Saturday, January 12, 2013

Want to Make a Bet?

The newly created Consumer Financial Protection Bureau announced new rules this week limiting "risky mortgages".

The Consumer Financial Protection Bureau is releasing Thursday much anticipated new mortgage rules, which will restrict the kind of subprime lending practices that caused both the financial and housing sectors to crash five years ago.
 The new rules come at a time when regulators and banks are trying to find a middle ground between overly lax and overly tight lending standards.
 About a decade ago, mortgage lenders started broadening their base of customers by offering an array of exotic loan products with esoteric names: subprime, Alt-A, or low-doc loans that required little to no documentation of income. Teaser rates and option ARMs that offered low initial monthly payments that later ballooned.
 Those loans got millions of borrowers into loans they ultimately couldn't afford, and it resulted in one of the worst crashes in modern history.

 Now this sounds great in concept, but since it has been government policy to force banks to make home loans to as many people as possible, want to beat that they will soon be suing those same banks for failing to give out those very same risky loans that they are legally prevented from making?

OK, that isn't really a fair bet, since the government is already doing that.


Wells Fargo has agreed to pay $175 million to settle allegations that it discriminated against minority borrowers, the Department of Justice announced Thursday.

The DOJ accused Wells Fargo, the nation's largest residential home mortgage originator, of pushing African-American and Hispanic borrowers into more costly subprime loans or charging them higher fees than comparable white borrowers. More than 30,000 minority borrowers between 2004 and 2009 were affected, the Justice Department said.