Real Action We Can Take on California’s Subprime Mortgage Crisis

"If enacted, AB 1830 will be the most comprehensive reform of mortgage lending in our State’s history, and the most aggressive mortgage reform in the nation. It will:

• Ban kickbacks paid to mortgage brokers to steer customers into pricier loans than they qualify for (known as “yield spread premiums”).
• Require lenders to determine if the borrower has the ability to pay over the life of the loan, not just the initial “teaser” rate.
• Ban loans where the borrower pays less than the accrued interest, leading to an increase in the principle (“negative amoritization” or “neg-am” loans).
• Prohibit prepayment penalties, which have stopped many borrowers from refinancing risky loans.

• Require pre-loan financial literacy counseling for certain high-cost loans, and require disclosure that recommends counseling for subprime loans."

um... none of these help people today only those in the future. Since these types of loans went bust there is no longer investors willing to lend money in this manner and there will not be any until the housing market turns around. (it will turn around) Furthermore those with adjustable loans were just given the biggest break they could get by the Fed, for many their rates will go down.

Hmm, I've been watching this story closely and was inspired to write a song:

http://www.youtube.com/watch?v=Ivp4YqGCI-s

In 1992, a prospective borrower told me as a mortgage broker that Fremont Bank was doing "no point, no fee" loans. It took a while, but I finally figured out that if I put a cashiers check with my own money into escrow to pay a borrower's loan, title and escrow fees on their behalf, ten days later I would get that money back plus my profit on the loan from the wholesale lender. I also realized that by doing very thin deals, I could always beat Fremont Bank by .125% to .25% in fixed rate on "no point, no fee" deals. In the 16 years since, 80% of my refinance transactions have been "no point, no fee" loans, and my profit has been an average of .5 to .625 points. I've done one sub-prime loan in my career. How is this use of yield spread premium hurting borrowers? Many of those early sofisticated borrowers refinanced again very .5% to 1% in fixed rates over the next several years, and went from the mid nines to the sixes without ever paying closing costs.

It appears that Ted Lieu and his cronies are not that bright, or are being heavily influenced by special interests...the banking industry. Taking away the ability to have a yield spread premium because of abuses my certain companies and individuals (brokers and direct lenders alike) in the recent past and current market, is analogous to penalizing all baseball players because certain ones cheated. Go after and punish (get rid of) the bad apples, don't cut off water to the entire apple orchard. AB 1830 is not well thought out. Yield spread premiums used correctly are a huge benefit to borrowers, sellers, lenders, brokers and the population as a whole. If Ted Lieu wants to get rid of mortgage brokers, stifle competition, increase rates, and let direct lenders do what they please thereby killing the consumers ability to shop and find a great deal with honest, ethical and hard working brokers, then keep attacking the yield spread premium. Then again, politicians are not the brightest colors in the rainbow, but they are always looking out for their own pot of gold. Hey sponsors of this bill, try harder, do more research, and don't follow the dollar to your own campaign. Do what we elected you to do, protect the bests interests of ALL of us...not just the ones who contribute to your coffers. Optimistically, I hope you see the light.

It appears that Ted Lieu and his cronies are not that bright, or are being heavily influenced by special interests...the banking industry. Taking away the ability to have a yield spread premium because of abuses by certain companies and individuals (brokers and direct lenders alike) in the recent past and current market, is analogous to penalizing all baseball players because certain ones cheated. Go after and punish (get rid of) the bad apples, don't cut off water to the entire apple orchard. AB 1830 is not well thought out. Yield spread premiums used correctly are a huge benefit to borrowers, sellers, lenders, brokers and the population as a whole. If Ted Lieu wants to get rid of mortgage brokers, stifle competition, increase rates, and let direct lenders do what they please thereby killing the consumers ability to shop and find a great deal with honest, ethical and hard working brokers, then keep attacking the yield spread premium. Then again, politicians are not the brightest colors in the rainbow, but they are always looking out for their own pot of gold. Hey sponsors of this bill, try harder, do more research, and don't follow the dollar to your own campaign. Do what we elected you to do, protect the bests interests of ALL of us...not just the ones who contribute to your coffers. Optimistically, I hope you see the light.

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