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Saturday, February 16, 2008

Economy: Whodunit of Predatory Lending

Eliot Spitzer &mdash a man for whom La Casa de Los Gatos has a deep and abiding respect based on his efforts to fight corruption and stand up for the average citizen &mdash pens a piece in today's WaPoo that should make anybody's blood boil.

If yours doesn't, please repair to the nearest emergency room. You may be dead and just not know it yet.

The gist of the article is that the Bush administration actively intervened to prevent states from protecting their consumers from predatory lending practices. It's bad enough that they just ignored all the warning signs. But to actively worsen the situation? WHAT?

Back when La Casa de Los Gatos had an ARM (Adjustable Rate Mortgage), we were already suspicious of the whole banking/mortgage hype. Lenders and realtors kept telling us our Casa was worth so much more than we thought it was, and offering us all kinds of fancy instruments and inducements; even offering to overvalue La Casa so that we could get a loan for a larger amount and have a "wraparound" home equity line of credit.

ThePoliticalCat wanted a house for only three reasons, really.
  1. Landlords are reluctant to rent to tenants who have pets, especially pets in the plural;
  2. We were getting really tired of the whole "pack and move" scenario;
  3. We just wanted a place to call our own, where we could hang our art on the walls and let the gatos come in and out as they pleased without worrying about traffic, nasty hoomans, landlords, pet deposits, et cetera ad infinitum ad nauseam.
ARMs, at the time, offered the lowest rates. We refused the interest-only, balloon-payment thingumajigs and opted for something we felt we could afford. It was iffy for a while, but we scrimped and saved and managed despite the rough spots. Thanks to all our dear friends who helped us through them.

Shortly after Chimperor McFuckface got "elected" &mdash no, wait, the asshole was appointed by his daddy's friends, wasn't he? &mdash we got very very nervous. Especially after we noticed that every time the pigball opened his mouth, the Dow dropped a few points. So we set about converting our ARM into a fixed-rate instrument. We agreed to the line of credit the bank offered, but it made us so nervous, we paid it back as soon as we could (we needed it to replace the roof and fix a floor).

Now that we see the pickle half the country is in, we're really really relieved that we did what we did. At the time, everyone thought we were idiots (and told us so regularly) for refusing all that "free money." But ThePoliticaCat knows quite well that nothing in life is free. Any time someone tells you they're about to give you a freebie, check your mouth for a hook and their hand for the line, because they're about to reel you in like the sucker they think you are.

And then to find out that not only did our government ignore the dangerous, foolish, and "oughta-be-illegal" practices of the banking industry, it actually crippled those who would protect the average consumer from being tricked and cheated. Gads, what bastards.

If you bought a house and are facing any kind of woes as a result of predatory lending, for mercy's sake, call your legislators, write them, fax them, and insist that they investigate this further. Here's how to find the worthless Federal Senate whores. Project VoteSmart helps you find the worthless Federal Congress whores. Juan Cabanela helps out Spanish-speaking (and reading) voters. Contact your State legiswhores here:

That's all we could find. If anyone knows how to contact legislators from those states not included in the preceding list, please feel free to leave the information and we will update this post accordingly.

Please call your state legislators and ask them about this story. If it's true, then it's really really big and we can't help wondering why it wasn't brought to the public consciousness before this.

Another thing: You might want to contact Rep. Henry Waxman and ask if his committee plans to investigate this ... this ... unbelievable breach of the public trust.

lolcat and funny pictures
moar humorous pics

And for the love of all that's holy DO NOT vote for Senator John McInsane, as he is bound to continue this fraudulent policy. At least Hickabee, no matter how much I despise his loutishness, is a populist at heart, and would never support such an egregiously bad act.

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At 1:22 PM, Blogger Vana Roth said...

Housing isn't the only problem when it comes to predatory lending practices. They also need to take a real hard look at credit card banking rules. Most of your large credit card lenders have incorporated in states that have NO limit on the amount of personal interest charged to consumers. The laws of the lenders state over-rule the laws of the borrowers state. What most card companies are doing is equivalent to loan sharking which is illegal, yet the government refuses to impose any meaningful restrictions ~ Vana Roth - author of A Nation of Expendables

At 8:00 AM, Blogger Connecticut Man1 said...

We have, essentially, lost our house because of an ARM. (Our mortgage doubled while we were trying to refinance, putting us so far behind the eight ball nobody would refinance us) We are in the process of looking for somewhere to rent and start all over again. Not too easy when you are in the first wave of those losing their houses and you live in a state where every landlord runs credit checks. In a few more months, when more people have bankruptcies on their credit reports, this should become less of an issue. I just hope we find a place before they boot us from this one! lol.

At 1:37 PM, Blogger ThePoliticalCat said...

Jeebus, connecticutman1, I'm so sorry to hear that. Here's wishing you the best.

You're right, Vana. I remember when a law was passed limiting the amount of interest that credit card issuers could charge - that law seems to have fallen by the wayside, and now they're setting rates of 25 per cent with impunity. And payday loan lenders are even worse.

At 1:44 PM, Blogger Vana Roth said...

I'm sorry for you and your family and anyone else in this situation. ALL of this has been induced/perpetuated by lender GREED. I'd like to know what they plan to do with all the houses that are falling back in their laps. Michigan is getting hit pretty hard with foreclosures as well. What ticks me off is homes being foreclosed on are now being sold for a fraction of what they're supposedly worth and sometimes for less than what was originally owed before foreclosure. How hard would it have been for the bank to give some extra time for the re-finance to go through or for them to refinance on conventional terms. Maybe everyone should quit buying and start renting or only buying with a land contract. Cut out the banks all together. Again I'm sorry and I wish you luck ~ Vana Roth - author of A Nation of Expendables

At 2:25 PM, Blogger ThePoliticalCat said...

Well, as I understand it, part of the problem is, there is no longer a specific bank, per se, holding the mortgagee's mortgage. The banking and mortgage industry joined forces to create a new range of financial instruments, which involved bundling mortgages together, slapping arbitrary ratings on them, and then selling them to multiple institutional investors, many outside this country altogether. The impersonality of this enormously complex system means that there is no single source with which the mortgagee can address her issues. Her mortgage is just one of several hundred,or thousand, sold in part to a financial institution in Germany, one in Norway, a third in China, et cetera, with each investor owning some percentage of the total indivisible package.

It still sucks though.


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