.
July 16th, 2008 7:52 pm
QUESTION??? CINA, referenced above…… Is it possible to identify CINA directly, on a company’s financial statements (as a particular line item)? I’d like to check out a few bank filings. Thanks to whomever can assist.
Oh, the Boom Bust Blog – Wells Fargo – someone put a reminder on there about WFC changing they’re notice of default or write down period from 90 to 120 days. I forgot WFC did this about 2 months ago. This would have an impact on their latest earnings B.S. report. Don’t get discouraged with the “suckers rally” bounce today. It won’t last too long. Don’t fight the tape! It is what it is. Go with it along with the knowledge of what’s really going on. Trade them on the way back up and trade them on the way back down – AGAIN.
July 16th, 2008 7:55 pm
Inflation is a real nice thing. This is the biggest screw going on. +9,2% in 12 months. No problemo. Warren Buffett is having a ball, him and his bunch at the FED. No shorting allowed. No gold buying allowed. No negative comments allowed. No truth allowed. That’s the way a country slips into a fascist state. Free markets. Freedom of speech. What’s next ?
July 16th, 2008 8:18 pm
Hold on a second here … I’m trying to hold my composure together. WHAT THE F*CK? $50,000 LARGE!
July 16th, 2008 8:36 pm
3 Billion here… 2 Billion there… 8 Billion over there…
Pretty soon you are talking real money!!!
July 16th, 2008 9:11 pm
I do not understand your indignation. Rebates were/are offered on every loan in America. You know the rebates went as high as 4% of the loan amount. You should be indignant on yield spread premiums paid out of escrow. Now, that’s something to get hot about. Mr Mortgage, have you ever taken a rebate Paid Outside Escrow (POE)?. Me thinks thou doth protest too much. The YSP – Yield Spread Premium rebates should be abolished altogether.
July 16th, 2008 9:13 pm
Donny- Here in socal there are quite a few 2-3 mil. loans written, and that number can be gotten on 1 deal. Think what the worthless “busy blonde” realtor makes on a 3 million dollar place in Brentwood or Palos Verdes. They shake their tits to $75k commissions all day long…and the mortgage guy does the work once the contract is wet.
I’ve seen it. Not lately…but I’ve seen it.
Stu-what a world we live in when a few billion here and there isn’t considered “real money.” I wonder what was out there in the US in total mortgage debt 30 years ago. And people wonder why the dollar is weak.
July 16th, 2008 9:35 pm
Dave, please don’t get me going on that!
When I see companies losing in 6 months what they made for profits over the last 5 years I am smart enough to know something is very wrong.
The totally strange part of it all is that the Sheeple march in line, totally clueless, and vote these same morons right back into office election after election. One would think that even the sheeple would get a clue at some point. One can only hope!
July 16th, 2008 10:11 pm
Some of you guys are so far off base, I can hardly figure out what you are talking about. Get this. When lenders, like Downey, and WaMu, etc., give big financial incentives to brokers to screw their clients, some of them are going to do it. The greater the incentive, the more likely the broker will be to screw their client, and the greater the degree of a screwing each client is likely to get. In other words, the lower your ethics, the more likely you are to do a pay-option ARM, for you client.
I have been originating for 22 years. I did a pay-option ARM, ONCE. The only reason I did that loan was because the client told me they would go elsewhere to get it, AND she (the client) could explain ALL of the terms to me, correctly. This led me to believe she understood the risks, and was prepared to deal with them. She refinanced it, paying the PPP, 10 months later, after the loan had served her purpose.
I did a stated income loan, ONCE. I did it for my sister, and brother-in-law. I did the loan because it was the only way they would qualify, and my asshole brother-in-law would have gone elsewhere, and paid A LOT more for the loan, if I hadn’t done it. Three years later they lost the house in foreclosure. It is the only loan I ever originated, where the lender took back the property.
The reason you have to disclose your YSP (”rebate”, for you illiterates), is that the Feds reinterpreted RESPA, and REG-Z. You are NOT a used car dealer. You are a fiduciary (go find the dictionary). Because you are a fiduciary, the level of your compensation, from all sources, is required to be disclosed to your client. Furthermore, if you anticipate the POSSIBILITY of compensation, from any source, you must, also, disclose this. Failure to accurately disclose ALL of your compensation, from ALL sources, to your client, in a constructive manner, which your client can understand, is FRAUD.
The reason you, routinely, defraud your clients, by bait & switch, or non-disclosure, etc., is the same reason you exceed the speed limit. The only difference is, it is 1,000,000 times more likely you will be caught speeding, than it is you will be caught defrauding.
The ENTIRE mortgage “crisis” is the result of a lack of enforcement. The proof is that you are not in jail, and neither is anyone else.
Every time you make a representation to a client, think of how you would look having to explain yourself to a judge, at your trial. Assume that the judge is a compliance attorney, and a former regulator. (It is a given that he is smarter than you.) Assume you are the only witness at the trial, and there will be no jury. If you don’t testify, the judge is going to look at the paperwork, in the loan file, in order to judge your guilt, or innocence. In any case, he is going to impose sentence, based on the gross amount your organization collected on the loan. Note, there is no question that you will be convicted. We ALL know this, the only question is: How long are you going to be in jail? If this scenario leaves you believing you should charge as much as possible, on every loan, you need to work on your ethics.
I discontinued actively seeking mortgage business three years ago. I close 6 loans per month. I have not misrepresented, by commission, or omission, to a client, since 1992. All of the loans I close are repeat business, for people who I have never lied to, in our entire relationship. I spend the majority of my time renegotiating the mortgages that YOU wrote, over the past five years, through my non-profit. I do this without charge to the borrower. Ever.
It’s not the brokers’ fault. What you did is human nature. It’s not the fault of the lenders. They wanted to make money, too. It’s not the fault of the realtors. They know even less than you do (which I find to be remarkable). What we have here is the most complete failure possible, of regulatory authorities, at every level. They would have caught the same percentage of you if they had been in the Bahamas, fishing, or in Paris, touring the Louvre (that’s one of the most famous museums (a museum is a place where they store interesting/historical stuff, for public display) in the World).
Does anyone think we need any more regulation? We are already regulated more closely than the nuclear power industry. In fact, you can correctly claim to work in the second-most heavily regulated business in the United States of America. Only the manufacture, and distribution, of pharmaceuticals (yes, that means “drugs”) is more heavily regulated than mortgage lending (there MUST be a parallel, there).
If we have as many regulations as any of us can imagine, and there is no way to regulate us any further, you MUST conclude that more regulations cannot, possibly, help. Look at the various proposed regulations, over the past two to five years. They are already on the books, or are impractical. This leads us to the conclusion that we cannot be regulated any further. And, since you cannot regulate/change human nature, the only logical conclusion is that we need ENFORCEMENT.
Don’t worry, you won’t see it. It isn’t sexy, or high profile. A headline of “Feds Hire Hundreds More Regulators”, is NOT going to make the first SECTION of the paper, let alone the front page. It is even less likely to get a politician’s picture in the paper. So you can go on defrauding, to your heart’s content. Even if someone complains, (in an effective manner) tomorrow, you will be past your 70th birthday by the time they send anyone to question you.
July 16th, 2008 10:39 pm
What I meant to say by all of that, is “If you are not part of the solution, you are part of the problem.” Be part of the solution. Don’t screw your clients, don’t vote for Democrats, and DO send SOME idiot Congressman, or Senator, a RANT, every week. Tell those jackasses to stop grandstanding, and do something worthwhile. Make every lending regulatory agency increase their staff by ten-fold, tomorrow. And tell everyone you know to do the same.
Remember, Osama Obama is about POWER. He is “marketing”, rather than substance. He’s telling you that he will give you a 1%, thirty-year, fixed-rate loan. The loan is for thirty years. The interest rate is one percent, for the first month. The interest rate is fixed, for the first month. If you can read the disclosures, you may be able to figure out the rest for yourself. Only God knows how much damage he will do to this country, if he gets elected. If you don’t remember Jimmy Carter, you need to get some reading materials. CONFORMING rates at TWENTY-ONE percent. (This was the reason we started doing ARMs on residential property. Until Carter, ARMs were only done on commercial loans.)
Sorry, I get a little excited, sometimes.
July 16th, 2008 11:19 pm
Ok, moving on from the election and back to the housing crisis…
July 16th, 2008 11:46 pm
Let’s all remember that borrowers can’t be “destroyed” by these loans without their full consent. Banks weren’t the only ones with dollar signs dancing in their heads. In the end, all greed is punished.
July 17th, 2008 1:02 am
Dude, you are a riot. First you put up this sensational headline about $50K in commissions. Then you take the time to point out “it said up to”. Next you refer people to your Youtube self flagulation.
The credit system is flawed because you could pay off all your debt and raise your credit score? I dont know who else could have thought that one up but once again you are taking a truth and twisting. If you paid off all your debt, you expect the credit rating to go where?
This all would work great but most of your audience is made up of loan officers. Most of the people that are on your side are the poor people who claim they got conned by a loan officer and would never have bought a house if they knew they couldnt sell it at a profit 6 months later.
DU/LP is flawed? All it did was automate what the guidelines book said. An underwriter was still supposed to check the documentation.
Im with the guy who says if you signed the papers, you are an adult and responsible for the loan. If the loan officer committed fraud, he is liable. 90% of us didnt commit fraud. We did our jobs. We found money for people looking for money. We explained the system.
Mr. Mortgage, check with The Enquirer, they are always looking for people who can write sensational headlines.
July 17th, 2008 1:10 am
Then we have this guy, who is holier than thou saying he is completely honest and above the board and would only commit fraud to save a commission. Otherwise his asshole brother-in-law would have went else where. Here is his quote. Where do you find these people?
“I did a stated income loan, ONCE. I did it for my sister, and brother-in-law. I did the loan because it was the only way they would qualify, and my asshole brother-in-law would have gone elsewhere, and paid A LOT more for the loan, if I hadn’t done it. Three years later they lost the house in foreclosure. It is the only loan I ever originated, where the lender took back the property.
July 17th, 2008 1:32 am
People, if you are going to play the who to blame game. Then let’s look at the fees the real estate agents are making. Wow 6 to 7% commission per loan, and they put the borrowers in homes and communities that they can not afford. Now, if that a 2 million dollar home, and they are REA on the deal. Then there compensation should be some where in the area of $140,000.00(WOW).
But, we talk about what the broker is being paid in fees, and not the 1 to 2% kick backs the banks are giving the builders. Oh, bye the way a lot of these builders own their own mortgage company, and real estate company, and title company. There has to be something wrong with this picture.
Now I understand that some one said don’t vote for a democrats, but our problems in the industry came under a what government leadership? WWWWWOOOOOWWWWWWW
July 17th, 2008 1:42 am
Bob Micklos, great post.
For this to be a serious crisis people need to go to jail from top down and bottom up. But we are not going to see that. Kind of makes the laws worthless if nobody enforces them. But everybody will cry when it comes to taxpayer bailout.
July 17th, 2008 2:12 am
I’m afraid, Dave! – that what you don’t want to hear is precisely what you need to hear! Anyone who just wants to bury their head in the Mortgage Mess (yuk!) and play ad infinitum with only 1 piece of The Puzzle is missing a few memory banks (and some screws) and will NEVER understand what is really going on now in America – or what’s coming down the pike. Reinsert some memory banks, Dave, and start connecting some dots. They’re all around us!
July 17th, 2008 2:15 am
PS Christopher Bollyn has a VERY interesting collection of dots on his website:
http://www.bollyn.com/index/
July 17th, 2008 2:28 am
Greed is not something that started in 2000. What started with Bush is a long chain of atrocities and lies, and ‘We, the People’ (Congress) let that Zionist ass-kissing slimeball get away with all of it – to this day! His appointments tell a tale! Greenspan and Bernanke (and others) opened Pandora’s Box and all of a sudden, Greed was able to inflate into a Titanic Bubble. America is being taken down (just like the WTC) and the SAME slimeballs are responsible – and for a lot more! The ‘Greed’ mantra is an attempt to throw up a protective smokescreen for the guilty to hide it. Same with the ‘Incompetence’ mantra – but only a fool still believes that one.
July 17th, 2008 2:59 am
And how much did these banks paid for protection against the bad boys shorting these overbloated and corrupt balloons ?
Now this country is supposed to be for free markets ?
“Naked shorting” is illegal. Nice. We knew that.
It’s strange that the SEC decided to take action ONLY to protect the chosen people in Wall Street. The rest of investors and companies can die. But don’t touch to the masters of the Universe.
(From MISH’s blog)
The order takes effect Monday, July 21, and will terminate at the end of July 29. The SEC said the order may be extended, but for no more than 30 calendar days in total duration. Interesting list indeed.
I wonder. What will be the next step ?
Impose by government decree and force people to own junk in their porfolios ? It’s coming you know. It’s coming. I am sure of that. So are exchange controls on the US dollar and banning ownership of precious metals. Bernanké, Paulson and “Con”gress started by attacking commodity buyers a few weeks ago. Now it’s the shorts. What’s next ? The US dollar shorts ? This is SCARY. Not just for the US, but for the of the world.
———————————————————-
The agency identified the following securities affected by its order:
BNP Paribas Securities Corp
Bank of America Corp
Barclays PLC
Citigroup Inc
Credit Suisse Group
Daiwa Securities Group Inc
Deutsche Bank Group AG
Allianz SE
Goldman Sachs Group Inc
Royal Bank ADS
HSBC Holdings Plc ADS
JPMorgan Chase & Co
Lehman Brothers Holdings Inc
Merrill Lynch & Co Inc
Mizuho Financial Group Inc
Morgan Stanley
UBS AG
Freddie Mac
Fannie Mae
July 17th, 2008 3:05 am
It also means. Don’t do business with these 19 banks and take ourt your money out of the banks before it’s too late. I always thought survivalists were a little bit crazy and craked in the head.
Not any more. You are probably right Eternal Optimist.
Want a reminder of what is happening at Indybank ? The FDIC list of busted banks is rumored to now being at 150.
July 17th, 2008 6:01 am
Better watch out. This morning the SEC will also be investigating on the people on the Internet that spread nasy and unfounded rumours on the US banking system. I wonder when will they close this site and put us all in prison ? Be very scared of what is going on in Washington.
July 17th, 2008 6:03 am
That’s nasty rumours. I don’t believe, but hey, crooked and corrupted as are your criminal politicians in Washington, I wouldn’t be surprised by anything.
July 17th, 2008 9:02 am
When I run across Sheeple who believe for example: The Fed (Government), The NAR, RE Agents, Bank Board members, Lender board members etc I always take them back a few years to this one sentence spoken like it was meant and with an entirely straight face and with meaningful vigor.
“Read my lips… no new taxes”
Off course only a few months later what did the American people get? New taxes!!! This coming from the man at the TOP… the President himself!!!
My point is this: You simply cannot possibly believe any politician that is trying to get re-elected in their 200K job. They will do, or say, anything that will get them re-elected. Look at these dopes leading the charge at the Fed and Treasury. They are doing their best at spin control and using any and all forms of rhetoric possible to get more power. The kicker on them is that they are not even elected, but appointed by the dopes we elected. The housing situation will get much, much worse before it gets better and that is ONLY if these folks get out of the way today and shut up and just do their jobs. Anything short of this and we prolong the inevitable, but make it that much worse when it finally explodes in our face.
Mr. B. better start raising rates in a hurry or we will have gone past having any control of what happens next. We will be at the mercy of China, Russia and the Middle East. They can bring us to our knees by selling off our currency and making the dollar basically a third world currency in terms of value. You think inflation is high now… if that happens, a stick of gum will cost you $10.00. A gallon of gasoline will cost you $30.00.
This is no laughing matter and quite serious in nature. We must get these morons out of their positions of power and get some people in place that know WTF they are doing. Mr. B. and his band of thieves clearly have no clue!!! They are not making policy in line with protecting the American public and keeping our currency elevated and controlling inflation. You know their one charter in life. Their only REAL job they are failing at terribly, and all to protect their banking buddies. The Treasury is the same way with Paulson, who came from Goldman, has his finance friends to protect. Bush is a lame duck and irrelevant at this point, but can still do some damage if not kept in line. The Congress just seems to be so far behind the 8-ball that they are still trying to pass a subprime “Bail Out” bill that not only has become irrelevant at this point as the subprime issue is clearly behind us, but the money they are talking about will help less than 2 months worth of folks facing foreclosure at today’s rate. Then on top of that they are now discussing giving the Treasury a BLANK CHECK to throw gobs of money at the problem. This is clearly what we did to get into this mess (look at our education system for what happens when you do that) and now they want to do more of the same. Yeah that will help us all out… spending more money we don’t have on worthless programs to keep lining the pockets of the banking industry shills. BRILLAINT!!!
I cannot believe personally that the Sheeple have not already taken to the streets over this. Maybe when WAMU and a few others go belly up and we witness a few more runs on a few more banks we will start to see the public stand up for them self’s. It is a shame we must go broke as a country and as individuals BEFORE we do anything as a Nation of Sheeple…
July 17th, 2008 9:33 am
Ok Let’s get back to essentials.
Now that the jerks at the SEC think they have squeezed the shorts, who will buy the new printed Fannie Mae and Freddie Mac shares ? What’s the amount again ? 70 billion dollars of shares. Who is going to buy that garbadge ? WHO ?
July 17th, 2008 9:35 am
Stu – are you running? – because while I agree we need to vote the bastards out – Who do we vote in? anyone with any ethics, intelligence, and candor to tell the truth cannot raise the capital to run a viable campaign, very sad, I do not believe this was what our founding fathers had ever anticipated.
On another note – did anyone hear the tid bits from the JP Morgan conf. call – That Jamie Diamon is reporting large increases in problems with “PRIME” Mortgages – Really? hmmm – Mr. M what do you think of them apples – ?
Then, Dick Bove pops on bubblevison to say, well that is not a big deal re: prime mortgages, because Diamon just likes to dappen expectations, so he can show gains next go around. (?) Are you shitting me? All these bank earnings are coming in higher than expectations, because the expectations were crap. If my kid comes to me and tells me she’s getting an F in Math – and then comes home with a D – Am I suppose to be happy? LOL / OMG !
July 17th, 2008 9:59 am
Evil-A, no I am not running. I figure if we just vote everyone out that is in there and then pressure and demand the newbie’s do what is right, we will be head and shoulders above where we sit today. Next election we do it again. We are basically enacting term limits by the way we vote. In a matter of 3 or 4 elections we will be very happy as a Nation compared to what we get now. The lobby power will shrivel up overnight if they have no extended ties and the bills that get written will be discussed and worked on because they don’t have time to waste. Any bill not acted on goes away after each election and must be done all over by the next governing body. Things like that will right this ship and get the public back in control of the Government and get the Government back in line with the publics best interest. Just a thought…
Here is a link http://static.seekingalpha.com/uploads/2007/11/21/dslmtgresets.jpg I am sure you have seen in regards to your question about “Prime Loans” As I said earlier today, the Subprime mess is pretty much behind us now, and it is Alt-A and Prime loans up next. Then Option Adjustable Rate loans will come after that. These new problems have already started, but really heat up from 2009-2012 which is why it is utterly laughable when people call for a bottom or passing a “Bail Out” bill will do anything at all to slow this train wreck down. We are in inning 3 of a 9 inning game and the players are already exhausted…
Your last point I could not agree more with. It is a joke when the standards set by economist are so low that the companies beat them and the street cheers. Bunch of idiots I tell you… idiots!
Did anyone see the builder confidence report yesterday? The Housing Market Index fell to an all time low of 16 (A reading below 50 indicates that more builders think home sales conditions are poor than those who think the environment is positive for sales)!!! I believe the builders reading on things, which is dismal, much more than I believe any rhetoric coming from the NAR or Fed speak on housing…
July 17th, 2008 10:04 am
Philadelphia manufacturing index down 16%.
Real good news for the real economy.
Oil going up again. Has anybody an idea how long the bullshit will last ? All the junk and the shit is going up.
July 17th, 2008 10:24 am
too bad stu – you would have got my vote
how about this “everyone” (in bubblevision land) is happy with the building starts? should we not be clearing existing inventory, why add any more – oh, and yup – the starts are in the north east for mult-family constuction -got to put all those new renters some where.
Marc – the b.s. will last as long as Wall St. and Washington allows it to – or until the sheeple get so wacked by gas, heating oil, food, and bank closures they do what stu suggests and riot in the streets – I should becareful what I wish for, but it would be kind of interesting to see.
July 17th, 2008 10:38 am
So we’re starting the day with some enlightening comments by MA, Stu and evil-A. But let’s briefly stand back from the financial trees and get a wider perspective and SEE! the forest! Stu’s hope in getting rid of our self-serving representatives in Congress is a lost hope. Elections can now be (and already have been) ‘engineered’. Who puts up the candidates for key offices that limits our choices? – and makes the outcome immaterial! (The answer is AIPAC – or the ‘Israel Lobby’ (Zionism)). If they want to, they can always rig the vote count (a la Stalin). The Fascist America is already here, folks, it’s just not blatant yet – it WILL be and SOON! Those Halliburton-built gulags are waiting for somebody! If you look carefully, all the advance planning is already complete and in place. The only thing missing is the ‘right’ moment (and 9/11-II).
What’s going on now in the world of Finance is shadow-boxing or flim-flam – it means NOTHING in terms of changing the planned and inevitable results: ‘Financial Armageddon’. The planners (Zionists) are just waiting for the ashes to settle to pick up the pieces – for a song (lotsa RE, corporate and infrastructure assets included here).
TPTB (Zionist fiddlers on the roof) are fiddling, singing, dancing and wringing their hands for show – while America is burning to ashes (and we ALL fall down). By the way, there are PLENTY of stooges in the employ of Zionism – Bush and Cheney leading the Charge for Israel’s leaders. Obama or McCain will be next – it doesn’t matter one iota who it is!
To appreciate the grand and evil design of the Zionist GAMEPLAN, have a thorough read of my website. If you don’t have much time (and you don’t), just read the Blog. If you are not a believer yet, just wait and WATCH!
July 17th, 2008 10:43 am
PS EVERY piece of The Puzzle will fall into place when the time is right – right before our eyes! (like it or not).
July 17th, 2008 11:09 am
Eternal Optimist, that doesn’t sound much like optimism to me… It sounds more cynical and is a little over the top for me. I am not sure where your conspiracy theory comes from, but count me out. I don’t believe any Zionist Regime is coming to take over America. We own guns in this country and a lot of them. The biggest army in the world is the American people. We just need Americans to wake up and get involved and a lot of this would just disappear all together (lobbyist for example or term limits).
While I concede that we do not have a large enough platform to pull enough Americans together to make the change I discuss immediately, it is worth a shot. I think if we can remove even one of the lifers (Dodd or Kennedy for example) we would be serving the country well. We must start somewhere and we now have a cause to institute large change in this country. We need to use it though!!!
What is going on in the world of finance is quite easy to see, but much harder to solve. We need to have total fallout and a major recession in order for us to start correcting it all. The Government just needs to get out of the way for this to happen. They need to reduce spending and cut back on their socialistic agendas in order to allow for a pause in the bleeding of dollars we are going through. Some of this will be forced onto them buy the foreign markets curtailing of lending and some by the fact that we don’t have the money to do much of this. I honestly believe the hold up in the “Bail Out” bill is partially because we can’t afford it… GOOD!!! The sharp hike in interest rates about to hit from the Fannie and Freddie fall out will also help keep business and the American people from becoming over leveraged any further. Free markets always take care of themselves… always!!!
The RE you reference that can be picked up for a song is really not the case. RE being priced where it belongs and purchased at true market value is a free market society in full working order. RE was never worth what people thought and had hoped for. Now that the speculation has been wrung out of the markets we are seeing the self adjustment back to affordable levels and historical norms. That is not buying for a song, but more like buying at true value. I watched my first home fall by 50% in value and then come back up 20% over the ensuing 7 years. I sold at what I considered a break even point. Very similar to today, but the numbers are much greater is all. This nothing new and nothing we won’t get past as a country. It may take 12-15 years before we do, but we will get there and I am certain there won’t be any Zionist to contend with during our travels along the way…
July 17th, 2008 11:22 am
The best bet would be go short on US treasuries.
Maybe the SEC will also outlaw this soon. The SEC could also outlaw the market like in USSR .Ah USSR! What a great success ! I think that slowly but surely effectively it will end up like that. I would start by withdrawing my money from the banks. All of them. Hey I live in Canada and I am seing the same thing going on, even if our banks are much more conservative. The number of houses for sale has recently increased a lot. Jobs in manufacturing are dissapearing like in the US. The weak dollar is not helping manufacturing. This is really troubling and scary.
July 17th, 2008 11:35 am
Well, Stu, I appreciate your measured and thorough reply. Under ‘normal’ circumstances, I’d be inclined to agree with you. But the time we live in is ‘out of joint’ – it has been put ‘out of joint’ deliberately. The hour is far too late for conventional remedies of the past and there just is not enough time left to solve the problems which have been created.
We all see the world through our own eyes and the eyes of our past experiences. Things look a little different every day. On some days we are hopeful and on some days we just want to keep our eyes shut.
What’s happening to America now and what will happen in the near future (next 4 years) is a real tragedy – BUT there is hope! You ask about my optimism? My optimism rests in things Eternal – not temporal – hence EternalOptimist. Read my Blog. Don’t be turned off by what you (at first glance) disagree with. Visit the links – especially the ones on my Blog header. I especially recommend David J. Meyer (LastTrumpetMinistries). You will discover things that will open your eyes in ways you can’t imagine. Good Luck!
July 17th, 2008 11:59 am
PS Someone is ‘playing’ with us (Americans and humanity) – like a cat with a mouse. We know what ENDGAME the cat has in mind as it ‘plays’ with the mouse. Find out WHO is ‘playing’ with us! – and what our destiny really can be. There is reason for Optimism.
July 17th, 2008 12:00 pm
For the ninny who criticized me for helping my family to save money, yes, I did something I should not have done. What did you do? Do you see my name on my post? What is yours, or can’t you spell it?
Now for the important stuff. Someone said that throwing money at the problem is not going to fix it. That is exactly correct, except for one thing; the banks MUST continue to do business. They must continue to, not “throw”, but lend. Based on sound, old-style, lending principles. the kind we had before some crook came up with the idea of credit scoring (which is bullshit, doesn’t work, anyways, and is the subject of a separate rant).
Right now, nearly every bank in the country is running scared. They are afraid to make loans, because they don’t know what the ROT is going to be, in their residential lending portfolios, or how much the trouble in residential real estate is going to bleed over into commercial.
What they are doing is making as few loans as possible, and socking away everything they can, for loss reserves. This is like sitting down, and waiting to bleed to death.
What they SHOULD be doing is lending like mad, to try to REPLACE the non-performing “investments” with performing ones. This will better afford them the opportunity to weather the storm, by increasing their cash-flow, from which they can bolster their loss reserves, and increase their capital.
Even worse, by showing a “bomb shelter” mentality, they project the wrong image to the public. If you want to find out if that is a good idea, ask the folks who ran Bear Stearns, and Indymac. They can REALLY tell you about the difference between perception, and reality. (Yeah, Indy was, probably, already toast, but the ASSHOLE Senator did not help things.)
It is ridiculous, and un-American, to try to legislate what people can say, or think. But SOMEONE has to do SOMETHING about sheeple (an extremely apropo’ term, by the way) being misled by the MONUMENTALLY irresponsible utterances of ALLEGED public servants, such as the moronic Senator who was the last straw on Indymac’s back. (Eventually, the politician will find out that legislating speach is impractical, and give it up.)
So, real estate lending professionals, here’s what I think we should do: Ignore it.
All of the bullshit, bluster, and posturing, are for a group which we are not members of. It’s all for the TV cameras, which inform the sheeple of what the politicians want them to hear.
Most of you understand, or have a pretty good grip, on what is going on. And you would have a better grip, if you put your outrage, and your fear, aside. Realize that you cannot, by yourself, materially effect the overall situation. You don’t get to hold the remote, so don’t try to change the channel.
Most of us believe that real estate is the most important sector of the economy of the USA. And, if you REALLY understand international currency valuation, the stock market, and what REAL wealth is, you will see it all comes back to real estate. The sheeple do not.
They think the price of stocks have something to do with the value of a company, our currency should be the most valuable, since we have the most powerful military, and we can reduce the price of oil by taking over the Middle East.
Instead of focusing on all of this bullshit, I think we should go back to work, and that our work should be focused “where the rubber meets the road”. Help the sheeple who need help. Help the homeowners who are in foreclosure, or who are going to be in foreclosure, by assisting them in the renegotiation of their loans.
This will help ALL of us get back to business, (almost) as it used to be.
Here’s the bad news: There are MILLIONS of homeowners in foreclosure, or at risk of foreclosure.
Here’s the good news: There are ONLY millions of homeowners in foreclosure, or at risk of foreclosure. For those of you who are relatively new, we had a refi boom in the early 1990’s. It dried up, because we ran out of people to refi. We can accellerate the foreclosure crisis by helping lenders to run out of people to foreclose on.
Every loan you renegotiate changes a non-performing asset into a performing one. This helps a lender to define his rot, re-apportion his loss reserves, and redefine his cash-flow. In short, it gives him a better idea of where he is.
Every house that doesn’t get foreclosed on is another one that doesn’t get added to REO/inventory, prolonging the situation, and making it worse.
Every house that doesn’t get foreclosed on is another one that is NOT contributing to the destabilization of housing prices.
Eventually, (and it won’t take as long as you might think), together, we will get a handle on this, and people will stop getting foreclosed on. This will cause housing prices to stabilize. People will start to buy. Lenders will start to lend, again (or those who are still in business, and I don’t care who they are, nor should you). Real estate agents will go back to work (sorry, there are bad side-effects to everything). AND, here’s the big one: You won’t have to hear any more IDIOTIC theories about who is to blame, from moronic, crooked, grandstanding, politicians.
But that won’t be the end of it. Those of us who are here, and who help to clean up this mess, have to remember it, and how it happened. We need to make licensing requirements more stringent, and enforcement agencies much stronger. WE need to check OUR ethics, and keep a sharp eye on those to whom we teach our trade. Because if we do these things, we have a better chance of avoiding a repeat.
It’s time to decide if you want to be part of the solution, or if you are going to continue to be part of the problem
Limiting Congressional, and Senatorial, terms to ONE is an excellent idea, for starters.
July 17th, 2008 12:26 pm
Great post Bob.
thx
July 17th, 2008 12:30 pm
Bob has outlined the correct course of action. It will not produce the results he anticipates – but it is the ‘right thing to do’, nevertheless. Then there are some additional things to do: Educate yourself about why we are in this mess. Do the homework (you can do it all on the Web). At least you’ll finally SEE! some parts of that ‘Hidden Hand’ and WHO is attached to it (and what’s coming!).
July 17th, 2008 12:40 pm
PPS Even worse than being ‘in the Dark’ is to be the ‘deer in the headlights’, when the Light finally arrives.
July 17th, 2008 1:03 pm
Speaking of dots (that can be connected to the Mortgage Mess), here is a BIG dot worthy of closer inspection – and reflection:
http://www.eastvalleytribune.com/story/118233
Now try to connect this dot to some others – like the ‘War of Terror’ and WHO promoted it and benefited from it.
July 17th, 2008 1:08 pm
Bob, while I agree with much of your post, I have something for you to ponder…
I liken many of the issues you raise to that of illegal immigration. In other words to get tax revenue up and health care cost contained we must FIRST have secure borders and a viable plan to rid this country of illegal’s as quickly as possible. Without that taking place any attempt at any health care program is just foolish (especially universal) and any revenue going to fund programs that ultimately enrich illegal’s is also foolish. We will spend much more than needed for much less in services as a result in my opinion.
Well in many of the instances you raise we cannot really target solutions until we first gain back control of our government. We will just be spinning our wheels trying to help while rules are being passed or backroom deals that go against what we are trying to accomplish. The Treasury’s (Paulson) “Bail Out” bill for example goes entirely against any movement to help out homeowners with foreclosure issues. It is designed to help lenders and banks. They are not going to help out Joe public but rather line their pockets with the money. We will still have over 2 Million foreclosures regardless and as a result of Paulson’s plan interest rates will sky rocket making it that much harder for people to be helped and that much easier for the lenders to have an excuse for why they can’t help. What you try to solve on one hand is being wiped out on the other. You make no head way doing it like that. First things first my friend…
What we need to do as a country is many, but we can start with the following and THEN we can make change… REAL CHANGE!!!!
1. Abolish the FED immediately (they are simply not needed any longer and do much more harm than good).
2. Term limits on the Senate and Congress immediately (we need them working for us and not one another and there cronies).
3. Balanced Federal budget immediately (figure it out people, my wife and I do every year).
4. End lobbyist immediately (gone should be the days of paying people off).
5. No new taxes, fees or increased payments of any kind for 2 years (figure it out people, my wife and I do every year).
6. No “Bail Out” plans of any kind for anyone (stop it already and let our free country and it’s free markets work on their own).
7. Stop all universal health care talk immediately (we simply cannot afford it right now, and I am not convinced we even need t).
8. Wage and hiring freeze on all government (they already make way too much and are out of touch with the average American they supposedly work for).
9. Real government reform on elections (way too much money, lobbying, and tv and radio disparity to one candidate).
10. Real Government reform on campaigning (way too much money, lobbying, and tv and radio disparity to one candidate).
While I am not opposed to fighting for change and being a part of the cure, I do think without these and many other things in place as a result of these things, we cannot be successful. I would rather see our efforts in making some of these changes either by ballot initiatives, petitions, etc. What ever it takes we must not stop until we have taken back our Government that we pay and who work for us. Until then it is all a moot point isn’t it…
July 17th, 2008 1:16 pm
Anyone hear about this today?
Wachovia St. Louis headquarters raided
Published by Morganat July 17, 2008 in Economy and Wall Street.
Securities regulators have raided the St. Louis headquarters of Wachovia to investigate the company’s actions around their issuance of auction rate securities (h/t Don) . The regulators are looking particularly hard at how the company valued and marketed the securities which have caused more than 70 complaints filed with the state from investors that have had assets frozen by the company during the mortgage meltdown.
July 17th, 2008 2:04 pm
Stu:
It is far too late to ‘take back our government’. Back in the 1950s, Sen Fulbright declared that the US Congress is “Israeli-occupied territory”. With the ‘Israel Lobby’, AIPAC and assorted Neocons feverishly at work since then, the US Congress is now “impregnable Israeli-occupied territory”. There is no longer entry into the US Congress unless you have a VISA from AIPAC! Anyone who tries to change that is likely to meet with Paul Wellstone’s fate! Anyone who gets into the WH on their coattails and then changes his mind, is in for JFK’s fate. Good Luck, trying!
Bob is right. Do what you can to help people.
July 17th, 2008 2:21 pm
If you REALLY want to know why WE the “TAX PAYER” is “Bailing Out” Fannie and Freddie you need to look no further than the Lobbyist in front of your nose!!!
Over the past decade, both Fannie and Freddie made the list of Washington’s top 20 lobbying spenders. They spent a combined $170 million to cultivate allies during that period, a bit less than the American Medical Association and a bit more than General Electric. At the same time, their executives have consistently led the mortgage-banking sector in campaign giving to members of Congress, contributing a combined $16.2 million since 1997.
People who have lobbied on their behalf have played or are playing roles in the presidential campaigns of both Republican John McCain and Democrat Barack Obama.
Defenders, including President Bush and Treasury Secretary Henry Paulson, say the nation’s two major mortgage companies — which own or guarantee roughly half of the nation’s $12 trillion in outstanding mortgage debt — are more vital than ever to the smooth functioning of the nation’s jittery financial markets.
The two companies were set up by federal law as “government-sponsored enterprises” that operate as private companies with profits and stockholders. Critics say they have used their clout and unusual status to create a sort of regulation-free zone around their businesses. When times are good, shareholders and executives of the companies are richly rewarded. When times are bad, as now, taxpayers could be left holding the bag.
“Congress created this problem by creating special rules at Fannie Mae and Freddie Mac and ignored the problem for years,” said Sen. Jim DeMint, R-S.C., a sharp critic of what he sees as a looming federal bailout.
Fannie Mae — the Federal National Mortgage Association — was established in the 1930s to encourage homeownership by buying mortgages from banks. That freed cash for the banks so they could make new loans.
Fannie and Freddie Mac (Federal Home Loan Mortgage Corp.), created later but with basically the same mission, hold some of the mortgages in their own portfolio and package the rest as bonds and other securities, which they sell.
Neither one makes loans on its own, and they were not directly involved in the subprime mortgage fiasco. But the housing downturn is so steep that they have been seeing increasing delinquencies on their conventional mortgages and have been exposed to investor flight from financial assets. Furthermore, because of their special status, they can keep smaller capital reserves on hand than other financial institutions. They need to raise cash to stay afloat.
Fannie and Freddie have long been distinguished by their outsized influence. They spend heavily on lobbying and hire liberally from Capitol Hill’s revolving door and their executives give top dollar to political campaigns. They’ve also funneled contributions into select charities and think tanks.
“They have always understood that the political risk was huge for them, and they put millions of dollars into using contributions, jobs and consulting contracts to stay in the good graces of people in power,” says Wright Andrews, a veteran banking lobbyist. “They had both parties — and particularly the Democrats — under incredible control.”
To help keep themselves free from unwanted regulatory and congressional prying, the two mortgage giants have surrounded themselves with scores of well-connected allies. Fannie Mae’s 51-member lobbying stable, according to its most recent disclosure, includes former Reps. Tom Downey, D-N.Y., and Ray McGrath, R-N.Y.; Steve Elmendorf, a Democratic political strategist and former congressional aide; and Donald Fierce, a longtime GOP operative. Freddie Mac’s list of 91 lobbyists includes former Reps. Vin Weber, R-Minn., and Susan Molinari, R-N.Y.
At times, the push for influence has gone over the ethical line. In 2006 Freddie Mac paid a $3.8 million civil penalty to the Federal Election Commission to settle charges that it had used corporate resources to stage 85 fundraising dinners that raised $1.7 million for candidates for federal office. In internal documents, Freddie Mac described the events as an exercise in “political risk management.” The fine still stands as the largest in the FEC’s 33-year history.
This past April, former Fannie Mae chief Franklin Raines and two top executives agreed to a $31.4 million settlement with the government over their roles in a 2004 accounting scandal.
Raines, the company’s former chief financial officer, Timothy Howard, and former controller Leanne Spencer were accused in a civil lawsuit of manipulating earnings over a six-year period at Fannie. Raines was appointed by Clinton, after serving as White House budget director under Clinton.
Raines’ predecessor, former Fannie Mae chief James Johnson, is a prominent Democrat who was an adviser to 2004 Democratic presidential nominee John Kerry and was selected by Obama to help vet his vice presidential prospects. But controversy over favorable loan deals he obtained with Countrywide Financial Corp., a bank seriously damaged by the mortgage meltdown decline, prompted him to abruptly resign that post in June.
McCain’s campaign manager, Rick Davis, also has ties to Fannie Mae. He was president of the Homeownership Alliance, a Fannie Mae and Freddie Mac-led advocacy group. And Arthur B. Culvahouse Jr., a one-time White House counsel to President Reagan, is providing behind-the-scenes advice to McCain in the Republican’s search for a running mate. Senate records show Culvahouse was registered to lobby on behalf of Fannie Mae and Lockheed Martin in a couple of instances several years ago, although his allies say his involvement was not extensive.
July 17th, 2008 2:22 pm
Thanks, Stu.
I am sure you are much more politically astute than I am.
I will tell you a few things, though.
I did not vote for over twenty years. This is because I did not believe it would make any difference. One bunch of crooks was no different than another. I am convinced that this is the view of more than 75% of the American public. The folks who vote just take a fatalistic view; “I might as well, because it might do some good.”
However, I have changed my mind. Now I go with a theory I read about, which is common in Asia; a fat cat chases, and catches, fewer mice. It means that a new leader/head man, etc., is more likely to spend time lining his pockets, than the old one. The old one already has things arranged, so he is more likely to let things be as they are. I vote Republican, as the lesser of all evils.
I know they are the ones with the money, and they want to keep it ALL for themselves, BUT they (generally) do things that are good for business.
I refer to the Democrats as “The Reds”, or “The Communists”. This is because they want to take all of the money from the working people, and redistribute it as they see fit. They want to government to make most of your choices for you. I find this MUCH more odious than the Republican agenda.
As far as health care, we don’t need it. I know WAY too many doctors who make over $1,000,000 per year, and have less than five employees. They make this kind of money because the idiot insurance companies will pay them.
Two years ago I had an emergency surgery to remove my gall bladder. I didn’t/don’t/won’t have health insurance. I was in the hospital for three days. The entire bill was $30,000. I am certain it would be much more, today.
What we need is some way to regulate medical fees. This would make health care affordable for everyone. Perhaps they could use the mortgage fee regulations as a model? Like mortgage fee regulations are a model for anything, other than stupidity, and incompetance.
Secure borders are impossible. I would be for the fence, except that it will be (over) paid for in tax dollars, and IT WON’T WORK (unless we put it 100 miles on the other side of the border).
The best solution for the “illegal immigrant” problem is to give them all citizenship. America was built on immigration, and the backs of immigrants. And, while we’re at it, let’s clean up the term “illegal immigrant”. What we are talking about, in over 90% of cases, are Mexican nationals, who came here to work.
Here are a few facts, about these “illegal immigrants”. 1) Very few of them utilize/subscribe to ANY type of government services. This is because they fear contact with the government. It’s the LEGAL ones who have a paycheck in one hand, and a welfare check in the other. They don’t have to worry about being deported, so they can afford to abuse the system any way they can. The ILLEGAL ones are afraid they will be asked for their papers, which will cause them to be found out, and deported. They buy Social Security numbers, on the streets of major American cities, and PAY the Social Security tax, out of their wages, through withholdings. This, despite the fact that they never expect to see one dime from Social Security. They consider it a cost of doing business.
Furthermore, they file their income taxes on time, and they don’t cheat. If they cheat, they may be audited. If they are audited, they may have to go to a government office. If they go to a government office, they may be discovered, and deported.
They have auto insurance, and driver’s licenses. They don’t violate the traffic laws. If they violate the traffic laws, they may be confronted by a policeman. If they are confronted by a policeman, they may be discovered, and deported.
They take jobs that no one else wants/will. A couple of years ago there was a rumor that all of the illegal aliens were going to take off, for one day. I was PRAYING it would happen. I wanted the American public to find out EXACTLY how well their cities, and their society, would function, without them. Just as a start, NO restaurants would be open, and the service in hotels/motels would be, virtually, non-existant.
Lastly, it is the fault of the United State government that they are here, illegally, in the first place. If government workers weren’t so lazy, and hard to fire, it wouldn’t take fifteen years for a Mexican citizen to get a work visa. As it is, they apply for the work visa, and cross the border, illegally. By the time they are ready to retire, back to Mexico, their work visa is approved. They can,then, sell their identity to someone else, and go home, financially secure.
How do I know all of this? Many of my clients, in yesteryear, were illegal immigrants.
So, just for the record, I consider any raising of the “illegal immigrant” issue to be anti-Hispanic racism.
I understand you want change. And so do I. But be careful what you wish for, because you might get it.
Before we have REAL/SIGNIFICANT change, in our government, and the way our laws are made, and administered, most of the voters are going to have to be educated, and they are going to have to be convinced they can make a difference. This will take small successes, first. And those successes will have to be well publicized.
After that, we have to have MUCH tougher anti-corruption laws, with a MUCH lower burden of proof.
I like the Russian (Soviet) model. If they caught an official with his hand in the till, pedeling influence, etc., they would shoot him. All they had to do was prove he got the money/benefit. Oh, and they would shoot his co-conspirators, too. The Red economy collapsed because of INEFFICIENCY, not because of corruption. Ours is in danger of collapsing because of corruption. Which would you choose?
I would roll back government wages, and abolish the IRS.
Here are a few facts about the IRS, according to the GAO:
1) They employ roughly 40,000 people. (I don’t remember EXACTLY where that puts them, but I am certain they are in the TOP TEN, for ANY organization, NATION WIDE.)
2) They collect enough money, in personal income taxes, from US citizens, after their own expenses, to run the Federal government for 45 MINUTES, per YEAR.
3) There are NO elected officials in the IRS, nor is the person they report to an elected official.
And, according to Bob, they are the most powerful organization on the face of the Earth. This is because they can do anything they want to, to any US citizen, at any time, and, even if they are absolutely wrong, the US citizen has NO RECOURSE. No other organization can do that, including the Marines.
If you want to start to turn this country around, and fix most of what is wrong with it, start by repealing the 16th Amendment to the Constitution. Then take away the ability of the government, at all levels, to levy, or collect, INCOME taxes, of any type. (If you learn about the 16th Amendment, you will find it does NOT creat an income tax. What it DOES do is clarify the rights, and method, by which the Federal government can levy, and collect, an income tax, from the citizens of the various states.)
That’s all, for now, sports fans. I have to get SOME work done, today.
July 17th, 2008 2:39 pm
Sorry, I meant to abolish PERSONAL income taxes. Over 95% of the tax money collected by the Fed Gov’t is in some form of corporate income tax.
July 17th, 2008 3:05 pm
Bob, I am glad you vote now because it does make a difference. Also if you don’t vote you would have no right to complain about anything Government related in my personal opinion.
Just so you know, I didn’t write that last post other than the first sentence. That is why I double spaced it. I was reading it on an article, but I am not sure about the rules here as far as posting links and such.
I know this is off topic for this thread and unrelated to the original column, but I must respond to some things you said.
1. Secure borders (to a degree obviously) are indeed possible. They are needed desperately in this country along Mexico and I hope your not naïve enough to think only Mexicans are streaming across.
2. We currently have heavy regulation for the medical, dental and vision in this country. It is a good thing. My dentist can only charge me X for a cleaning for example or my Doctor only X for a physical. It has been this way for many years now.
3. I think it would be absolutely insane for us to grant citizenship to all illegal’s. That is no solution at all. They would immediately bring all of their family members here and we would have another 20 Million within a year or so after doing that. I have many, many issues with this past proposed legislation.
4. While I appreciate your past in dealing with illegal’s you have a few problems in your argument. They ALL subscribe to many Government services. Driving on our roads and using our healthcare system which cannot be denied by law for example. They cheat the system as well to use many other resources. Very few pay taxes and most do not have licenses either, but drive illegally. Cops can’t deport them and neither can judges. People are screaming for work and if the jobs in fact existed, Americans would take them.
5. I have no issue with Mexicans or any other ethnic group, but I have a big issue with law breakers draining our national resources and not paying there fair share while doing so.
6. I agree and would add abolishing the IRS, but again ONLY after we have a solution (flat tax or whatever) in place. Walk before we run.
While we may seem eye to eye on many issues, we are very far apart on some as well…
July 17th, 2008 4:39 pm
Am I the only one who scrolls right past every EternalOptimist post? Every post is the same. Get a new agenda or find another forum…its tired.
July 17th, 2008 4:58 pm
No
but I am a Zionist….so, it makes sense.
July 17th, 2008 5:11 pm
No such thing as a Zionist evil-A. There are good people and bad people. And that’s it. Usually the bad people sell drugs, sell weapons and are in politics and love guns and oil. Eternal Optimist is a little bit simplistic. He forgets the good fellaws from Saudi Arabia, all good buddies of Dick Cheney,(hush hush, it’s a french name but Mister Chenier doesn’t know it), and George W. Bust (his grand-father was a lobbyist for Adolf Hitler). Check it.
July 17th, 2008 6:35 pm
marc,
I know, I was just joking,….
I am also a believer in good people and bad ones, and that is it – no matter to religion, skin color, or what have you, I was more responding to what it seems that most who really like this blog are frustrated with..all and all….you are either a good egg or a bad.
cheers.
July 17th, 2008 7:10 pm
Hey, Dave…..’the same’…..has a familiar ring to it…..as in: ‘yesterday, today and tomorrow’. WHO is the same – yesterday, today and tomorrow, Dave? Anyone else you know? There’s nothing more tiring that an inconvenient truth, right, Dave?
Pssst…..Dave…..if you scroll past every one of my posts, how can you be sure they’re all the same, huh? That’s a rhetorical question, Dave. Better replace another memory board, Dave – or Daisy will shortly come into your life.
And MA, I’m surprised at you. You flicker like a defective lightbulb – between 100 watts and 2 watts. You mean there are only Black Hats and White Hats? What about all the other colors of the rainbow? – not to mention shades of gray and all the possible combinations and permutations! And what about shapes and corners? Ever hear of a ’sombrero de tres picos’? Wanna SEE! a real Zionist in action? Watch Bush, Obama, McCain or Pelosi (or anyone, for that matter) when they speak at an AIPAC meeting. There’s enough groveling to make your skin crawl.
Who’s being simplistic here, MA?
Gotcha! – right between the eyes! So much for today, but there’s always hope for tomorrow.
How about a rotten egg? (or scrambled).
July 17th, 2008 7:13 pm
PS You people crack me up with your eggs!
July 18th, 2008 2:28 am
Look Eternal Optimist I was just saying that if there is a conspiracy, it’s far more important and generalized.You have Saudis, Russians, Chineese, Germand, Swiss, Burmeese, Arabs, Aficans.
You really what to know who is the BOSS today ? The boss is China. When the chinees generals decide to pull the plug, you will feeel it, included all these little cocky arrogant and imperialist zionists, that are obsessed by Israel, and holdupping the US foreign policies and making war to Arabs. The real power speaks mandarin Eternal Optimist.
As for your obsession with hebraic culture, I don’t understand. So can we talk about something else ? Bad apples like George W. Bust love to hang with other bad apples of every origin. Bad apples love to ruin the middle class in EVERY country, Israel, USA, Canada, France, Swaziland, Zimbabwe, included.
The bad apples are the one that profit by all these horrendous credit bubbles, and they are from all nations. Believe me it has to have with the super rich, big shareholder of JP Morgan, financed by central bankers, killing and exploiting the poor and the middle class.
The best that described the phenomenon of stock bubbles and credit manipulations, was Karl Marx. At the origin a disgusted stock trader and a jew, lost his shirt in a good old bubble ! It’s about class warfare Eternal Optimist, just that. A chineese general, a KGB boss, a Saudi Prince, a Hezbollah boss and a “zionist” banker have more in common than you think. It’s called money, greed and corruption. “Greed is good.” ain’t a monopoly Eternal Optimist. It just ain’t.
July 18th, 2008 3:20 pm
Eternal Optimist, you are correct on most accounts, except for the 1000 year reign. The true Christianity is Orthodox, and before Armageddon Russia must rise, and there shall be one last Czar. Please witness the rebirth of Christianity in Russia, which will be the last Christian Nation on Earth. You need to learn about Orthodox Christianity and especially Orthodox prophecy. The 1000 year reign is absolutely false interpretation of the Bible, typical of many (mislead and heretical) Protestant groups. There is no pre-trib rapture. Be warned!
July 18th, 2008 4:20 pm
Mathens, thanks for your well-meant comments, I’m sure. I am certain that there will be a great spiritual awakening in Russia and Russia will play a critical role in the End Times (SEE! the Prophecy section on my website – Prophecy #9). Messianic Jews will play an even greater role when God casts His Spirit onto all flesh in a final appeal to humanity to come to His Son!
As for ‘Orthodox Christianity’ (RCC, Greek, Russian or any other kind), they do NOT represent true followers of Jesus the Christ but Deception by the Devil. The opulence, pomp, ritual, paraphernalia, worldliness, hidden wealth, pedophilia and other hidden sins are anathema to Christ – and all of that will be destroyed before the return of our Lord! God will ‘clean His house’ first, as He is now doing in the RCC. Beware of false doctrine and “wolves in sheep’s clothing”. “There will be gnashing of teeth”.
“A servant is not greater than his master. If they persecuted Me, they will also persecute you”. Who, among the leaders of the various ‘Orthodox’ churches, is being persecuted for His name’s sake? NO, NOT ONE! They all live a worldly and opulent life. It is all Deception by the Devil! The sheep are being led astray by false shepherds! “They shall their reward”.
Concentrate on Christ, Himself. Forget ‘Orthodoxy’. He is meek and gentle in Spirit and devoid of all wordliness. Before He returns, everything worldly disguised within ‘Christianity’ will be burned by the fire of God.
July 18th, 2008 4:21 pm
“Based on sound, old-style, lending principles. the kind we had before some crook came up with the idea of credit scoring ”
Right now that still can’t be done in many areas. House prices are too high and too few Americans have the cash saved up for a 20% downpayment. If the banks would start getting the REO’s sold and off their books this would lower prices back to where sound lending principles could be used. Banks aren’t giving out loans because there is nobody to give a loan out to at the prices houses are currently at.
July 18th, 2008 4:27 pm
OK – I apologize for being slightly ‘off topic’ in the last few comments!
July 19th, 2008 11:04 pm
I agree that this is going to be the next wave of troubles for the financial market..That is why I believe that Paulson wants a blank check..he has alot of zeros he plans on adding to the end of it…
July 21st, 2008 12:02 am
Paulson. What a nice guy. He sold his stake in Goldman Sachs for 800 million. He and his accountants managed to differ indifinetely any capital gains. Nice example to soak the poor and middle class. It’s a nice example. Like the great patriots from Haliburton moving the company to Dubai ! It now pays 1% income tax in Dubai, while benefiting of all these nice contracts and largesses in Irak. What a great country ! And these bastards run the country and say pay your taxes. Paulson is a jerk like Rubin. They are part of the problem. “What’s good for Goldman Sachs id good for America.” Except it’s not true, and never was.
July 21st, 2008 12:00 pm
Spot on, MA! “They shall have their reward”. No one will ‘get away’ with ANYTHING. EVERYTHING will be brought to Light and judged – whether it is good or evil.
September 16th, 2008 6:21 pm
PLEASE LET ME KNOW WHEN DOWNEY SAVINGS HAVE A CLASS ACTION LAWSUIT AGAINST I WILL GLADLY JOIN, THEY ARE SCUM
SCUM SCUM
September 16th, 2008 6:23 pm
EQUITY FINANICAL GROUP LLC IRVINE,CAL DON’T DO BUSINESS WITH THEM THEY STAND RIGHT NEXT TO DOWNEY SAVINGS, I WILL JUMP FOR JOY WHEN THEY CLOSE THEIR DOORS.