Senate votes to bar mortgage kickbacks, liar loans

ProSense

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Wed May-12-10 02:48 PM
Original message

Senate votes to bar mortgage kickbacks, liar loans

Senate votes to bar mortgage kickbacks, liar loans

WASHINGTON (Reuters) – The Senate on Wednesday voted to end mortgage kickbacks and so-called "liar loans," two lending practices that played a role in the meltdown of the subprime mortgage market.

By a 63-36 vote, the Senate adopted a measure that would prohibit mortgage lenders from offering incentives to brokers who steer customers into more-expensive loans.

The amendment, which was added to a sweeping rewrite of financial regulations, also would end "liar loans" by requiring lenders to verify that borrowers have enough income to repay their mortgages.

Both practices led to a proliferation of shaky mortgages in the years before the subprime meltdown, which led to the worst recession in 70 years.

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SharonAnn

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Wed May-12-10 02:53 PM
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1. Good! I couldn't believe the number of "christian" mortgage brokers around here

who steered people into high-priced loans, just to receive kickbacks.
You'd think they would have known the 10 Commandments, and that 'Thou shalt not lie" and "Thou shalt not steal" are in them.

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JTFrog

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Wed May-12-10 02:54 PM
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2. K&R!

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SpartanDem

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Wed May-12-10 03:11 PM
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3. but there is no difference between Dems and the GOP

:eyes:

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ProSense

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Wed May-12-10 03:28 PM
Response to Reply #3

4. Well,

some say that.

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Gormy Cuss

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Wed May-12-10 03:33 PM
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5. Banning stated income loans is overkill.

A better approach would be to attach criminal penalties for overstating income and assets in order to qualify. Stated income loans used to be products for self-employed people and others who had less traditional income streams. It was broker promotion of them as a way to get bigger loans that created the "liar loan" problem.

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ProSense

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Wed May-12-10 04:19 PM
Response to Reply #5

6. It goes too far? n/t

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Gormy Cuss

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Wed May-12-10 06:40 PM
Response to Reply #6

7. Yes, in terms of stated income loans, and not far enough in terms of abuse of that product.

Stated income loans served a useful purpose for some self-employed people. Before them it was often the case that the newly self-employed wouldn't be approved for loans even when their overall financial picture was healthy. That said, there's no excusing the abuse by brokers who suggested this product as a way of qualifying for a bigger mortgage and no excusing for the borrowers who lied in order to qualify either. Implementing stiff penalties would address those behaviors while preserving this option for the few who do need to qualify for a less than traditional mortgage. Stated income usually have higher interest rates and fees which are sufficient for the slightly higher risk when the applicant is honest.

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