First Major Curtailment of Gramm-Leach-Bliley Act

[Frozen Sooner]

Soooo....

If you haven't been paying attention, GLB is the act that for all intents and purposes repealed the Glass-Steagal Act, which was a Depression-era law that banned federally-chartered banks from engaging in stock and insurance brokerage business.

Anyhow, one of the other provisions of G-S was it prevented federally-chartered banks from getting into the real estate brokerage business. Over the last 9 years (since passage of GLB) the Realtor lobbyists have managed to get one-year bans on banks getting into the dirt-selling game into various appropriations bills. Apparently Congress is all set to vote to make this ban permanent.

This is something of a solution looking for a problem-I don't know that banks are really looking at getting into this business. Still, nice to see that Congress is looking at actually doing some regulating of the financial industry again. A bit late, sure, but there you have it.

[Okla-homey]

psssst. Here's a tip. No offense, but the financial industry is kinda high on folks sh-t list and bankers are hanging out with used car sellers in terms of public confidence nowadays. ;)

[olevetonahill]

psssst. Here's a tip. No offense, but the financial industry is kinda high on folks sh-t list and bankers are hanging out with used car sellers in terms of public confidence nowadays. ;)

So yer saying they still a tad bit Higher than Lawyers :P

[AlbqSooner]

During the 80s bust of the oil boom, Oklahoma banks were in the realety business. They had so much real estate on their books that some of them hired out-of-work real estate sales people to help them get the inventory off their books. REO is not a category most banks want on their financial statement.

[King Crimson]

economic love for Phil Gramm and his wife, on the board of Enron who Phil protected and abused public office and was a Bush saudi royal family oil wonk.

[OUMallen]

So yer saying they still a tad bit Higher than Lawyers :P

Eeeeverybody hates a lawyer until they need one. :pop:

[Frozen Sooner]

psssst. Here's a tip. No offense, but the financial industry is kinda high on folks sh-t list and bankers are hanging out with used car sellers in terms of public confidence nowadays. ;)

pssst...I know. And having seen some of the abuses of the financial sector, I don't really blame people.

I got my start in consumer finance working for a bank-owned finance company. We did some pretty horrible stuff to people. One of the major reasons I quit.

[Jerk]

Just my opinion - but the way to prevent this would have been the good old fashioned fixed rate mortgage with a 10 or even 20% down-payment and a payment of no more than 1/4 of the borrower's monthly income.

These banks make these fancy shmancy ARM and NINJA loands, bundle them up, and sell them to suckers..oops, I mean investors. Problem is, the investors might have been told that these people filled out their applications with honesty. Or they just sell them to Fred and Fannie. The whole thing was a giant ponzi scheme.

Now that we're talking about things I have great knowledge of, anyone want to discuss String Theory?

[Frozen Sooner]

Just my opinion - but the way to prevent this would have been the good old fashioned fixed rate mortgage with a 10 or even 20% down-payment and a payment of no more than 1/4 of the borrower's monthly income.

These banks make these fancy shmancy ARM and NINJA loands, bundle them up, and sell them to suckers..oops, I mean investors. Problem is, the investors might have been told that these people filled out their applications with honesty. Or they just sell them to Fred and Fannie. The whole thing was a giant ponzi scheme.

Now that we're talking about things I have great knowledge of, anyone want to discuss String Theory?

There's a lot in your post to agree with, particularly with the limitation on payment vs. income. I don't agree with making everyone put 10% down-there's some really good programs that don't have any higher default rate than conventional mortgages with reduced down payments-the VA program, for one.

I remember back in 1999 I had people complain about the fact that there was a risk premium associated with a 125% LTV loan and the rates were higher because home values never went down and you can always get your money back on a foreclosure. :rolleyes:

[yermom]

strings? they've moved to membranes now

or something

where can i get a NINJA loan? that sounds awesome

[Frozen Sooner]

strings? they've moved to membranes now

or something

where can i get a NINJA loan? that sounds awesome

It's structured like this:

HUGE PAYMENT-little payment--HUGE PAYMENT-HUGE PAYMENT-HUGE PAYMENT--little payment-HUGE PAYMENT

[Jerk]

where can i get a NINJA loan? that sounds awesome

Go to some mortgage broker, tell them you want a nice ARM with a low "teaser" rate, and that you have No Income, No Job, and No Assets (you're a ninja!).

Might have worked a few years ago, but today there is no one left to fund the loan.

[Jerk]

There's a lot in your post to agree with, particularly with the limitation on payment vs. income. I don't agree with making everyone put 10% down-there's some really good programs that don't have any higher default rate than conventional mortgages with reduced down payments-the VA program, for one.

I remember back in 1999 I had people complain about the fact that there was a risk premium associated with a 125% LTV loan and the rates were higher because home values never went down and you can always get your money back on a foreclosure. :rolleyes:

Well i guess that myth has been busted - the one about home values never going down.

The reason I like the down-payment is because it gives people a huge reason not to just walk away from the house.

I'm speaking like I'm some sort of an authority here on banking to a banker. You got any truck driving advice?

Anyway, hey Froz, you remember a few years ago someone posted a news article here about people walking away from their mortgages? Wow if we only knew what was coming. I certainly didn't see it.

[jkjsooner]

Just my opinion - but the way to prevent this would have been the good old fashioned fixed rate mortgage with a 10 or even 20% down-payment and a payment of no more than 1/4 of the borrower's monthly income.

These banks make these fancy shmancy ARM and NINJA loands, bundle them up, and sell them to suckers..oops, I mean investors. Problem is, the investors might have been told that these people filled out their applications with honesty. Or they just sell them to Fred and Fannie. The whole thing was a giant ponzi scheme.

True, and thus we need regulations.

If it were only a matter of dumb people overextending themselves and losing their homes and stupid banks losing money of these loans then I would say let the market work itself out.

Unfortunately, if allowed to get big enough, these problems harm the entire economy.

I think both political parties have a lot to learn from this:

1. Republicans - Deregulation in some ways is good but you can go too far. Capitalism is by far the best economic system but it must be regulated. As even the Republican Greenspan now recognizes, companies can not be guaranteed to act in their own long term best interests and definitely not in the country's best interest. (Greenspan did not say this part but IMO there are various reasons that this is true and should have been predicted by Greenspan: A) Too many actors within a company have it in their own best interest to take excessive risk for short term gain. B) To many others within the company are just stupid. C) There is just too much fraud and misrepesentation in the communications and thus bad loans get packaged up into AAA rated securities and bought by investors.)

2. Democrats - You don't get something for nothing and there are always unintended consequences. If your goal is affordability and you attempt to achieve it by shoving more and more money into the market you will, in the long run, create distortions and ironically will achieve exactly the opposite.


I assigned #1 to Republicans and #2 to Democrats but that is too simplistic. Bill Clinton fell into the thinking that deregulation of financial markets always lead to prosperity. On the other hand, George Bush was happy to accept the good old days of the bubble and proudly talked about how home ownership rates rose earlier this decade.

[jkjsooner]

I certainly didn't see it.

I saw it coming only because I've been obsessed with the Real Estate Bubble for about 6 years. I was just astonished at how the people would believe anything no matter how illogical it may have been. I was astonished that everyone (media included) would believe anything the NAR chief economist would say and would not question his motives. (They still don't.) Guys would ridicule me for not buying an overpriced POS - or not buying 3 or 4 of them.

Anyway, I'm not tooting my own horn. I'll tell you one thing I did miss, the affect on all of this on the greater economy - especially the stock market. I knew plenty of people were warning that it would happen but I thought it all would be somewhat contained (didn't understand how leveraged everything was) and even thought that maybe some of the money flowing into houses the last 10 years would start flowing back into stocks. Doh!

[Jerk]

Yes, JK, the effect has been downright scary. Here's a nice video explaining how the Fed's response to this has been so much different than anything we've ever seen before

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