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Fed Governor Elizabeth Duke says that while the housing market is slowly mending, it's still in...

Fed Governor Elizabeth Duke says that while the housing market is slowly mending, it's still in need of a lot of help. Any sustainable housing recovery depends on more action from Congress and federal regulators to stabilize the U.S. mortgage market. What can they do? They can start by loosening lending standards by banks and mortgage lenders, Duke says. That will go a long way towards attracting buyers back to the market.
Comments (8)
  • Placebo Investment Advice
    , contributor
    Comments (3630) | Send Message
     
    This quote will go down in history like Jamie Dimon's rant against regulations--just before JP Morgan blew a couple of billion dollars on a bad speculation. This Fed governor apparently has forgotten what happened the last time lending standards were eased. Now she wants to ease up on lending standards as the international economy is slowing down, thereby increasing the odds of recession in the USA. Brilliant!

     

    Maybe Ms. Duke was too busy oiling Bernanke's money printing machine to notice the rising default rates among FHA (subprime) borrowers.
    16 May 2012, 08:19 PM Reply Like
  • Jabberwockey
    , contributor
    Comments (32) | Send Message
     
    Loosen lending standards?...you would have had more credibility refinancing underwater borrowers for current amount owed at a lower rate, at least i could see some rationality in that.

     

    Ms. Duke unfortunately belongs to a party that wants more banking and lending regulation, so good luck with that one. I happen to be a middle of the road moderate, but she's just plain hypocritical.

     

    Additionally, how do federal regulators loosen lending standards? not do audits?
    16 May 2012, 09:08 PM Reply Like
  • nightfly
    , contributor
    Comments (1017) | Send Message
     
    When nothing changes, you get the same results - over and over, only worse each successive time.

     

    Here we go again: cheap money, "everyone qualifies" for anything... good times for a year or so, then pop goes the weasel.
    16 May 2012, 10:36 PM Reply Like
  • kmi
    , contributor
    Comments (4527) | Send Message
     
    Considering the JP Morgan's of the world prefer to lose $3b on speculative prop trading with taxpayer guaranteed backstops rather than lending into the economy to boost it, perhaps discouraging that sort of activity may be a good first step.
    16 May 2012, 10:38 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1756) | Send Message
     
    wasn't it looser standards one of the causes of the mortgage meltdown in the first place??? lol
    16 May 2012, 10:42 PM Reply Like
  • Tack
    , contributor
    Comments (14296) | Send Message
     
    Keeping responsible credit standards, including significant downpayment requirements, is a good idea.

     

    However, there's a little-discussed issue that has tanked many a home sale, even though buyers, sellers and lenders were all in agreement. That issue is appraisals.

     

    After the recent crisis, one of the supposed "fixes" instituted was making appraisers personally liable to lawsuits from buyers on their appraisals. This has turned out to be a terrible idea. Appraisers work for a fixed fee. They have no incentive to take legal risks to elevate property values, when they're not being compensated to do so and when costs of a lawsuit could be ruinous. Therefore, appraisers are routinely lowballing appraisals, tanking many sales, when appraisals fail to support the sale prices.

     

    The system needs to return to its previous status, where appraisers are paid to offer banks an "opinion," not some guarantee subject to lawsuits. The responsibility in lending needs to occur though application of good credit practices and sufficient downpayments, not by threatening outside consultants (appraisers) with ruin, as an indirect way to control lending.

     

    As it is now, new loan originations are in many cases crippled by super-safe appraisals that do not align with the actual market, which is what a willing buyer, seller and lender are willing to do.
    16 May 2012, 11:24 PM Reply Like
  • davidbdc
    , contributor
    Comments (3184) | Send Message
     
    Have to disagree with the idea that holding appraisals as potentiall liable for their work being a bad idea.

     

    I own a business where part of the business is occasionally giving appraisals for a fee. My business would be liable if we gave an appraisal that is demonstrably wrong. And not just for the original fee.

     

    You either stand behind your work or you don't. And if your negligent or corrupt or simply not very smart, then there should be potential consequences to that.

     

    I totally disagree with the Fed Governor. Who says the market needs "help". Seems to me that we are focussed entirely on the wrong thing - the idea that higher housing prices are somehow inherantly good.

     

    What about "affordable housing"? What about treating housing as a utility - a roof over your head and whatever fancy stuff your willing to pay for inside for your own pleasure?

     

    The government should be pushing the banks to get all the houses they hold onto the market - flush it all out and then go from there. Likewise, zero programs for homeowners - can't pay the mortgage pack up and move to an apartment. Life goes on.
    17 May 2012, 12:31 AM Reply Like
  • Tack
    , contributor
    Comments (14296) | Send Message
     
    david:

     

    There's a huge difference between having contractual liability to the party to whom you are contracted -- as an appraiser, the banks -- and having tort liability to third parties -- purchasers and sellers. Like it or not, this is having a chilling effect on appraisal values which is now downwardly distorting values, just as the old flipping frenzy was upwardly distorting them.

     

    The only thing this political nicety did was reward the tort lawyers, Washington's most powerful political group.

     

    Completely agree with you on consequences for nonpayment of mortgages for buyers. The banks are and have been trying relentlessly to accelerate foreclosures, but politicians smell votes in giving away yet more billions to undeserving foolish borrowers, rather than properly addressing systemic issues and properly observing contract law.
    17 May 2012, 08:12 AM Reply Like
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