The newest thing in Congress in the area of Housing is the QRM. To me QRM = lets punish the victims. Who are the victims? You and I and every home owner in the country. Lets review.
In the 90's and into the early 2000's a tremendous amount of money found it's way into our country. America was considered a safe haven for funds. Both Greenspan and Bernacki told us not to worry. It was normal for people to want to invest here. But as usual a lot of cash caused problems. What that cash did was create debt. How can cash create debt? Easy. If there is 100k available at good interest rates somebody will borrow it for a mortgage . So there is now a 100k debt. Multiply that by billions.
Billions were invested in the housing market. When you have this kind of money both domestic and foreign pouring in you have inflation. But in our case we had more. We had easing of borrowing rules. We had all kinds of weird and wonderful ways to borrow for those who had no money. It wasn't enough to run up prices. There was so much money that we had to find ways to get people to borrow it. In fact we even had to create instruments to sell off loans . Then when folks started asking questions we created "insurance" to calm the market. And when even that became a problem Merrill created a division to buy these toxic assets from the division in Merrill that was selling them. And of course everybody got their bonuses.
Well the crash came. So who is to blame? The folks on Wall street that created these toxic assest? Maybe the lenders who poured out money? Maybe the folks that created these weird and wonderful borrowing programs? Maybe the Fed who should have stepped in a lot earlier when tons of money was pouring into our economy? No none of these folks are to blame. The blame is being placed on the victims. You and I and everybody that lost their home.
The argument goes you should have known better than to borrow under these terms. That is what we are telling borrowers who could not refinance and ended up in foreclosure. Yet the government of Iceland who has folks with degrees in Economics was going belly up because of their investment in American housing. Some how though folks with High school diplomas here should have known better than economists.
So lets punish the victims. You and as home owners are victims.. The values of our homes have gone down. It is harder to sell. It is harder to make a living in Real Estate. But that's OK because we deserve to be punished while the big banks and brokerage houses make tons of money and pay out big bonuses.
So instead of QRM how about eliminatig ARM. After all that is a gambling type of mortgage. Get rid of it. Get rid of interest only mortgages, get rid of negative equity mortgages. Go back to fixed rate loans where folks need good credit.
People who have VA loans, USDA loans and FHA loans that have jobs are not defaulting. And if they are it is usually because they are victims of this crisis which THEY DID NOT CREATE. They love and want to stay in their homes.
As long as it makes banks more money to allow properties to go into foreclosure we will not see modifications in the numbers we need to stop the slide in prices. We victims will continue to be punished until we look past whether someone is a Republican,or Democrat and vote for people who want to see the victims of this housing crisis, You and I , not be punished anymore.