11 Feb Mortgage Bankers Want Your Home, Not Your Money
Congress is considering changes to the Bankruptcy Code that would allow the same judicial modification of home mortgages that is currently allowed for vacation homes, business property, and other assets. Letting families keep their homes by reducing principal and interest to market value would let tens of thousands of homeowners resume making their mortgage payments, halt many of the 46,000 foreclosures that are taking place each week, and stop the glut of foreclosed homes on the market that are continually ratcheting housing prices downward.
But surprise, surprise, the Mortgage Bankers Association opposes these changes. Why? Let’s look at the facts.
They first say that including these changes is “a polarizing issue” that threatens to bring down a crucial measure this country needs in order to avoid a serious economic downturn. Seems that this wasn’t “polarizing” until the MBA started arguing that it was. I guess that if the country is in favor of letting people save their homes, and the MBA wants to foreclose on them, in “bankspeak” that constitutes polarization.
They next argue that, “the lending community remains united against this idea.” Not true. Citibank, the country’s largest bank, supports it.
Next is the wonderful sentence: “It is our position that if this proposal were to become law, mortgage rates would increase in cost by 150 basis points.” Note that the MBA doesn’t say, “studies show,” or “data demonstrates” or even “the fact is” that this increase will occur. Only, “It is our position” that this would happen.
From now on, it is “My Position” that I can eat all I want without gaining a pound. By making it “my position,” I don’t need to offer any proof. And there isn’t any.
Although judicial modification is available to every other type of secured loan it doesn’t result in increases in loan rates, higher down payments or higher costs at closing. In fact, judicial modification of residential loans is already available in Chapter 12 bankruptcy, which is available to family farmers. Has its availability resulted in an increase in loan or borrowing costs? No! And has the epidemic of foreclosures resulted in lower interest rates, lower downpayments or lower closing costs? No!
It must be nice to put out these press releases without having to provide any justification. Sort of reminds me of the things the mortgage bankers did that got us into this mess in the first place.
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