Obama administration pushes banks to make home loans to people with weaker credit

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    Apr 03, 2013 7:17 PM GMT
    This worked out so well the first few times around.

    http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html?hpid=z1
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    Apr 03, 2013 7:39 PM GMT
    Sounds reasonable and overdue. We're talking about some young first-time owners with no credit score to go upon, and others with less-than-stellar but not down-in-the-trash credit scores.

    One reason this recovery is so much weaker is that housing recovered late and slowly.

    OPHousing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

    Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
    ...
    Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.

    “There’s always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s,” said a senior administration official who was not authorized to speak on the record.

    The administration’s efforts come in the midst of a housing market that has been surging for the past year but that has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases.
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    Apr 03, 2013 7:44 PM GMT
    q1w2e3 saidSounds reasonable and overdue. We're talking about some young first-time owners with no credit score to go upon, and others with less-than-stellar but not down-in-the-trash credit scores.

    One reason this recovery is so much weaker is that housing recovered late and slowly.

    OPHousing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

    Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
    ...
    Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.

    “There’s always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s,” said a senior administration official who was not authorized to speak on the record.

    The administration’s efforts come in the midst of a housing market that has been surging for the past year but that has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases.


    Again, yeah, cuz it worked out so well the first time. To those who don't have to take the risk it always seems "sensible" - just like it seemed sensible to encourage higher risk borrowers to buy homes in poorer communities and give banks the incentives to do so.
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    Apr 03, 2013 8:22 PM GMT
    q1w2e3 saidSounds reasonable and overdue. We're talking about some young first-time owners with no credit score to go upon, and others with less-than-stellar but not down-in-the-trash credit scores.

    One reason this recovery is so much weaker is that housing recovered late and slowly.

    OPHousing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

    Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
    ...
    Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.

    “There’s always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s,” said a senior administration official who was not authorized to speak on the record.

    The administration’s efforts come in the midst of a housing market that has been surging for the past year but that has been delivering most of the benefits to established homeowners with high credit scores or to investors who have been behind a significant number of new purchases.


    Pardon my french but, you are completely fucking kidding, aren't you?
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    Apr 03, 2013 9:28 PM GMT
    Topic title:

    Obama

    "Obama administration pushes banks to make home loans to people with weaker credit"

    The reality:

    "Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default."

    Nothing like reality instead of hyperbole.

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    Apr 03, 2013 9:47 PM GMT
    Where's the hyperbole? You cherry pick one part of an article that doesn't even provide the complete context of what the Administration is trying to do. Little wonder you think you think you think that high interest rates in the 80s will pay for your Canadian pension. No, the title is in fact fair.

    The sentence before the one you quoted:

    In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.


    The sentence after the one you quoted:

    Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

    Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.
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    Apr 03, 2013 9:48 PM GMT
    http://business.time.com/2012/09/20/home-sales-prices-rise-is-housing-finally-ready-to-lead-a-recovery/

    Read this summary first before you guys scoff at relaxing lending to home buyers. Any valid criticism of Obama should include this argument--his housing recovery policy was inadequate and ineffective.

    And no, it's not a joke...most previous recessions improved by the housing market first, whereas this recession was dragged down by it. Look it up.
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    Apr 03, 2013 9:52 PM GMT
    q1w2e3 saidhttp://business.time.com/2012/09/20/home-sales-prices-rise-is-housing-finally-ready-to-lead-a-recovery/

    Read this summary first before you guys scoff at relaxing lending to home buyers. Any valid criticism of Obama should include this argument--his housing recovery policy was inadequate and ineffective.

    And no, it's not a joke...most previous recessions improved by the housing market first, whereas this recession was dragged down by it. Look it up.


    The problem is that this particular recession was brought on by a housing bubble and a credit bubble. The fundamentals will take care of themselves - the problem is the inconsistent interventions from government - whether it be Bush or Obama, they are and were unhelpful - and had surprisingly, unintended consequences.

    The point of making mistakes is that you should at least learn from them.
  • venusrider

    Posts: 68

    Apr 03, 2013 10:15 PM GMT
    Gee..I recall a certain pres. Bill Clinton doing the same thing.

    The result? A severe real estate bubble that burst sending the entire economy into the toilet by having folks who couldnt afford property were obtaining it.

    So..why not try it again...after all...the economy isnt in complete shambles..and the depression hasnt returned.

    Yet.
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    Apr 03, 2013 10:35 PM GMT
    We're not talking about deadbeats here. We're talking about people with FICO scores of 700-750 and who can do 10-20% downpayments who are being rejected by banks.

    http://realestate.msn.com/potential-homebuyers-hit-mortgage-brick-wall

    http://www.nbcnews.com/business/economywatch/bernanke-even-worthy-borrowers-cant-get-mortgages-764702"To be sure, a return to pre-crisis lending standards wouldn't be appropriate," Bernanke said. "However, current standards may be limiting or preventing lending to many creditworthy borrowers."

    Lax lending practices, including "liars' loans" handed out to borrowers who provided little or no documentation for jobs and incomes, have been cited as a key contributing factor in precipitating the severe financial crisis.

    Bernanke implied the backlash by banks against criticism of their lending practices, which now are far tighter, might be overdone and will be extremely hard to reverse.
    ...
    Bernanke said Fed surveys show that even when homebuyers can make a 20 percent down payment, banks are often reluctant to offer mortgage money to any but the best qualified.

    "Most banks indicated that their reluctance to accept mortgage applications from borrowers with less-than-perfect records is related to 'putback risk' - the risk that a bank might be forced to buy back a defaulted loan if the underwriting or documentation was judged deficient in some way," he said.