You make a good point here. Lenders protecting themselves from defaulted loans is what you are describing. But these lenders would be better off being more cautious in who they lend money to. And keeping rates and fees more competitive in the long run. Can someone please make this clear to Barney Frank and big government intrusion types?!?!

http://www.fdic.gov/regulations/laws/rules/5000-5100.html

Institutions should recognize the additional risks inherent in subprime lending and determine if these risks are acceptable and controllable given the institution's staff, financial condition, size, and level of capital support. Institutions that engage in subprime lending in any significant way should have board-approved policies and procedures, as well as internal controls that identify, measure, monitor, and control these additional risks. Institutions that engage in a small volume of subprime lending should have systems in place commensurate with their level of risk. Institutions that began a subprime lending program prior to the issuance of this guidance should carefully consider whether their program meets the following guidelines and should implement corrective measures for any area that falls short of these minimum standards. If the risks associated with this activity are not properly controlled, the agencies consider subprime lending a high-risk activity that is unsafe and unsound.

Seems the banks and loan companies may have been greedy. :o

Buddahaid

Definitely a part of the problem as well. Of course, they should have payed heed to the long term risks. It's my opinion that if the government never intervened in the housing sector in the first place, these lenders might have been more cautious with their capital.

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis





Government policies

Main article: Government policies and the subprime mortgage crisis
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U.S. Subprime lending expanded dramatically 2004-2006


Both government failed regulation and deregulation contributed to the crisis. In testimony before Congress both the Securities and Exchange Commission (SEC) and Alan Greenspan conceded failure in allowing the self-regulation of investment banks.[102][103]
Increasing home ownership has been the goal of several presidents including Roosevelt, Reagan, Clinton and G.W.Bush. In 1982, Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed non-federally chartered housing creditors to write adjustable-rate mortgages. Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages. These new loan types are credited with replacing the long standing practice of banks making conventional fixed-rate, amortizing mortgages. Among the criticisms of banking industry deregulation that contributed to the savings and loan crisis was that Congress failed to enact regulations that would have prevented exploitations by these loan types. Subsequent widespread abuses of predatory lending occurred with the use of adjustable-rate mortgages.[104][105][106] Approximately 80% of subprime mortgages are adjustable-rate mortgages.[107]
In 1995, the GSE's like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the Fannie Mae and Freddie Mac with the subprime market.[108] In 1996, HUD set a goal for Fanny Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.[109] From 2002 to 2006, as the U.S. subprime market grew 292% over previous years, Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion per year, which included $350 billion of Alt-A securities. Fannie Mae had stopped buying Alt-A products in the early 1990's because of the high risk of default. By 2008, the Fannie Mae and Freddie Mac owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the total U.S. mortgage market.[110] The GSE have always been highly leveraged, their net worth as of 30 June 2008 being a mere US$114 billion.[111] When concerns arose in September 2008 regarding the ability of the GSE to make good on their guarantees, the Federal government was forced to place the companies into a conservatorship, effectively nationalizing them at the taxpayers' expense.[112][113]
The Glass-Steagall Act was enacted after the Great Depression. It separated commercial banks and investment banks, in part to avoid potential conflicts of interest between the lending activities of the former and rating activities of the latter. Economist Joseph Stiglitz criticized the repeal of the Act. He called its repeal the "culmination of a $300 million lobbying effort by the banking and financial services industries...spearheaded in Congress by Senator Phil Gramm." He believes it contributed to this crisis because the risk-taking culture of investment banking dominated the more conservative commercial banking culture, leading to increased levels of risk-taking and leverage during the boom period.[114] The Federal government bailout of thrifts during the savings and loan crisis of the late 1980s may have encouraged other lenders to make risky loans, and thus given rise to moral hazard.[115][36]
Conservatives have also debated the possible effects of the Community Reinvestment Act (CRA), with detractors claiming that the Act encouraged lending to uncreditworthy borrowers,[116][117][118][119] and defenders claiming a thirty year history of lending without increased risk.[120][121][122][123] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of mortgages issued to otherwise unqualified low-income borrowers, and allowed the securitization of CRA-regulated mortgages, even though a fair number of them were subprime.[124][125]
Both Federal Reserve Governor Randall Kroszner and FDIC Chairman Sheila Bair have stated their belief that the CRA was not to blame for the crisis.[126]


Some history on regulation changes.


Buddahaid

Here is the problem, the insurance required for the % due on the loan, fees, etc. No problem. Part of the deal. However, I'm still paying these and have bailed out the banks via the government via my tax money. In essence, I'm getting hit twice. See my picture? :03:

It wasn't. The data and hard numbers bear them out on this.

And the word was written upon a stone ---

Thou shall not worship FALSE idols and beware of false idols for they have no idea of sin and pain of ordinary people that have NEVER sinned AND get the short-end of the stick of a so called leader:

http://learnabit.homeserver.com/lab/falseidol.jpg

Can't say it any better myself.

-S

Crud,can you get a faster connection or post things like normal people?

-S

Isn't that what a Republic is? It's not your will but your representative's. And, anyone who's ever dealt with eminent domain knows private property is a myth. Just ask the farmers from Oak Ridge. Wake up! If your government wants it, they will have it, democracy or not!

Buddahaid

Yes , and if the government wasn't involved the banks would just adjust their fees to make up for the new losses so you would still be paying more for other peoples mistakes.

That's a valid point, but I disagree as it is based upon the assumption that banks would work as a unified entity when imposing the fees.

If the banks were not under such strict government regulations they would be forced to compete for the consumer's dollar like any other industry. Competition is key to lowering costs (that is the guiding principle behind anti-trust laws).

Government regulation is the force that allows fees to remain high as part of standardization.

They don't have to work as a unified entity to screw their customers.
Banks themselves stifle competition, if you have a deal with one bank and wish to transfer it to another because it offers a better deal then you have to pay penalties to the first for the transfer. If the the first bank later offers a better deal and you want that then you have to pay the second bank penalties again.
Besides which the current property crisis is mainly down to poor regulation of the financial institutions not the strict legislation you mention.

I'm certain that Neal sleeps with ease now that he has your endorsement.

The bank can not adjust my fees on a contract already signed. It is a fixed mortgage. Fixed means fixed(not adjustable like those loans that have sunk many). Never had a fee go up ever. Only thing that can legally change is property taxes due. They have no control over that nor do I. See, the contract signed is for the entire amount due on the loan, plus fees, interest, closing cost, etc. It is all encompassing. There is a final figure I will pay after 30 years with exception of property taxes if said property taxes are handled by the mortgage lender which in most instances is the case. The mortgage company can not simply add fees for their screw ups. If they do so, simply refinance at a more reputable institution. You are never bound to the same company for the 30 years on a mortgage. If they suck, you find someone else. I have and so have others.

With your line of thinking a loan for a car could go up in fees over the life of the loan if your neighbor got his car repo'ed because of non-payment of his loan at the same bank as mine. It does not work that way. My car loan is fixed on everything. Contract signed. The bank can not say, oops, Joe down the street is not paying. Here is the new payment schedule for you as a result of Joe not paying on his car loan.

Sorry, I believe your thinking is correct.

As I stated, I have paid the mortgage insurances for others mistakes. I understand that and is part of the contractual agreement on the loan. All done, paid in full. Great. Now, my tax dollars just bailed out the banks for bad loans. Great. I just paid again. I do not know how to explain it to you any clearer than that.