Attention: The Subprime Meltdown Will Be Politicized

The subprime meltdown has made its way into campaign speeches, thanks to one Sen. H. Clinton (D-NY).

From Reuters:

Her proposals were a sign that America’s brewing housing crisis has become an issue facing candidates in the November 2008 election, with thousands facing the prospect of losing their homes because they accepted mortgages that are now too expensive.

The New York senator, on the campaign trail in New Hampshire, also proposed a $1 billion fund to supplement state programs that help homeowners catch up on mortgage payments, renegotiate loan terms or provide financial counseling.

She pressed for eliminating penalties for early repayment of mortgages, which are often associated with less traditional home loans to individuals who fall short of qualifying for prime loans and turn to more expensive subprime mortgages.

In other news, American Home Mortgage Investment Corp., the 10th-biggest U.S. home lender in 2006, filed for bankruptcy protection on Monday after freezing mortgage applications and laying off 90% of its workforce.


UPDATE 1-Clinton proposes crackdown in US mortgage market
[Reuters]
American Home Falls Swiftly [Forbes]
RELATED: $1 Billion Pledged For Refinancing Subprime Mortages, But It’s Not Nearly Enough
(Photo:)

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  1. capnfive says:

    Wow, so maybe I should’ve been less responsible and bought a home, too. If I knew the government would bail me out, I could be a homeowner instead of still renting…

  2. Crumbles says:

    Ah yes, socialism is creeping closer and closer… Oh, wait, I mean “progressive.” I forgot that the left wing hates the words: Democrat, Left Wing, and Liberal now.

  3. beyond says:

    Thanks Hilliary for taking my tax money and giving it to people who aren’t responsible with their money.

    Another reason I won’t be voting for her.

  4. Ahhh the welfare state, gotta love it.

  5. Islingtonian says:

    what’s with all the libertarians? it’s hardly socialism she’s proposing.

  6. stuckonsmart says:

    This notion of — go ahead and be STUPID because good old Uncle Sam will protect you from your OWN STUPIDITY — is getting waaaayyyyyy too old and OUT OF CONTROL.

    RESPONSIBLE PEOPLE living and acting prudently and responsibly are getting PENALIZED (aka SCREWED). Because we then have to pay more taxes, so dear Uncle Sam (that’s taxpayers folks — you and me) can bail people and corporations out of their impetuous, self-serving, stupidity.

    Imagine the excuses: “Oh — I didn’t know that Adjustable Rate Mortgage REALLY meant the lending institution could ADJUST the RATE of my MORTGAGE. They duped me!”

    “Me thinks the world is crazy save thee and me, and at times I wonder about thee.” Samuel Johnson, 18th century English writer

  7. dbeahn says:

    No shit. Nice to know Hillary wants to use my tax money to buy houses for people that can afford them even less than I can. So my reward for being fiscally responsible is to be stuck renting and have my tax money used to buy houses for people that aren’t fiscally responsible.

    And people wonder why the Democrats don’t have a chance with the moderate voters.

  8. Cowboys_fan says:

    I have absolutely no problem with my tax dollars helping those in need, except for those who argue against it. I hope you all go broke, homeless, lose your “SOCIAL” security, and watch your tune change. These people I’m sure never expected help from us when they got in those jams. We’re not paying the mortgage, just helping them catch up. Would you honestly rather see 10 million more homeless people? You guys are the real problem. Unbelievable how people refuse to help their brothers in need. I’m not pitching socialism, but we should all be included in a basic standard of living. Your tax money has helped me through tough times and in turn, I am able to give back in tax money. If I did not get help, I would not be paying taxes, but begging for change on the streets.

  9. Karmakin says:

    Actually the reason why Democrats don’t have a chance is because people who claim to be “moderate”, are actually just knee-jerk.

    [www.hillaryclinton.com]

    So you don’t have to click the link.

    1. Require mortgage brokers to disclose to borrowers that their compensation rises when borrowers’ mortgage rates and mortgage fees are high.

    2. Work with states to develop strong licensing standards and require federal registration for mortgage brokers.

    3. Eliminate prepayment penalties on mortgage products.

    4. Require mortgage lenders to include the cost of taxes and insurance in the underwriting assessment of higher-risk mortgages.

    5. Establish a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure…(Comment:This is not “buying people houses”, this is helping people to make a payment, or refinancing to make payments possible)

    6. Expand Fannie Mae’s and Freddie Mac’s Foreclosure Prevention Efforts. (Focusing on less-risk loans)

    7. Establish a $1 billion fund to provide federal support to housing trust funds established by state, county, and municipal governments. (Funding for low-cost housing)

    8. The plan announced today supplements the plan Hillary announced earlier this year to address the problems in subprime mortgages. In that earlier announcement, Hillary called for expanding access to independent face-to-face counseling; restricting prepayment penalties for subprime mortgages; requiring “plain-talk, no-fine-print disclosure”; promoting “foreclosure timeout” in which at-risk borrowers and lenders work out alternatives to foreclosure; and strengthening the Federal Housing Administration so that it could provide more homebuyers with an alternative to the subprime market.

    There’s a little bit of funding for various “welfare” type programs, but the majority of the bill is to allow borrowers both information and flexibility, both essential in a truly free market.

  10. ancientsociety says:

    Meh, more hollow campaign promises from the clones that are our 2008 “candidates”.

    Does anyone really believe anything the Dems or Repubs say anymore?

  11. Dibbler says:

    I guess I’ll stop making house payments and wait for Hillary to stop by and help me out. Wow, isn’t big government great?

  12. howie_in_az says:

    @Karmakin: As a homeowner with a spotless mortgage payment history, I, too, should be allowed to refinance my 30 year fixed mortgage and have the government pay for the refinancing. Why do poor people get all the breaks?

  13. jtlight says:

    @Cowboys_fan: It’s insulting that just because people don’t want the government to provide money (that will most likely be wasted, HELLO FEMA), that you accuse them of not wanting to give those in need. In actuality, it’s those libertarians and conservatives that give the most to charities, etc. to help those in need.

    If liberals, socialists, etc. want to help the poor people, they should put their money where their mouth is and stop trying to take money from other peoples pockets to give to others.

    This is especially true when you look at how badly the government has failed in it’s many social programs, which are a joke. This would just be another.

  14. etinterrapax says:

    Agree with Karmakin. This is mostly for the industry, which has repeatedly violated the legal requirement to base lending decisions on the ability of the homeowner to repay the loan. There was a column in the Globe today about lenders tightening up on jumbo mortgages, which are more common here in MA because of our high housing costs. But brokers get a bigger commission for jumbo mortgages, so they have a financial incentive to find a way to get a borrower into the loan they want, regardless of the borrower’s true ability to repay it. I’ve been shocked to read what some people who make less than we do and have less education and fewer opportunities for career growth have been able to borrow to buy a house. Where did the lenders think that half-million dollars was going to come from?

    This is not to say that I’m letting borrowers off the hook. The lenders shouldn’t have written loans for more than borrowers could repay, but the borrowers have too often been entirely unwilling to consider buying a house that’s within their means. Eastern and southern MA are enormously overpriced, but there are houses and jobs in central and western MA, and home prices and taxes are much lower. People’s unwillingness to spread out–and don’t tell me that it’s because the schools are so much more awesome in Lawrence or Lowell than they are in Feeding Hills–is largely to blame. Yes, we’re living much further out from the city than I’d prefer (my husband doesn’t mind as much), and yes, the schools aren’t top-fifty. But it’s not like we bought this place to die in it. I’d far rather live here than be drowning in debt and tax liens ten miles from a city I could no longer afford to enjoy. And I’d rather be able to save and have a few luxuries now, in this smaller house and less-ideal community, than strain every month to afford the place we can still have, and more comfortably, in five or ten years if we’re careful now.

  15. Dibbler says:

    @Cowboys_fan:

    The problem is that these people knew going in that they couldn’t afford the house they bought. These people, for the most part, bought a house much larger and nicer than they could afford. They should have found a nice “starter” house and fix it up, make it nice then sell it and move up to a nicer house. Instead they went for instant gratification and now are in trouble. Hard lesson to learn but one they need to learn. If they become homeless then I have no problem using my tax money to help them get back on their feet. I don’t want to bail them out though.

  16. jtlight says:

    One question I have, is what actually happens during a foreclosure. Will the house be lost only, and the foreclosed will have to move to a different location (within their means), or can other assets be seized?

  17. MENDOZA!!!!! says:

    @Cowboys_fan
    you really don;t want to even mention “social” security, becuase that’s as good as gone anyway

    Is anyone expecting to see one cent of this by their retirement?
    Can some in Washington please start talking about this looming crisis instead?

  18. slowinthefastlane says:

    @JTLIGHT

    It depends on the state. If you’re in a non-recourse state (such as California), the only thing that the bank can do is take the home. The home is the only asset for the loan. They can destroy your credit rating, but your other assets (savings, cars, stocks, etc) cannot be touched to pay off the loan. If you’re in a recourse state, the bank can come after all kinds of assets to cover the loan. If your home is foreclosed, the only thing you will lose is the home (and any equity built up in it).

    If this thing gets really bad, the mega-banks are going to be the ones that hurt the most by this melt-down. Folks in California that made no-money-down/intrest-only loans will have no equity built up in the home. If they can’t afford the mortgage, they can pack up their home, leave their keys on the counter, and drive off with almost no financial loss. The banks will be left to sell the empty homes on the open market, where the could be potentially competing with other foreclosed homes.

  19. LoneRider says:

    @capnfive: Yeah, I’m, starting to feel pretty silly for being responsible in buying a house my wife and I can readily afford. :-

  20. Jaysyn was banned for: http://consumerist.com/5032912/the-subprime-meltdown-will-be-nothing-compared-to-the-prime-meltdown#c7042646 says:

    Jesus. It would really, really be nice if our government would *stop bailing out irresponsable people & companies*!!

    The disallowing penalties for early repayment isn’t a bad idea however…

    @ancientsociety:
    Not a damn thing, they are all liars. The only good canidates are the ones that don’t have a chance to be heard

    @Cowboys_fan: Just name one successful Federal social program in the past 30 years & you’ll see why this is a bad idea.

  21. Cowboys_fan says:

    @jtlight: No arguements here that the gov is useless, but so are most charities. Unless you’re going to invest a lot of time researching charities, your money could very well be wasted(ie mother theresa).
    @Dibbler: I agree the borrowers are as much to blame as the lenders but isn’t your point much the same as health care? Don’t invest in preventative measures, just solve the problem after it happens? I think it costs alot more taking people off the streets than to stop them from being there in the first place. I think the lessons have been learned, this should only be a one-time solution for this enormous crisis. $1 billion is not that much money considering we’re nearing $1 trillion in the war. Thats 1/1000 of the cost. I think we can afford it.
    @Cassifras: The fact social security won’t be there was kind of my point.

    I am by no means a hillary supporter, I simply have no objections to this measure.

  22. hustler says:

    I’m in this boat, but its on the student loan side. Too bad that’s not a viable talking point. Oh dear god, I don’t know if I can handle any more vAPR increases.

  23. IC18 says:

    Is it me or does Hillary’s face gets soggier each day?

  24. andrewsmash says:

    If I agree to loan a homeless guy $100, I pretty much give up right to expect that money back. It was a piss-poor decision and I should be punished by not getting that money so I might learn something. If I do something equally stupid as a business, I don’t really lose the money, because I was smart enough to incorporate, so the money I lose actually belongs to my investors. My investors are rich people who are friends with people who they helped get into office. They talk their politician friend into getting their money back for them. Of course, they only invested with me because they thought I could make them even more money, so they try to get some of that out of the government too. So, really, the only people who lose out were the ones who were approved for a loan that they could never afford, and really, who cares about them, right?

  25. Nemesis_Enforcer says:

    Ok so I have a pretty good insider view of the mortgage industry. I worked for 2 1/2 years for a mortgage company. We weren’t the biggest or the worst, we were pretty careful about who we loaned money to. For the most part I felt our company was ethical in the home loans we gave out. We sent many people away because they didnt qualify. On most days we denied more applications than accepted. Funny thing was that almost all the oes we rejected were picked up by other less scrupulos mortgage companies. The thing about this whole situation is all brokers lie, most real estate agents lie and if they aren’t lieing they are hiding info at the least. I have seen loan applications get falsified by brokers, false bank statements, false letters from employers regarding how much people make, pretty much anything can and will be forged in order for the broker to close the loan and get thier commision. Acusing everyone who is in trouble of being stupid and or not researching the loan is ridiculos. Its a whole system set up to hide the truth and just get loans funded so money can be made, as long as the person can make thier payments for 12 months is all most loan companies care about because almost all loans are bought up by huge investment banks. They care about the 12 month part becuase if the borrower defaults before 12 months the loan companie has to buy the loan back.

    All these loans went thru many levels before a check was cut. Everyone needs to chill out on totally blaming the people, its not entirely thier fault. They do have a level of responsibility to read what they are given but when the loan disclousres are between 35 and 80 pages do you really think the average person can understand what is really being done? Working for a mortgage company I had the opportunity to buy my own home but out here in Cali. the average cost of a house ina nice area is $650-800k. F that I will keep living in my apartment.

    Oha nd the reason I don’t work for a mortgage comapny anymore….layoffs. Its hard to sell any loans right now becuase everyone is so skittish even for good borrowers.

  26. Nemesis_Enforcer says:

    @Nemesis_Enforcer: Almost forgot so seeing the f’d up stuff that went on at a ethical loan companiy, I can’t even begin to fathom what the really crooked ones did to thier borrowers. I know there was a few companies out here that were funding loans for people with 500 fico scores…:o. The lowest we went was 660 and you better have a bunch of cash in the bank with a score that low.

  27. cubsfan52245 says:

    Although 1 billion may seem like a lot of federal “hard earned tax dollars being wasted” on IDIOTS as so many of you have proposed. Keep in mind it’s about “48 hours” worth of hard earned tax dollars at work funding a war in Iraq that I’ve still yet to hear a legitimate reason for starting or being there.

    We’re spending 12 billion a month over there. But still can’t find a few hundred million to support of school systems. What’s a billion dollars to right the market? It wouldn’t be in free fall if big banks had loaned out money responsibly rather than just get fat on the stupidity of others. What did they think would happen? the 18 y/o they gave 400K to would pay it back at 12 percent? Sorry. They’re just as stupid as anyone. And now WE ALL have to pay for it…out of our 401k’s which will lose value as they go belly up.

  28. Canadian Impostor says:

    Hooray let’s bail out irresponsible people. They’ll get to live in taxpayer subsidized houses while those of us who thought the housing market was overvalued and weren’t dumb enough to sign a balloon payment mortgage get fucked.

  29. dbeahn says:

    @Karmakin: “5. Establish a $1 billion fund to assist state programs that help at-risk borrowers avoid foreclosure…(Comment:This is not “buying people houses”, this is helping people to make a payment, or refinancing to make payments possible)”

    I don’t care what you call it. It’s still using the tax money of people that were fiscally responsible enough to not get suckered into these bullshit loans to pay off the debt, or help pay off the debt, of people that couldn’t be bothered to do the due diligence and figure out it was a REALLY BAD IDEA to buy a house you can’t pay for.

    They were stupid, they can suck it up and get another job or whatever they need to do, or they can lose the house they couldn’t afford and shouldn’t have bought in the first place. I see no reason the tax money of other people should go to pay for their mistakes.

    “Actually the reason why Democrats don’t have a chance is because people who claim to be “moderate”, are actually just knee-jerk.”

    Actually, the reason is because liberals like you call anyone who won’t support a communist or socialist system “knee jerk”.

  30. Nemesis_Enforcer says:

    @cubsfan52245: Ithink the figure is updated to 20 Billion a month. But don’t forget the real cost in our brave soldiers who are hurt or killed needlessly.

  31. CumaeanSibyl says:

    I wonder if the mortgage assistance programs are a loan or a gift. I’d be okay if they made it a loan and rolled it into the refinanced mortgage.

    We bought a house in April, and by May American Home Mortgage had sold our loan to Wells Fargo. I was slightly irritated at the time, but now I’m very glad they did it. All lenders are going to take a hit of some kind, but lenders that have a banking arm to hold them up probably won’t go under the way a mortgage-only company would.

  32. mac-phisto says:

    it’s amazing that there’s so many blind smart people in one place. newsflash: this affects everyone, whether you like it or not. it’s not small, no name banks closing shop anymore – this is starting to affect the big boys.

    just wrap your head around this for one moment: bear sterns – one of the world’s largest investment banks – is losing billions of dollars on mortgage securities. still think you’re immune?

    here’s another one: commercial banks are heavily invested in mortgage securities b/c of their relative safety in the investment market. that safety is being heavily compromised. so, don’t be too surprised when your bank locks its doors a couple years down the road.

    the water’s rising, folks & when it stops, there’s going to be a whole lot of people drowning – & not just those that took a risky mortgage.

    i’m not for “bailouts” – i’d much rather see a rate reduction by the fed, & the creation of federally-backed funds to ensure continued investment in mortgages. nothing says this money needs to be given away – uncle sam can earn his share too at 7.5-8.0%.

    or, we can do nothing & we’ll all enjoy the ride down the shitcan together.

  33. gibsonic says:

    man this sucks! i am desperately trying to sell my house and this market is killing me!

  34. Nemesis_Enforcer says:

    @Nemesis_Enforcer: Man I gotta start spell checking my posts…can we get that option maybe?

  35. Cowboys_fan says:

    So exactly who does everybody expect to pay for this if not the government? We know the banks won’t take the hit, they’ll pass it along to us in the end anyways.

  36. lizzybee says:

    @Karmakin: Thank you for actually posting facts– it’s refreshing!

  37. TechnoDestructo says:

    @beyond:

    She was whoring her book on Sesame Street. That was enough for me, and that was 11 years ago.

  38. hoo_foot says:

    Even Hell somehow froze over and she was elected, this proposal would never make it through Congress.

    Empty promises as usual…

  39. shinratdr says:

    @ JAYSYN

    Where did this idea come from that, because a bunch of inept, corrupt governments can’t create good social programs while simultaniously targeting the problem instead of just bailing people out, that no social programs can ever work. EVER???

    Seriously, the problem is Hilary Clinton, and all those other fakes who would rather compromise their ideals to gain campaign contributions. So they rush out stupid, half assed programs to appeal to voters. And do you know why this appeals to voters? BECAUSE MANY OF THEM ARE IDIOTS. It may not even be their fault, I mean, where did you learn how to make these life choices, your parents? classes perharps? Maybe just life experience. Yet it is so unfathomable that somone else HASN’T learned these things. NO, of course not, they’re just irresponsible freeloaders who waste my money, theres no way they could be GENUINELY UNEDUCATED and not know how to perform these tasks. School is supposed to prepare you for life? Then why are so many millions of americans in debt? Becuase they don’t teach you actual life skills at school, your parents are supposed to do that. So lets recap – Stupid, debt ridden parents raise their children to be just as stupid, and the schools don’t care because they have other shit to teach that will be instantly forgotten and have to be relearned later. They leave school and their house without any life skills, get a mortgage they don’t understand and buy a house they can’t afford. Now with the whole story it sounds less like just ‘irresponsible idiots wasting my money” The people wasting all your money is the government on ineffective shams of programs, YOU NEED BETTER EDUCATION, NOT MORE ANIMOSITY TOWARDS STUPID PEOPLE.

  40. doodaddy says:

    A think a modern re-telling of the Ant and the Grasshopper is in order: [davefaq.com]

  41. shifuimam says:

    This is unbelievably frustrating. I am sick to death of the socialis liberal democrat attitude that says “we need to bail out people who are irresponsible with their money, no matter what”.

    The huge majority of these people who are facing foreclosure got expensive subprime mortgages because *gasp* they couldn’t afford the fancy home they wanted. Rather than invest in a home that doesn’t have an inground pool and a commercial-grade kitchen, they idiotically signed their souls away so that they could continue to live beyond their means.

    The economical situation of most American citizens is a disaster because our culture has taught us that what we can afford isn’t good enough, and that we should use credit and loans whenever possible to be able to finance a lifestyle that only the likes of Paris Hilton can actually afford.

    This makes me sick.

  42. ScramDiggyBooBoo says:

    Jesus people. Noones crying about the 2 billion a week we spend in Iraq, people always preach about helping our own, and now someone steps up and gets nothing but crap for it? Can’t make ‘em all happy i guess.