New and Better Mortgage Lending Standards Maybe

rs-2New Orleans               The press is making a big deal of Mel Watt’s comments as the chief housing regulator at the Federal Housing Finance Agency to the Mortgage Bankers Association’s convention in Vegas.  He claims he has a new plan to loosen up the rules so that banks finally lend some money to first-time buyers and lower-and-middle income borrowers.  There’s a problem though.  The bankers are applauding, but there are no real details to the plan available, so what’s the story here?  Frankly, I don’t trust this.

Too much of this seems like a suck-up to the bankers and the equivalent of a “get out of jail” quickly ticket for them to blame their fast and loose behavior on the borrowers, which has been part of their narrative since the meltdown of the Great Recession.  Under the so-called “plan,” the housing finance agency would ease up on the rules that require the banks to buyback mortgages “that show evidence of fraud or other flaws in the underwriting process.”  Supposedly the buyback now would be based on the ability of the feds and the prosecutors to prove a “pattern of misrepresentations and inaccuracies.”  Furthermore the bank rip-offs would have to be “significant” enough to have disqualified the borrower from a Fannie Mae or Freddie Mac guarantee on the loan.

There’s a rumor of approving loans with as little as 3% down payments, and maybe that’s a good thing, but who really knows without the details.

To me this looks like a bank stickup with the bankers holding the gun against the government’s head and refusing to make loans until they get enough promises that they are not going to have to pay billions in fines and buybacks if they rip-off their borrowers yet again.  My argument would once again focus on one of the least corrected causes of the meltdown:  brokers.

As long as lenders refuse to supervise their broker networks even while all of the incentives are left in place for brokers to act independently and to be paid at the point of production regardless of affordability of the loan to the borrower, the conditions remain in place for fraud and predatory behavior.  Allowing this much finger pointing away from themselves, lets the bankers juice up the market without any accountability.  Even better, but only for them, they’ll get to still blame the victims, rather than take responsibility for their own thievery.

We need a subprime market.  We need for low-and-moderate income families to have the choice of buying a home, if it makes sense for them financially.  But, do we really want to make it easier for bankers to look the other way and claim their hands are clean when they are financing the fraudsters?

Many of the advocates are applauding this so-called plan.  I’m hoping they know a lot more of the down-low than has been made public, because at this point it looks like a deal made on our knees with the bankers where we’re once again begging for money for our people and they, once again, are dictating the terms and setting the table for more mischief and mayhem.


Blacklisting by Banks

bank-of-america-steve-rhodesNew Orleans      The Federal Consumer Protection Bureau is looking into the issue of “blacklisting” by banks when some consumers try to open checking accounts.  If you are lucky, you may ask, what are they talking about, aren’t banks in the business of providing customer service through individual checking accounts?  Oh, child, you are so “old school,” 1980’s, and yesteryear.

Many big banks argue that they lose money on personal checking accounts.  At best it’s a loss leader of sorts.  They want them because they need the deposit base in some cases, but in most instances checking accounts have become little more than the way banks access your money to charge excessive fees for every little thing.    It starts with the monthly service charges that suck out your minimum balances and then there are the overdraft charges that can range up to and over $35, and that’s not counting the fact that many banks are all too willing to let scammers hit your account for predatory and multiplying charges, sell your info for credit card solicitations, many of them from their own subsidiaries, and often nearly rob you blind.

An FDIC survey reveals 65% of banks deny checking account applicants who have prior mismanagement in their consumer reports.  “A consumer who bounced a check once is not a deadbeat, a consumer who bounced a check once may not even have made a conscious mistake,” said Ed Mierzwinski of the National Association of State Public Interest Research Groups.  Mierzwinski said potentially millions of Americans are “blacklisted from banks” and consumer advocates worry financial institutions could be shutting out some people whose records were dinged by accident.  “There could have been an automatic payment that the consumer had canceled but the company by mistake continued to try to take out of their account, and that is happening more and more often today,” Mierzwinski said.  Federal law says you can request a free banking history report each year, and dispute any incorrect information. Chex Systems said if consumers find errors it is “committed to resolving all such disputes as quickly as possible.” Early Warning declined comment.

            This is a good thing for the FCPB to investigate.  Who reads the fine print, but when you open an account you give the bank the right to reject you as a customer unilaterally without cause or explanation.  With the huge databases out there, banks who are pre-screening new accounts might take a bounced check or overdue payments from your teenage years and block you from an account for years.  And, despite the fact that the devil lives in these details, as predatory as banks have become, not having an account at all exposes a consumer to even more difficulties in bill payment, establishing credit, and even receiving their paychecks electronically in many companies.

            Damned if you do, damned if you don’t.  Some protection and minimal, enforceable, easily accessible rights would be welcomed because the news everyday proves repeatedly that we need help and protection in dealing with banks.