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tazzygirl -> RE: "Occupy" Arrest All Over ... (10/26/2011 3:17:02 PM)
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How did a bank STEAL your money? Was it in the stock market (which is not insured and has risk) or was it in an FDIC-insured account (and they didn't pay you when the bank failed)? Or could it be because you weren't responsible enough with your money that you placed it at risk and either borrowed more than you could pay back (either student loan or mortgage) or thought a 401(k) was a savings account? Is it the BANK's fault that you are not financially literate?
Yup.
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.[41][119] Approximately 90% of subprime mortgages issued in 2006 were adjustable-rate mortgages.[2]
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In recent years, banks have moved to a new model where they sell on the mortgages to the bond markets. This has made it much easier to fund additional borrowing,
But it has also led to abuses as banks no longer have the incentive to check carefully the mortgages they issue.
In the past five years, the private sector has dramatically expanded its role in the mortgage bond market, which had previously been dominated by government-sponsored agencies like Freddie Mac.
They specialised in new types of mortgages, such as sub-prime lending to borrowers with poor credit histories and weak documentation of income, who were shunned by the "prime" lenders like Freddie Mac.
They also included "jumbo" mortgages for properties over Freddie Mac's $417,000 (£202,000) mortgage limit.
The business proved extremely profitable for the banks, which earned a fee for each mortgage they sold on. They urged mortgage brokers to sell more and more of these mortgages.
Now the mortgage bond market is worth $6 trillion, and is the largest single part of the whole $27 trillion US bond market, bigger even than Treasury bonds.
............
They told them that they could get cash by refinancing their homes, but often neglected to properly explain that the new sub-prime mortgages would "reset" after 2 years at double the interest rate.
The result was a wave of repossessions that blighted neighbourhoods across the city and the inner suburbs.
By late 2007, one in ten homes in Cleveland had been repossessed and Deutsche Bank Trust, acting on behalf of bondholders, was the largest property owner in the city.
http://news.bbc.co.uk/2/hi/business/7073131.stm
It goes on to say how people were taken advantage.
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But these mortgages had a much higher rate of repossession than conventional mortgages because they were adjustable rate mortgages (ARMs).
The payments were fixed for two years, and then became both higher and dependent on the level of Fed intereset rates, which also rose substantially.
Consequently, a wave of repossessions is sweeping America as many of these mortgages reset to higher rates in the next two years.
And it is likely that as many as two million families will be evicted from their homes as their cases make their way through the courts.
Banks werent telling, mortgage companies werent either... and people were being screwed.
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Prior to the passage of AMTPA, banks were barred from making anything but the conventional fixed-rate, amortizing mortgages. AMPTA lifted those restrictions, giving birth to all the new and exotic mortgages that have so many borrowers in hot water today. For instance:
Adjustable-rate mortgages, in which the interest rate becomes floating after a number of years.
Balloon-payment mortgages, which have an outsized payment when the loan comes due.
Interest-only mortgages, which require only repayment of interest (not principal too) during the first few years of the loan, only to hit borrowers with crushing monthly-payment resets once the new monthly payment kicks in.
And worst of all, the option-ARM, which allows borrowers to underpay by as much as they want during the first few years. The awful upshot is the unpaid monthly interest gets tacked onto the size of the loan. So your $300,000 mortgage can turn into a $350,000 loan in a hurry, destroying any equity you have in your home.
"One of the problems was that there were no substitute regulations to make sure these new mortgages didn't turn out to be exploitative," says McCoy.
http://money.cnn.com/2008/01/30/real_estate/congress_subprime.fortune/
How many people were told, and fully understood, the above? From the reports, not many.
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