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Obama Administration to Banks: Why aren't you making High Risk Loans?

Posted by on Apr. 5, 2013 at 1:40 AM
  • 22 Replies

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html?hpid=z1



Have they not learned a damn thing? 

by on Apr. 5, 2013 at 1:40 AM
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Replies (1-10):
SallyMJ
by Ruby Member on Apr. 5, 2013 at 2:27 AM
1 mom liked this

Hmm... I thought this was what screwed up our economy worse only by the Great Depression.

It's understandable that some knuckleheads would try the same actions, with hopes of great results. Maybe fifty years down the line.

But not the same people 5 years apart!!

Who ironically blamed Bush for this.

Carpy
by Platinum Member on Apr. 5, 2013 at 7:02 AM
2 moms liked this

They like the economy to be weak, so more people are dependent on the Government.

Billiejeens
by Ruby Member on Apr. 5, 2013 at 7:41 AM

Damn predatory lenders !

Wait!

kam013
by Member on Apr. 5, 2013 at 8:09 AM
1 mom liked this

Did they learn nothing from the first time around??

Good grief!!

jcrew6
by Jenney on Apr. 5, 2013 at 9:24 AM
1 mom liked this

Apparently not.

Quoting kam013:

Did they learn nothing from the first time around??

Good grief!!



ohmandy
by New Member on Apr. 5, 2013 at 9:58 AM
1 mom liked this

my understanding of the lending practices prior to the collapse was that its wasnt so much that people with weak CREDIT were getting loans.., it was people with weak credit who really couldnt afford it were convinced to take mortgages that started low and kept going up (excuse the preggo brain haha, not fixed, the other...)

THIS is what caused the main issues.  i know the slight increases from taxes make me cringe, imagine all of a sudden you are owing hundreds more on a mortgage you are already struggling with.  people f- up their credit a lot.  luckily since i was a kid i was really smart about my credit, others dont realize the effect of defaulting on that credit card when they're 18... or lose their job and miss payments on bills, then they get back to a good place financially but are stuck cause of their credit.

if "high risk" is only associated with credit scores, i dont see a problem with this... as long as other requirements... income to debt ratio, salary and job security are also factors.

jcrew6
by Jenney on Apr. 5, 2013 at 10:50 AM
1 mom liked this

Research the correlation in the modifications made to the community reinvestment act and predatory lending. Haven't we learned enough from this historic past?  What makes you think this time will be different? 


Quoting ohmandy:

my understanding of the lending practices prior to the collapse was that its wasnt so much that people with weak CREDIT were getting loans.., it was people with weak credit who really couldnt afford it were convinced to take mortgages that started low and kept going up (excuse the preggo brain haha, not fixed, the other...)

THIS is what caused the main issues.  i know the slight increases from taxes make me cringe, imagine all of a sudden you are owing hundreds more on a mortgage you are already struggling with.  people f- up their credit a lot.  luckily since i was a kid i was really smart about my credit, others dont realize the effect of defaulting on that credit card when they're 18... or lose their job and miss payments on bills, then they get back to a good place financially but are stuck cause of their credit.

if "high risk" is only associated with credit scores, i dont see a problem with this... as long as other requirements... income to debt ratio, salary and job security are also factors.



MsDenuninani
by Bronze Member on Apr. 5, 2013 at 11:57 AM

As long as you are regulating/monitoring trading of high-risk loans on the securities markets, loaning to people with lesser credit ratings/scores, shouldn't be a problem.

It wasn't the loans that caused the problem -- it was the unregulated trading of securities that reached a frenzy during the housing bubble.  

Predatory lending will always happen.  But the loans themselves were being bought/sold by people who never bothered to look at how much the loans were actually worth.  That's why Dodd Frank was enacted -- to make banks/securities firms pay attention to what they are doing.   Whether or not it does so, though, is another matter. . .

Billiejeens
by Ruby Member on Apr. 5, 2013 at 12:04 PM
1 mom liked this

 

Umm no,

Banks were pressured (forced) to provide loans to people that the banks knew could not repay the loans.

Quoting ohmandy:

my understanding of the lending practices prior to the collapse was that its wasnt so much that people with weak CREDIT were getting loans.., it was people with weak credit who really couldnt afford it were convinced to take mortgages that started low and kept going up (excuse the preggo brain haha, not fixed, the other...)

THIS is what caused the main issues.  i know the slight increases from taxes make me cringe, imagine all of a sudden you are owing hundreds more on a mortgage you are already struggling with.  people f- up their credit a lot.  luckily since i was a kid i was really smart about my credit, others dont realize the effect of defaulting on that credit card when they're 18... or lose their job and miss payments on bills, then they get back to a good place financially but are stuck cause of their credit.

if "high risk" is only associated with credit scores, i dont see a problem with this... as long as other requirements... income to debt ratio, salary and job security are also factors.


 

ohmandy
by New Member on Apr. 5, 2013 at 1:07 PM

this is what i meant haha.

Quoting MsDenuninani:

As long as you are regulating/monitoring trading of high-risk loans on the securities markets, loaning to people with lesser credit ratings/scores, shouldn't be a problem.

It wasn't the loans that caused the problem -- it was the unregulated trading of securities that reached a frenzy during the housing bubble.  

Predatory lending will always happen.  But the loans themselves were being bought/sold by people who never bothered to look at how much the loans were actually worth.  That's why Dodd Frank was enacted -- to make banks/securities firms pay attention to what they are doing.   Whether or not it does so, though, is another matter. . .



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