Mortgage market pandering....?

Hate to say this, but I think that in this case, Hillery is pandering the ‘po folk' vote by advocating setting up programs to help pay their mortgages.

The problem is, of course, that there was an irrational housing bubble coupled with a lot of criminal activity on the part of realtors, lenders and appraisers who scammed the system and sold homes to people who were not at all qualified either through credit history or income. Coupled with speculators who leveraged into houses with the idea of ‘flipping' and we had a disaster in the making when they simply walked away when the market topped.

Aside from putting a lot of those people in jail for fraud, conspiracy, etc. I agree that there should never be pre-payment penalties, ever, and variable rate mortgages should be outlawed simply because the low early rates are intended to lure buyers who then get in big trouble if and when the rates go up.

Perhaps legislation which would make an original lender still responsible for a loan after he spins it off to Fannie Mae or Freddie Mac in the secondary mortgage market would have a good moderating influence! Some legislation of home builders making them somewhat responsible for the properties they build after they sell them and liability for local governments who issue building permits simply for revenue without zoning concerns, etc.

In other words, the problem is regulation and responsibility, not billion dollar bailouts which is required to prevent future abuses! ... It really is that simple!

Clinton proposes crackdown in mortgage market
By Jeremy Pelofsky

WASHINGTON (Reuters) - With the U.S. mortgage market in turmoil, Democratic presidential front-runner Sen. Hillary Clinton on Tuesday proposed clamping down on lending abuses and providing more aid to families who face losing their homes.

Her proposals were a sign that America's brewing housing crisis has become an issue facing candidates in the November 2008 election, with thousands facing the prospect of losing their homes because they accepted mortgages that are now too expensive.

The New York senator, on the campaign trail in New Hampshire, also proposed a $1 billion fund to supplement state programs that help homeowners catch up on mortgage payments, renegotiate loan terms or provide financial counseling.

She pressed for eliminating penalties for early repayment of mortgages, which are often associated with less traditional home loans to individuals who fall short of qualifying for prime loans and turn to more expensive subprime mortgages.

The proposals come as world markets have been see-sawing in reaction to problems in the U.S. subprime mortgage markets and rising defaults among less credit-worthy borrowers. Lenders in recent months have tightened their loan standards as a result.

"We can look at the statistics, wring our hands, and continue to do nothing, or we can do what America has always done in times of difficulty: acknowledge that we face a real challenge, and confront it head-on with real solutions," Clinton said.

She has a 22-point lead over her closest rival, Sen. Barack Obama, according to the latest USA Today/Gallup poll. Almost half, 48 percent of Democrats and Democratic-leaning independents, backed her, versus 26 percent for Obama.

Two major residential lenders who specialized in subprime loans have filed for bankruptcy protection this year, American Home Mortgage Investment Corp and New Century Financial Corp and dozens of lenders have closed.

The Bush administration has argued that the recent subprime mortgage market turmoil appeared to be contained and is not hurting the broader economy, but it is closely monitoring the situation.

"We need to help those facing the pain of foreclosure," Clinton said in a statement. "We need to secure the marketplace and put reforms in place right now."

Her proposal also includes requirements that mortgage brokers fully disclose their compensation to borrowers when they apply for a mortgage and require federal registration for mortgage brokers.

Additionally, Clinton said another $1 billion should be set aside to help state and local trust funds that help subsidize low-income housing. The New York lawmaker did not offer details on how she would pay for the programs if enacted.

Some lawmakers in Congress, including Democratic presidential hopeful Sen. Chris Dodd, have been looking into overhauling regulations governing the subprime mortgage market, but no concrete proposals have advanced in the House of Representatives or Senate.