AlterNet: Subprime Is Really SubCRIME: America’s Deeper Financial Crisis
http://www.alternet.org/module/printversion/77375
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The perception is that those who have made money out of residential lending, are to blame for this sorry state of affairs, and the article turns to a Mr Basil Williams, chief exec of Concordia Advisors, a hedge fund, who says we need “a safety net for the innocent and a dragnet for the guilty.” and that “the greedy should pay to help the needy.”
Mr Williams says that the costs can be recouped by going after:
1.Mortgage brokers who originated loans to those who didn’t understand the conditions, couldn’t afford them and should not have qualified. – how can you demonstrate whether the borrowers understood the conditions or not? Only if the borrowers should not have qualified can action be taken.
2.Appraisers who overvalued homes, knowing that the higher the value they gave a property, the more business they would reap from a dishonest broker.- Appraisers have to justify the values that they place by comparison to the values demonstated by other similar sales that have taken place. Only if they have failed to do this are there grounds for recourse. In an over-heated market, favorable comparables are quite easily found.
3.Banks and brokerage firms that purchased, packaged and resold the mortgages for huge fees.- Unless something illegal was done or some misinformation given, there are no grounds to demand compensation from these companies, huge fees or not.
The mistake quite plainly lies with the lending laws in America. Going on a Witch Hunt will not alter that fact in any way. To follow Mr Williams recommendations would take years, cost millions, and achieve almost nothing at all. Alter the regulations that apply to lending on residential property so that a minimum deposit is required that cannot be overridden by subsiduary loans, and to ensure that the lending has a specific percentage relationship to the borrowers proven, documented income.
Posted on 22-Feb-08 at 5:50 am | Permalink