Should We Re-Call Defective Loans?
March 19th, 2008
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My column today on Realty Times raises the idea that perhaps we need a toxic mortgage re-call.
Why not? A mortgage is simply a financial product. When manufacturers ship out products which endanger the public welfare we demand that they be re-called. As the column says:
“The reason millions of people are facing foreclosure today is very simple: A lot of money was made originating, selling and packaging loans with terms that were unfair and unconscionable from day one. Like tainted food, defective cars or toys covered with lead, such flawed financial products should be recalled at no cost to the consumer. After all, isn’t that the moral thing to do?”
When we have product re-calls we don’t say, well gee, that will cost the manufacturer a ton of money, we say such products are dangerous and no one should be exposed to them.
Just why, exactly, should a product re-call not apply to toxic loans? Is not the public harm overwhelming?
And if not a re-call, how about a modification — no prepayment penalties and no steep rate increases with the first re-set?
My goodness, that would make such loans seem like boring, but safe, FHA mortgages.
For the full story, please see: Is It Time For A Mortgage Product Recall?
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This entry was posted on Wednesday, March 19th, 2008 at 8:24 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
Listen to FHA Loan Pros columnist Peter Miller on American Public Radio:
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March 19th, 2008 at 1:31 pm
I appreciated your article “Is It Time For A Mortgage Recall.” In addition to the interest-only loans that had been offered, I have experienced a lender also qualifying me for a fixed-rate mortgage that makes my debt to income ratio about 55-60% (with very low credit card debt and no car payment.) Why? because I have a very good credit score. This has put an immense amount of pressure on me, as I also have to pay monthly child care … and I’m a single mom. I’m now in the position where I need to sell my home after less than a year of living there.
I think the news a couple years from now is going to include situations like my own, asking the question … Are lenders/brokers looking out for our best interest even if we have good credit? If this keeps up, people with excellent credit scores may find themselves in the position of loosing everything all at once.
Thank you for calling for greater responsibility on the part of the lenders.