January 29, 2013

Obama to redistribute credit scores [Darleen Click]

Because there comes a point when it’s only fair to subsidize the uncreditworthy

New mortgage rules issued last week by the administration will have the effect of forcing lenders to approve prime loans to borrowers who would normally only qualify for subprime loans carrying higher interest rates and fees to cover the added risk of default.

Banks are already under renewed pressure from federal prosecutors and regulators to make home loans to low-income borrowers with blemished credit as part of the administration’s stepped-up enforcement of anti-redlining laws. […]

[U]nder the new mortgage rules, loans with subprime features do not fall under the official government definition of “qualified mortgages,” and therefore do not provide a “safe harbor” against lawsuits and other action.

As a result, analysts warn lenders may end up having to “subsidize” riskier borrowers at the expense of other customers.

The Consumer Financial Protection Bureau, the Dodd-Frank Act-created agency that wrote the 800-page mortgage regulation, has decreed that the way to distinguish a prime loan from a subprime loan is by the interest rate charged, even though the main distinguishing feature of a subprime loan is a sub-660 credit score.

“Under its tortured definition of ‘prime,’ a borrower can have no down payment, a credit score of 580, and a debt (-to-income) ratio over 50%,” as long as the borrower is charged a prime rate, said former Fannie Mae chief credit officer Edward Pinto.

Mortgages carrying a prime rate, or one within 1.5 percentage points of the national average, will have the strongest level of legal protection, according to the regulator. Analysts say this rule effectively limits lenders’ ability to price for risk. Lenders who charge rates above the 1.5-point threshold open themselves up to legal liability.

Not to worry, I’m sure if the banks don’t perform to Obama’s liking, we’ll just get rid of the last vestiges of private finance.

Big Government will supply you a qualified place to live, just as it going to supply you qualified healthcare.

What could go wrong? Forward!

Posted by Darleen @ 7:39pm
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Comments (40)

  1. The Consumer Financial Protection Bureau, the Dodd-Frank Act-created agency that wrote the 800-page mortgage regulation, has decreed that the way to distinguish a prime loan from a subprime loan is by the interest rate charged, even though the main distinguishing feature of a subprime loan is a sub-660 credit score.

    Being the believer in the Law of Unintended Consequences that I am, why do I expect that this will ultimately make all loans “subprime”?

  2. eC

    But it is UNFAIR that responsible people get better terms on their mortgages! They didn’t build that score, they’re just lucky.

  3. Isn’t this what created the housing market crash in the first place?

  4. Isn’t this what created the housing market crash in the first place?

    And a cynic might wonder if that’s the intent here.

    You know, “never let a crisis go to waste” and all that.

  5. let it burn. go back to your states and be involved.

  6. Involved in what? Playing in the ashes?

  7. Involved in what? Playing in the ashes?

    well kick out the tsa at your airports and replace with the sumthing like the private security at san fransico airport. tell epa to eff off(yo texas!)

  8. Banks will subsidize nothing. “prime” just suddenly becomes a few percent higher and other borrowers do the subsidizing.

  9. Here we go again. Clinton’s HUD, and the reinvigorated Community Reinvestment Act of 1994, is the ‘smoking gun’ that eventually caused the 2008 economic collapse…

    Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

    At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage
    market and stiff fines, along with other penalties.

    The threat was codified in a 20-page http://www.ots.treas.gov/_files/25022.pdf “Policy Statement on Discrimination in Lending” and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

    The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

    “The agencies will not tolerate lending discrimination in any form,” the document warned financial institutions.

  10. i wouldn’t want subprime trash buying a house near mine

    they’re welcome to buy anywheres they like in hyde fucking park though

  11. Banks will subsidize nothing. “prime”

    pushing out more worthless paper on to the “market”

  12. The agencies will not tolerate lending discrimination in any form,”

    gramsci march

    me
    i like

    link

  13. 2 + 2 = 5

    Shut up, they explained.

  14. Oh, and this has nothing to do with the Fed buying up $40B a month in worthless mortgage paper.

  15. - Looks like Jug ears and the Pinkogressives have realized they ran out of vote buying handouts, so they’re pecking around the edges for any political give-aways they can come up with, hoping to wrangle “someone” else to pay the tab.

    – Yes, Framk and CRA and Fannie and Freddie did the first housing bubble, but of course the homes all went back after the election (they also destroyed countless home values in the process thereby potentially helping the poor bastards in that way through widespread de-eval making homes cheaper if you can pry one out of the cold dead fingers of the banks), so Win, win!

    – Dar, theres no exclamation mark after Forward. The Lefturds have no fucking idea where they’re going with this clusterfuck. The whole mess is adrift on the open seas of “feelings”. Heaven help us.

  16. - Framk = Barney

  17. Given that a lot of the idea behind encouraging home-ownership in “traditionally under-served communities” is that if middle-class people own homes, then helping lower-income people buy homes will make them middle-class, it shouldn’t come as a surprise that they would come up with the idea that if we charge subprime borrowers “prime” rates, they become prime borrowers.

    As for me, I get to look forward to having to read this monstrosity (along with a good chunk of the other 2700 pages of regulations that the CFPB issued recently) over the next few weeks as part of my day job. The fact that the rules issued may in fact be null and void due to the fact that the current head of the CFPB was recess-appointed while the Senate was not actually in recess, makes things no easier…

  18. Mr. benzeen what would a “subprime rate” even be in these days of bernanke fun money?

    Would it be… onerous?

  19. “New mortgage rules issued last week by the administration will have the effect of forcing lenders to approve prime loans to borrowers who would normally only qualify for subprime loans carrying higher interest rates and fees to cover the added risk of default.”

    So the housing lending crisis was Bush’s fault and destroyed the economy, yet the answer from THE ONE is to do the exact same thing throughout the entire financing system by regulatory decree?

    Fuck. I want to hide in a hole for the next 15 years now.

  20. This is not incompetence. This is demolition. They are busting out the system to feed stupid thugs one last time just before the frenzy hits.

  21. the level of activity out there in the housing market today is a fraction of a fraction of what it was when all those loser subprimers were buying gobs of houses they couldn’t afford

    the food stampers are desperately trying to sop up inventory is all so maybe maybe maybe one day, possibly in our lifetimes, the economy can grow without bernanke handjobs or food stamp multiplier effects

  22. Good grief, Darleen, that story is from 1999! Blogs are for CURRENT events!

    Chop chop!

  23. Boy, you wingers don’t stop, do you?

    Obama’s just doing what has been done in the past by presidents almost as important as he.

    RACISTS!

  24. do NOT eat lunch meat if it says 1999 on it

    especially if you are with child

    you’re welcome

  25. - The only thing that could charm me is if I woke up tomorrow and found myself in a world where all the Progtards were under water, and I don’t mean their house mortgages.

    – Not sure how that would effect Geico ads on TV, but there you are.

  26. Shit. I don’t want aquatic proggtards. Let ‘em stay on the land.

  27. - While its tough to get away from a feeling that we’ve fallen down the rabbit hole into a sort of political little house of Horrors, once in a great while I run across a small ray of hope.

  28. oh. This is neat. Moody’s Analytics has a junior propaganda slut in training for when Zandi is vacationing

    “The fact that GDP could come in above 1 percent is pretty respectable given all the headwinds and the challenges the economy faced in the final three months of the year,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.

    meet Ryan Sweet

  29. What palaeomerus said. This isn’t unintended, it’s the intended consequence.

    Unfortunately, they have the largest propaganda operation in history, shameless traitors to their profession, nation and people.

    “Journalists”

  30. Propaganda slut/journalist/marketeer.

    Tomato/tomato/tomato.

  31. Journalism is dead, Merovign.

    Problem is, it’s going to take more than a shotgun blast to the head to put the zombified corpse down for good.

  32. Missed it by that much Mr. Sweet.

    UNEXPECTEDLY!

  33. oops link

  34. “Fuck. I want to hide in a hole for the next 15 years now.”

    You assured me you had it under control.

    I have nothing left for them to take, so I got that going for me.

  35. - Looks like Jug ears and the Pinkogressives have realized they ran out of vote buying handouts, so they’re pecking around the edges for any political give-aways they can come up with, hoping to wrangle “someone” else to pay the tab.

    I disagree. I think this is another set of shackles to be applied to the finance sector to keep them in line. Washington knows that since the bailouts, they own the banks; they just need to make sure the banks don’t forget this. So the answer is to force them into a money-losing business model, so that they’re forced to beg for waivers and handouts for years to come. They’re setting up a game where the rules won’t allow you to win, so the only thing left is to buy off the referees.

    Missed it by that much Mr. Sweet.

    I’m certain that Mr. Sweet will stick to his insistence that “a mere 0.1% contraction” is still “pretty respectable given all the headwinds and the challenges the economy faced.” It doesn’t matter that your conclusions are all wrong, so long as your analysis is politically correct.

  36. Four years of Keynesian stimulus and quantitative easing, wasted.

  37. “You assured me you had it under control.”

    I don’t remember that.

  38. As I recall I poo-poo’ed Glenn Beck a little and you rolled in with some taunts and later admitted that you didn’t know much about the guy but don’t like poo-pooing or something.

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