That's exactly what the Bush Administration is proposing. Most of you (including me) won't remember the stock market crash of 1929 but it was a difficult time. Housing was really affected by the situation at that time too. My grandparents had purchased a home in Birmingham, AL (a cute, even today, bungalow) and were making their payments on time. But as the stock market crash began to take down employers and banks it became increasingly difficult for them to make the $74 a month mortgage payment (those were the days!). My grandfather who worked as a Welding Foreman for a large employer in the Birmingham area deposited his paycheck one Friday and the following Monday the bank failed. There was no FDIC at that time to protect his deposit and presto he didn't have the money to pay the mortgage. What my grandparents did was show the bank the receipt for the paycheck deposit and wrote the bank (who held the mortgage) a check for the mortgage payment, but my grandparents knew at that point that they were going to lose the home. This was a home they loved and one they had worked for diligently. My great-grandfather (my grandmother's father) had given them the downpayment for the home just before he died when my mother 6 months old.
The response to the failures of that time was to create reforms such as the Federal Deposit Insurance Corporation and put other safeguards into place. This has been good. My dad, before his death, spent many years working in the banking industry and in the 1970s I remember vividly that there would be times at night that my dad didn't come home. His employer, a large bank holding company, would be purchasing a bank that had been declared insolvent by the FDIC that day because they could no longer guarantee the deposits. I remember my dad describing what it must be like, just as a branch would be closing, someone from the FDIC would appear to announce that the branch had been taken over by the FDIC because the bank was insolvent. That must have made lots of hearts fall into stomachs, especially with the notice posted on the door of the branch that the bank had been seized by the FDIC.
Those measures worked at that time. Banking wasn't national but regional at that time. The only "banks" in the world with demand deposits were national bank regulated by the FDIC and savings and loans regulated by states. In the 1990s we would see savings and loans (who were insured by something similar to the FDIC) face the same crisis.
What we are seeing now is that many other entities in the money game are being affected by the shut down of the subprime lending market. Additionally they brokerages are losing obscene amounts of money by the collapse of the subprime mortgage lending standards and now they are facing bankruptcy and insolvency.
While we should be seeing a smaller government (my libertarian views do come out at times) and less regulation by our government, we don't want less regulation. What the Bush Administration is proposing, giving the Federal Reserve Board more authority to oversee these brokerage houses and insurance companies is a smart move on the part of the government. There does need to be more regulation of the mortgage industry and the brokerages that invest in these mortgages. That is most evident! What will this mean ... we probably aren't going to see loose lending standards for a long time. We are going to see that the Truth in Lending statements that mortgage companies are required to give to their borrowers and the Good Faith Estimates are going to be scrutinized further. Additionally the Federal Department of Housing and Urban Development is going to make the HUD-1 (the statement you receive at closing) easier to undestand. That seems to be appropriate. I have found in the past few years that not all closing attorneys are as careful and diligent in the handling of the HUD-1 and the explanation of the form as my closing attorney, Matt Lamm. That's why I recommend Matt so highly!
Please know that the lenders I recommend and Mr. Lamm are highly season professionals and I know they are going to give you the outstanding service that my clients deserve and want.
Dana Couch-Davis
Oh, by the way .... if you know anyone that would benefit from the real estate services I offer, please send me their name and business number. I'll take great care of them!
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