House of Paine

fore--warned is un---armed

  
  eve 
   household alert (number 6)




  are u in a  basket of  armed peons  ?

   watch yer ass ....




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  read and absorb :

"WASHINGTON, July 14 - 
For two months now, 
federal banking regulators 
have signaled their discomfort
 about the explosive rise 
in risky mortgage loans.

First they issued new "guidance" 
to banks about home-equity loans,
 warning against letting homeowners
 borrow too much against their houses. 

Then they expressed worry 
about the surge in 
no-money-down mortgages,
 interest-only loans 
and "liar's loans" 
that require 
no proof of a borrower's income. 

the upshot:

It's as easy to get these loans 
now as it was two months ago
If anything, 
people are offering them 
even more than before 

The reason 
 federal banking regulators
 from the Federal Reserve 
to the Office of the Comptroller 
of the Currency,
have been reluctant 
to back up their words 
with specific actions.

officials  are loath to stand in the way
 of new methods of extending credit.

they don't want to stifle financial innovation

they have the most vibrant housing
 and housing-finance market
 in the world,
 and there is a lot of innovation.
 if consumers have a lot of choice,
 that's a good thing

they do not think 
       it is their
 job to push  this frenzy  back down. 

The main issue for regulators
 is whether banks and other lenders 
are properly managing
 their own risk,
 and 
 the lenders are looking good.

They have hedged their risks 
by bundling mortgages into securities 
that are then sold
 to investors around the world.

 And if interest rates go higher,
 they have shifted
much of the risk onto consumers 
because a growing share
 of home buyers 
have taken on adjustable-rate mortgages.

 At the same time,
 they have built sturdier financial institutions 
through mergers 
and the breakdown of barriers 
to interstate banking.

compared to  the crisis at savings and loan institutions 
in the 1980's,its like night-and-day 
                 No comparison

But consumers 
- and perhaps the broader economy -
 are taking on more risk.
 About 60 percent of mortgages 
last year had adjustable interest rates
 many with artificially low teaser rates
 that expire after the first few years
 If a mortgage rate jumps
 from 4 percent to 6 percent
 just slightly above current levels
 the monthly payment can jump 
by roughly 30 percent 
when the teaser rates 
come to an end. 

The jolt can be higher
 for people with interest-only loans
 In addition to facing higher rates
 borrowers also have to start
 paying down the amount they owe 
after about five years

 People who put no money down 
face a different risk: 
if housing prices decline
 even slightly
 owners who need to sell their homes
 may have to come up with 
thousands of dollars 
beyond the sale price
 to pay off their loans.

Indeed,
 because the main risks
 are to consumers
 rather than to financial institutions,
 some critics say regulators
 have no interest in stepping in 

The prevailing attitude 
is that if you're taking on
 a risky mortgage,
 you're an adult 
and you're taking on the risk yourself,"

---------------------------------------------------- 

"If you are 
the comptroller of the currency 
or  chairman of the Federal Reserve
 you're looking out 
                for the  financial system 
                          of the world
            You're making
               global  macroeconomic policy
                        thats much more fun 
              than looking out for consumers."
                                    barney  Frank  

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 About a third of home buyers 
in the last 18 months 
did not put any money down
 according to a recent survey 
of home purchasers
by the National Association of Realtors

Over 25 percent of all new mortgages 
in the last year 
have been interest-only loans
 which allow buyers to postpone 
principal payments for three
 to five years

Perhaps the hottest new loan 
is the so-called option adjustable-rate mortgage,
 or option ARM, 

which gives borrowers
 the choice of paying interest
   and principal,
 interest only,
 or even less than the normal interest
  If the home buyer picks 
the lowest possible payment
  the mortgage debt goes up 
      rather than down.

 speculative buying 
has increased
 with many people hoping 
to quickly resell houses 
and condominiums 
before the construction 
is even finished. 

------------------------------------------------------
"There is a lot of pressure on banks
 to build market share, 
and consumers are looking 
for a quick response," 
sez Barbara J. Grunkemeyer,
 deputy comptroller for credit risk
 at the Office of the Comptroller 
of the Currency. 
"With respect to these new mortgage products,
 they are new and have taken off rapidly.
 We are still in the process 
of understanding
 the risk-management systems
 that surround them."
----------------------------------------


Led by the comptroller's office, 
 federal banking regulators
 published guidance 
in May that gave lenders
 more detailed instructions 
on how to evaluate 
the risks in home-equity loans.

The move was a warning shot to lenders
 The value of home-equity loans 
shot up 40 percent in 2004
 to $398 billion
 Almost all of those loans 
are at adjustable interest rates
 which could rise sharply
 and many were extended to people
 who had just borrowed money
 to buy a house.

Regulators say they plan to raise many 
of the same concerns this fall
 that they have already raised about home-equity loans

. The areas experts find worrisome 
include granting loans
 equal to 
100 percent of the value 
of the homes;

 granting large loans 
without due attention 
to the likelihood 
of higher monthly payments 
in the future; 
and 
granting "no-doc" (no documentation) 
or "low-doc" loans 
that require little or no proof 
      of income or assets. 

" no -docs" are very cutting edge risk preoducts   
  why would he be willing to pay 
a quarter-percent more
 when he could have gotten
 a lower rate
 by giving a copy 
of his pay stub and a W-2 form,






sub prime timers....

 predatory lending is heavily concentrated 
among subprime borrowers,
 or people with spotty credit records 
and erratic incomes 
who probably could not have obtained 
a mortgage 10 years ago.

The volume of subprime mortgages
 has soared from about $35 billion in 1994 
to about $530 billion in 2004
 more than 20 percent
 of all new mortgages last year

 That growth helped propel
 the homeownership rate 
to a record 69 percent in 2004

 The foreclosure rate 
on subprime mortgages remains modest
 only 3.5 percent 
in the first quarter of 2005
 but that is nine times 
the rate for prime borrowers


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