November 06, 2007
Why is Barney Frank pimping for big banks?
This morning, HR 3915 goes to markup in the Financial Services Committee. I know this sounds about as thrilling as clipping your toe nails, but the reality is that this bill will effect your life in a number of ways, especially if you want to buy or refinance a home. If this bill becomes law the mortgage industry, already suffering under a difficult credit cycle, will cease to exist as we know it.
In it's place will return the bad old days of mortgage lending, when it was impossible to buy a home with less than 10% down and when big banks set the interest rate, not the market. This isn't a return to local lending, something that already exists with the millions of mortgage brokers that provide financing to Americans today. This is a return to big corporate banking and unless your credit is perfect, get ready to rent for a long, long time. The only question is, why would Barney Frank do this?
Here's the skinny on what's so wrong...
There has, admittedly, been tons of bad coverage about mortgages going bad in the US. Basically, an entire industry is being dragged down by a few bad actors, less than 2% of the brokers in the US. The real problem is with builders like DR Horton who own their own mortgage companies and steer home buyers to them by offering incentives... but only if the buyers use THEIR mortgage company.
In reality, this bill will do little to stop bad lending practices. The only thing it will do is make sure that there isn't anyone to keep the banks honest. Without mortgage brokers keeping the market competitive, there's no one to help you. Further, the laws and regulations we have now are enough but, like the EPA, the money to enforce them is lacking. Why isn't Frank concentrating on that? He can propose an appropriations bill as easily as any other member of Congress.
Chairman Frank and the other co-sponsors may not realize the damage they are about to do. That's why it's important to LET them know.
Posted by mcblogger at November 6, 2007 12:39 AM
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