Obama OK’s Subprime Borrowers for Prime Loans

Paul Sperry, Investor’s Business Daily, January 14, 2013

New mortgage rules issued last week by the administration will have the effect of forcing lenders to approve prime loans to borrowers who would normally only qualify for subprime loans carrying higher interest rates and fees to cover the added risk of default.

Banks are already under renewed pressure from federal prosecutors and regulators to make home loans to low-income borrowers with blemished credit as part of the administration’s stepped-up enforcement of anti-redlining laws.

Before the mortgage crisis, lenders were able to hedge losses by placing such homebuyers in higher-cost subprime mortgages—something the government at one point actually encouraged as part of a strategy to expand credit opportunities for lower-income minorities and close the racial “mortgage gap.”

But under the new mortgage rules, loans with subprime features do not fall under the official government definition of “qualified mortgages,” and therefore do not provide a “safe harbor” against lawsuits and other action.

As a result, analysts warn lenders may end up having to “subsidize” riskier borrowers at the expense of other customers.

The Consumer Financial Protection Bureau, the Dodd-Frank Act-created agency that wrote the 800-page mortgage regulation, has decreed that the way to distinguish a prime loan from a subprime loan is by the interest rate charged, even though the main distinguishing feature of a subprime loan is a sub-660 credit score.

“Under its tortured definition of ‘prime,’ a borrower can have no down payment, a credit score of 580, and a debt (-to-income) ratio over 50%,” as long as the borrower is charged a prime rate, said former Fannie Mae chief credit officer Edward Pinto.

Mortgages carrying a prime rate, or one within 1.5 percentage points of the national average, will have the strongest level of legal protection, according to the regulator. Analysts say this rule effectively limits lenders’ ability to price for risk. Lenders who charge rates above the 1.5-point threshold open themselves up to legal liability.

Starting in January 2014, when the new rules take effect, borrowers who default on nonqualifying home loans will have the power to “raise a foreclosure defense” against banks, according to Joseph Barloon, a lawyer for New York-based Skadden, Arps, Slate, Meagher & Flom.

{snip}

In addition, lenders who underwrite such nonqualifying loans could open themselves up to federal charges if recipients are minorities.

CFPB has the power to enforce “fair lending” laws, and is already coordinating lending-discrimination cases against banks with the Justice Department.

As part of recent consent decrees, Justice has ordered several bank defendants to approve prime-rate mortgages for African-Americans and Latinos who otherwise would not qualify for them.

{snip}

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  • Puggg

    Hooray, another housing bubble. You know, like the first one didn’t bring our economy to the brink of collapse.

    • Inflating another housing bubble is also being done to gin up the construction industry, which in turn has the deliberate design of attracting Hispanics across the border.

    • Sherman_McCoy

      Yep. Here we go again!

      • The__Bobster

        Yep, they never learn.

  • wmarkw

    The hallmark of the second term is going to be a requirement that “standards” produce politically correct results — in test scores, discipline policies, lending, hiring, and policing.

    • When he leaves office, he and the Democrats can point to their success at providing affordable homes for a large number of minorities. The next Republican administration will be blamed when the program collapses.

      • StillModerated

        There will be no more Republican presidents. I certainly will never for vote for one.

        • tickyul

          I gave up on the scam called voting……..Vomit D or Vomit R.
          Look at the fools……yet again making housing less affordable…….while at the same time inflating another housing bubble.

      • Ed_NY

        I’m afraid that by the time Obama leaves office, the dollar, the economy and society will have collapsed. I do not have much hope for the future.

  • And, of course, whitey is going to be picking up the tab.

  • Robb

    As I was shoveling snow a week or two ago, I started thinking… How long will it be before white people are forced to shovel the driveways of “people of color” due to disparate impact or the legacy of slavery?

    • Some Guy

      The shovel will be deemed a racist symbol of slavery..then the mop, the broom, the hammer, etc.

      • Joseph

        No- snow shovels are okay for use by “ice people” like us.

    • tickyul

      LOL, I have had thoughts along the same line.
      How about this, when a “rich” White school has a fundraiser…..the monies must go to the state to dole out as they see fit……….30% for the White school, 50% to the poor Urban American school, 20% to the Mexican school!!!!!
      Prepare for Pol Pot America!

  • bigone4u

    Another hidden subsidy for minorities that whites will pay for with taxes or the inflationary effects of the deficit. When the recipients default, there will be another cost passed on to others. There appear to be no moral or ethical constraints on a federal government obsessed with diversity.

    • Joseph

      And WHEN they default, it will be due to Mitt Romney or some other privileged white guy to blame for “disproportionately exporting the jobs of minorities overseas”. With the big Post Office cuts they are threatening – who is going to employ the vibrant workers who are laid off? Of course I realize that they will probably extend unemployment payments for 4 years or something, but after that? Maybe Marco the Magic Cuban” will be president and he can fix it.

    • Joseph

      And WHEN they default, it will be due to Mitt Romney or some other privileged white guy to blame for “disproportionately exporting the jobs of minorities overseas”. With the big Post Office cuts they are threatening – who is going to employ the vibrant workers who are laid off? Of course I realize that they will probably extend unemployment payments for 4 years or something, but after that? Maybe Marco the Magic Cuban” will be president and he can fix it.

    • The__Bobster

      And with higher housing prices…until the minorities move into their neighborhoods when the housing prices crash again.

  • Lewis33

    Obama homes! sounds like…

    • StillModerated

      It sounds better than Robert Taylor Homes.

  • AmericanPatriot

    yeah well, I can’t waste a lot of tears on the tribe’s banks. Real Solution- private Whites only mutual community lending and aid societies to handle our credit and insurance needs

    • pcmustgo

      I am half jewish, fyi…. and I am here on amren.

      • StillModerated

        Half Jewish? No such thing. You either are or you aren’t. It’s a faith, not blood.

        • Bill

          It’s through the blood of the mother that a person is determined by Jews to be a Jew. So it’s more than faith. Try being a convert and getting married in Israel. Won’t happen.

          • Katherine McChesney

            Not true. SOME Jews recognize the mother. I believe these are the leftists. Actual tribes are determined by the male bloodline and carry male names.

          • StillModerated

            OK. I suppose that explains why so many Jews have Scottish names: Rupert Murdoch, Robert Maxwell, etc.

          • StillModerated

            Try being a Christian Arab on the West Bank.

        • tickyul

          Nice try…..it is a little more complicated than that!

          • Bill

            NOT in Israel – the land of the Jews governed by rabbinical law. Yes, it IS as easy as that. If you can’t prove you a Jewish through your mother’s blood line, you cannot get married in Israel. They have to go out of country to even get married, and when they come back it is not recognized by the rabbinate.

          • PesachPatriot

            I’ve been there many times…Israel is not governed by rabbinical law…most of their laws are based on british laws from the mandate period between 1919-1948. The ultra-Orthodox in the country are actually upset about this because Israeli citizens can buy unkosher meat(not as easily as in the states, but its there) and drive on saturdays. The rabbinate does have a large say in marriage and burial rites, because there is no separation of synagogue and state but its not like Saudi Arabia where shari’a law is strictly enforced. There are also no more “tribes” like in the bible…the ten tribes basically disappeared from history after the first temple was destroyed by the babylonians, all modern day jews are basically assumed to be from the tribe of judah…Some 19th century theologians actually believed that the native amerindians were a lost tribe of Israel.

        • Katherine McChesney

          It IS blood. You are just an anti-Semite.

          • The__Bobster

            You lose. You used the Hannity word.

          • StillModerated

            So what? I’m a racist, too. And a male chauvinist pig. Thank you for noticing.

        • pcmustgo

          Ok, then I am 100% a Christian… jesus was a jew, that being said. Jewish people see half jews with a Jewish mother as fully Jewish. It is a blood- carried by the mother’s line. If I had a jewish father, no, they would not view me as Jewish at all.

      • Nathanwartooth

        Well I’m a quarter Jewish so I only got a 1/4 ounce of gold at birth. 🙂

        It really depends on what you identify with. There are plenty of Jews that identify as White. It also depends on whose interests you have at heart.

        There are just too many Jews in power who identify as being Jewish and only work towards their own tribes interests.

        • pcmustgo

          I agree many of these NYC Jews are far too self-absorbed and tribal and in some bubble world. I think Jews also suffered in the past from being “pushy immigrant types”, meaning some of that behavior is just the stereotypical “pushy” unassimilated immigrant behavior we see from East Indians, Asians , etc.

          Do I think Americans should be ok with endless wars for Israel? No… That being said, I support an Israeli state as much as I support Europe being for Europeans. I also think Europeans should stop downplaying the Islamo-threat.

          • Nathanwartooth

            Honestly we should start protesting the Jews for being supremacist in wanting their own country. I’m tired of supporting something when those same people want my country to be overwhelmed by the third world and blended out of existence.

            At this point in the Islam/Jew war I don’t know who to root for. One wants to destroy us with bombs and the other wants to destroy our people and culture through political means.

            Maybe they’ll just wipe each other out and I wont have to worry about it anymore.

      • falsedawn

        I used to play chess with a Jewish man on Wed. evenings. I still would except he died.

  • PesachPatriot

    I think the US Government is probably now considered a subprime borrower by foreign central banks and financial institutions. This whole idea worked out fantastically well the first time George Bush tried it in 2004….you know a trillion here, a trillion there and pretty soon you’re talking about real money. Its a good thing that most of the modern monetary supply exists as computerized 1’s and 0’s on plastic cards. If the cash was being physically printed the north american continent would probably be deforested. Go ahead an put it on my kid’s tab…along with other 16 trillion dollars we owe. I wonder what Washington and Jefferson would think of the ridiculous numbers being thrown around today.

    • Joseph

      We need Old Hickory back.

      • PesachPatriot

        The gentleman on the twenty dollar bill has long been one of my favorite presidents. I think he may have been a little bit too rough with the cherokee and the seminoles, but he knew exactly how to deal with the banking sector. My quip of the last election cycle was that the only candidates worth actually voting for were all unfortunately deceased.

        • gemjunior

          My quip of the last election cycle was that the only candidates worth actually voting for were all unfortunately deceased.
          Wow, you reallys said it well. I will have to spread this far and wide, crediting you of course. But aside from being funny – it’s so true.

          • PesachPatriot

            Thank you for your kind words…The truest statements often contain the most humor. When the benghazi incident happened I remarked to a friend that I wished some of the civil war guys were around…I don’t think either blue or gray would tolerate foreigners attacking an american embassy. As the election neared I joked with people that the rotting corpses of statesmen long past from this world would probably do a better job running america than the current crop of bankster sock puppets.

          • gemjunior

            I joked with people that the rotting corpses of statesmen long past from this world would probably do a better job running america than the current crop of bankster sock puppets.
            LOL, good one – maybe we could employ some of the zombies from Dawn of the Dead (or the thousands of zombies from the current crop of zombie genre movies) could fill the post. They are ugly enough and their appetites are quite similar; they both want every last drop of our blood and flesh…….

  • Is he Bush II, Bush gave several minorites cheap loans as well.

  • StillModerated

    As if! You mean the 2008 debacle taught Wall Street and the New York banks nothing? Wash rinse repeat. I guess the economy seems to be recovering so the elites are setting up more wreckage.

  • professor

    The banks are withholding a tremendous amount of unsold homes from the marketplace due to poor sales and a reduction in value. Shortly these properties will become condemned as they continue to deteriorate without adequate maintenance and the usual theft of resellables and appliances. By allowing this action the banker’s bottom lines will appear less damaged then they actually are and UncleGov will foot the bill when it comes due as we know it will. Remember that Morgan Stanley handles the food stamp program which may explain some of the atmospheric rise in that fiasco. They don’t do it for free and neither will they or their ilk on this housing deal. Just another method to keep those bonuses coming.

    • Ed_NY

      Approximately 2 years ago I tried to purchase a vacant and bank owned home in central Florida. The bank told me it was a forclosure and not for sale. Now, 2 years later it is still vacant and not for sale. The only problem it has been vandalized numerous times since and is pretty much worthless now.

      • Joseph

        That’s probably because they didn’t have to take the write-down at the time, they just put it off ’till later. They’ll list it on the balance sheet at it’s last sale or taxed value.

        My son-in-law (who secures foreclosures) looked at a property several years ago that had been foreclosed and was valued at something like 90k. It had been empty for a year or two, bums had been squatting but he decided it might be a good flipper and offered the bank about 30k which they scoffed at. The house sold about 1 1/2 years after that in about the same condition for 9k. It lost fully 90% of it’s value while they sat on it!

        • The__Bobster

          Oh, these banks are still being bailed out at your expense. What do you think the 0% interest rates on your deposits are all about? The government is giving them free money.

          • Joseph

            Does Ben Shalom Bernanke know about this?!

          • That’s more of a result of governments exerting pressure on the private financial system to keep interest rates low in order to make it cheap for governments to borrow, in exchange for banks having been bailed out. Look up LIBOR.

  • alas

    And the higher interest rates on credit worthy people (ie white people) and the taxes needed to pay for the banks to be bailed out in ten years time will all mean lower white birth rates, whilst these subsidised houses for minorities will mean, you guessed it, higher birth rates. We are being forcibly displaced with our own money it makes me sick. If we have a tax rate of 5% or so for the minimum things, the white birth rate would be at replacement level I can promise you.

    • Fredrik_H

      Yupp, the bar for starting a white family just got raised a bit again.

  • SintiriNikos

    The root of a new housing crisis. And as lousy as Dubya was, the last bubble all started under the other W, the slick one.

  • Not that this will ever happen, but this is why you can’t necessarily bring back property ownership as a condition of voting. Welfare Shaniqua slinging a neo-subprime mortgage is now a “homeowner,” but you’re slaving away in an expensive city at a real job and can barely afford to rent. Meaning Shaniqua can vote and you can’t.

  • Dave4088

    I just had a feeling that Obama and Holder were going to hold a gun to the lending industry’s head and force them to continue make loans to risky black and mestizo borrowers at prime interest rates. Then when these people default the bank will be sued again for “discrimination”.

    Equality of outcome is the name of the game in Obama’s Amerika.

    • The__Bobster

      By then, Obongo will be out of office and free to sue Citibank once again on behalf of ACORN.

  • Michael_C_Scott

    This really just means the financial risk is being passed on to the responsible borrowers. For a new home loan borrower today, I would recommend a non-adjustable fixed-rate mortgage with at least 20% down on a house a couple can afford on one income. I made advanced payments on the principal and paid off my mortgage in 2004, after eight years, and my house was part of an ironclad prenuptial agreement; if Sayaka and I ever get divorced, I keep the house as a pre-existing non-marital asset . A man who gets married without a prenup these days is an idiot.

    When one pays interest on a loan, one is really paying the lender to accept a risk, so these new lending rules mean you will be subsidizing the new crib N’DeShawntavious and his baby momma be haben. Gnome sayin?

  • Michael_C_Scott

    This really just means the financial risk is being passed on to the responsible borrowers. For a new home loan borrower today, I would recommend a non-adjustable fixed-rate mortgage with at least 20% down on a house a couple can afford on one income. I made advanced payments on the principal and paid off my mortgage in 2004, after eight years, and my house was part of an ironclad prenuptial agreement; if Sayaka and I ever get divorced, I keep the house as a pre-existing non-marital asset . A man who gets married without a prenup these days is an idiot.

    When one pays interest on a loan, one is really paying the lender to accept a risk, so these new lending rules mean you will be subsidizing the new crib N’DeShawntavious and his baby momma be haben. Gnome sayin?

  • So once again it’s not about equal opportunity, it’s all about equal outcome.

    • Ed_NY

      You are so right. It’s about equal outcome. Equal outcome is impossible without redistribution of wealth. Redistibution is communism.

      • Katherine McChesney

        Redistribution of wealth was the Catholic ideal and comes from the encyclical Rerum Novarum.

        • Just another reason I’m a big advocate of whites giving up religion. Our race should be our only religion

  • The only way I see this program working even temporarily without crashing and burning out of the gate is if it’s “subsidized” by some combination of interest rate hikes on really creditworthy borrowers and Federal subsidies hidden behind one conduit or another. But any interest rate hikes results in further depression in selling prices. Now, that’s not a problem to me in a macro economic sense, because housing is still way too expensive for the sake of affordable family formation. But most of the political class rings its hands over houses not being expensive enough, yet Obama just did something which will very likely result in selling prices of houses taking further plunges in the short term.

  • Well, this is what Barry Dunham and his cohorts at ACORN did to Illinois; now he can do it for the whole nation.

  • CRA 2.0???

  • So what is going to happen to the secondary mortgage market? Let’s say a union pension fund wants a safe investment with predictable income and they buy up some “prime” mortgages, Will they know what percentage of the mortgages are crap and doomed to default? How will the union know what the actual level of it’s risk really is? If the market for mortgages dries up because the investment community can’t determine the risk of the mortgages, will FNMA (aka “taxpayers”) end up holding all these mortgages?

  • Katherine McChesney

    Is this the one that will accept EBT cards as collateral?

    Seriously, I hate obama. I’ve never said that about anyone in my life.

  • GERRY

    Obama will complete the destruction of America in his second term and then tell the American people “Anybody that is so clueless as to vote me in twice get’s exactly what they deserve”.

  • This will be the final nail in the coffin for all but the largest lenders and effectively shift mortgage lending to the federal government.