Traci Gregory, Financier

Bits and Pieces

So, the Donald is going to bail out Ed McMahon on his $4.8 mil mortgage.

Wonder how many regular guys he could bail out with that kind of money? 

~~~~~~~~~~

Countrywide Financial Corp. is the subject of yet another federal investigation: the Federal Trade Commission (FTC) is investigating for possible violations of federal laws in the servicing of its $1.49 trillion loan portfolio.

Aren't they the ones foreclosing on McMahon?

~~~~~~~~~~

From the Associated Press:
After a full six months of investigating appraisals in the US, an independent federal agency known as the Appraisal Subcommittee says the nationwide system set up to monitor appraisers because of the savings and loan crisis (?) did little to prevent appraisers, real estate agents and mortgage brokers from colluding to inflate home prices during the housing boom.

There just don't seem to be any appraisers with a backbone in this country . . . I read everywhere that they were coerced into high values . . . Please.

~~~~~~~~~~

From the Wall Street Journal:
Are Obama's tax cuts The New Tax Welfare? Is he proposing to create or expand government spending programs disguised as tax credits?

I didn't know he had thought up tax cuts - I thought he just wanted to make sure we were all at a 54% income tax level, in addition to paying for capital gains, and, oh, yeah, when we die . . .

Pax et bonum

Brad Inman on the collapse of the secondary housing market

Brad Inman is founder and publisher of Inman News.

In the afternath of the news about fannie mae, freddie mac and the NEW IndyMac FEDERAL BANK, Brad Inman made ten predictions about the collapse of the secondary housing market.

"...Those that do lend will revert to back-to-basics underwriting: perfect credit, large down payments, proof of income, personal character and good family upbringing.

"...Housing industry lobbyists will make the mortgage liquidity problem their number one policy issue in the next two years. They will argue that the sky is falling and it is.

"...Like so many parts of our American culture, the accessibility to unlimited and poorly scrutinized debt helped turn Americans into a sloppy group of consumers, which spawned greedy Wall Streeters, out of control lenders and starry-eyed investors."

Read all ten, and the rest of his article at Imagine housing without a secondary market

Housing Economic Recovery Act advances in the Senate - Do they read the bills they vote on? Really?

FreedomWorks, American Conservative Union,  Americans for Tax Reform ,  Citizens Against Government Waste,    Club for Growth,  Competitive Enterprise Institute,  and the National Taxpayers Union   have come together to urge the Senate to say NO to the Housing Economic Recovery Act, commonly known as the Dodd-Countrywide bailout bill.

Here’s an excerpt from their letter:

“The Dodd plan creates a new housing trust fund that will collect more than $530 million a year through a new levy on Fannie Mae and Freddie Mac. The trust fund in turn makes these funds available to politically active community groups like ACORN outside the normal appropriations oversight.

“In addition, the Dodd plan creates a new $300 billion facility that allows mortgage lenders to cherry-pick their worst performing loans and roll them into the FHA, shifting 100 percent of the loan liability to the taxpayer.”

http://www.freedomworks.org/uploads/dodd-frank-coalition.pdf

The THREE HUNDRED BILLION DOLLAR BAILOUT went to the Senate Floor today and advanced in the Senate with overwhelming support.

I'm thrilled that they are shouting we don't need more taxes so that Countrywide and others are empowered to keep doing business as usual . . . (I say Countrywide because from all appearances Countrywide will be one of the prime beneficiaries of this bill due to the overwhelming business it did in the sub prime market.)

The Housing Economic Recovery Act, if passed, will, after adding  $300 billion to the taxpayer’s burden, probably send those banks' worst loans to the FHA, which, you guessed it, will create another FIVE HUNDRED MILLION DOLLARS IN TAXES ON GSE's. (GSE's are Federal Home Loan Banks, Freddie Mac, Fannie Mae, Ginnie Mae, Federal Farm Credit Banks, Federal Agricultural Mortgage Corporation.)

These same issues are supported by findings released earlier this week by the Congressional Budget Office’s (CBO) scoring of legislation.

"Mortgage holders would have an incentive to direct their highest-risk loans to the program," the agency noted.

But the Congressional Budget Office thinks the FHA plan might only have a modest impact.

Despite up to $300 billion in loan guarantees, CBO's analysis of the Senate bill projects demand for only $68 billion through 2011.

"CBO estimates that approximately 400,000 loans would be guaranteed under this legislation with an average loan amount of $170,000 each. Thus, CBO estimates that FHA would require about $68 billion in loan commitment authority through 2011 to implement the program. "(The legislation would authorize FHA to provide up to $300 billion in loan guarantees under the new program)

AND   "...35 percent of the loans refinanced through the program will eventually default anyway."

CBO estimates that enacting this legislation would increase revenues by about $8.0 billion over the 2009-2018 period, net of income and payroll tax offsets. Over that period, we estimate that direct spending from those proceeds would total about $7.2 billion. The additional revenues would thus exceed direct spending by an estimated $800 million." Read the full text of the CBOs findings

So they've figured out how to arrive at a surplus in the budget, rather than a deficit by creating this whole new way of life for originators, lenders, sellers, servicers  . . . How about we just SPEND LESS MONEY?? Isn't that what you do when you don't have it?  You spend less.

Where do revenues come from for the federal government?  Regardless of who writes that last check,  ultimately, revenues come from taxpayers . . .

These bills are NOT going to improve the quality of life for most people . . . they will help lenders, who knew they had a parachute when they made these risky loans (REMEMBER THE S&L BAILOUT - they were bailed out with tax dollars).

And it will help people who probably shouldn’t have gotten a loan in the first place and may not pay it back even after this second chance.

Write your representatives. 

Stand Up and Be Heard, or you’re going to be paying for it for the rest of your life.

And, sadly, so will your kids.

2008 and the New Year didn't bring much cheer, did it?

I've gotten through Christmas, new baby, new year's, groundhog day, and lots of political rhetoric about the mortgage mess, and essentially my business remains in a state of near madness . . . I've read dozens of books about the economy, wall street, the mortage business, and I've stayed with my conclusion that the problems we're involved in now are the result of greed, or a lesser vice, that being the American urge to consume . . . at the bottom of the food chain: homeowners in problem mortgages, I think probably they just wanted to do the best they could for the families (don't we all?), and for the top: Wall Street Bankers who created the funds for "exotic mortgage products", they just wanted to make money.  It is what they do, and they did it well. 

As you probably know, we've gotten back to stern guidelines for owner occupied properties - FHA, the original sub-prime mortgage is making a comeback (and well it should!  520 credit scores and a 97% mortgage for 6.125, 30 years fixed!! Why would you go anyplace else with that score??)

Mega Jumbo ltvs are down, although those loans still get done. 

Conventional rates are lower than they've been in . . . three years?  05 saw rates like this, in the 5's.  And while we talk about 18% in 1981, I get the impression that people who were born in the 80's don't really believe it!

If you're in an ARM, now is the time to refinance, rates are so good, you probably should move now.  If you're in a loan that is in default, there are options for you - exercise them!  No one should be losing a house right now with so many options to save them.

Bush effectively against HR 3519

I hope that I have written my last diatribe re: HR 3519. 

EXECUTIVE OFFICE OF THE PRESIDENT, OFFICE OF MANAGEMENT AND BUDGET, has issued a STATEMENT OF ADMINISTRATION POLICY  that is against most of the Bill HR 3519. 

Notable are references to work already being done by the Department of Housing and Urban Development in revising its Real Estate Settlement Procedures Act (RESPA) to enhance mortgage disclosures, and the Federal Reserve’s intentions to improve disclosure requirements and develop new national standards for unfair and deceptive practices.

The best news is that it pointedly states "The Administration does not support the provisions of H.R. 3915 that could overly constrict the primary and secondary markets for mortgage finance, such as the bill’s specific underwriting standards, assignee liability provisions, and the subjective obligations for mortgage originators. The Administration is concerned with these and other provisions that could lead to greater uncertainty and increased litigation, which could cause an undesirable reduction in mortgage credit and a drop in future homeownership."

Who would have thought it?  Well, I admit I have been told he wouldn't let it go into law, but I didn't expect an announcement this early in the game.

Read the full text here

Pax et bonum

Update on Friday, November 16, 2007 at 03:25PM by Traci Gregory

The House of Representatives Thursday approved HR 3915 in a slightly watered down version, in a 291-127 vote.

Rep. Tom Feeney, R-Fla., called HR 3915 "the landlords and lawyers relief act," because he said it would make it more difficult for renters to become home buyers, and make lenders and the investors who back them more vulnerable to lawsuits.

Formerly a "galloping horse," the housing market has "gotten very sick," Feeney said. "What we are doing for the sick horse is feeding it strychnine," by restricting home buyers' access to credit, he said. 

Appears that according to him, Americans should live on credit cards, drive nice cars, and rent their homes.  Or, maybe they could just live in their cars.

COMMITTEE PASSES H.R. 3915 45 - 19

GOES TO FULL HOUSE NEXT WEEK

So, Senator Bradley Miller's bill has the approval of 45 of his peers.  It moves on to the House, and then President Bush has the choice to sign it or veto it.  My Republican friends don't think he will ever let government take over the market in such a gross fashion, but my Democrat friends think he may throw this bone to the Dems because he has taken such a hard line on other things.

Read the final mark up of the bill as it passed.

Whatever happens, the face of the mortgage industry is changing, and on the surface it appears that "Big Brother" is taking care of consumers who can't take care of themselves . . . Yeah, you can read into that remark that I don't think "BB" needs to interfere with our lives anymore, AND that consumers should be responsible for the things they do.  Particularly when they make a commitment for 30 years and a lot of money.

I know there are loan officers who made loans with no thought to the consequences for the borrower and made a lot of money doing it.  I'm not one of them, and I don't think all of them worked for broker shops. 

I also know that what the politicians are ignoring is that America has a "hunger" for credit, and expects to get everything on a signature, not with the exchange of cold hard cash.  Theoretically, they know they'll pay for using other people's money, but most don't look at it as realistically as, say, Dave Ramsey or Suze Orman.

They are also ignoring the fact that Wall Street fed that hunger with loan programs that created a lot of profit, because selling money makes money.

Two Wall Street firms moved directly into the sub prime market with their own mortgage companies to feed the greed:

Merrill-Lynch bought First Franklin (a company specializing in sub-prime loans) for $1.3 billion on Dec. 30, 2006.  Why?  Because the money was great!

Bear Stearns opened Bear Stearns Residential in 2005.  This from Business Wire "Bear Stearns Residential will focus on non-conforming loans which are included in the private label MBS market."  Read non-conforming: sub prime loans.

"The addition of a wholesale unit complements our presence as the largest underwriter of mortgage-backed securities," said Warren Spector, President and Co-Chief Operating Officer of Bear Stearns. "The business allows us to round out our mortgage franchise and provides us with an additional way to serve our clients. By employing the latest technology, we are enabling brokers to come directly to Wall Street for financing."

Loan Officers are sales people.  Face it.  They sell a product.  Money.  They do a lot of other things, the good ones consider long term goals of the borrowers, and real life circumstances, along with usually un-meet able expectations of the uninitiated.  And they give advice, answer endless questions about credit, pricing, payments, programs.  But it isn't a charity.  They do it, like I do, for pay.  We have families to support, we can't do it for nothing!

Then there are loan officers who for whatever reason, be it greed, ignorance or lack of support from their company,  will put a loan where ever it will close fastest and pay the most.  And sometimes, they place loans that way because the borrower wants it that way - "I don't care what it costs, it has to close in 7 days!"  They don't care before it closes, but they will after it closes . . .

So, my take on this is-

• The way America works will change with this bill.  Mortgages won't be easy to get (that has already happened, and will worsen)
• Where America gets mortgages will change - Brokers will disappear, maybe not all of them, but a lot of them will do something else.  They might work for a Bank or a lender, or they might change industries.  (Something I've thought seriously about for a couple of years.  This is hard work, not easy money, and there is a tremendous amount of stress involved.  If the stress increases and the money decreases, there comes a time when it just doesn't work anymore.)
• We all know that when there isn't money to buy houses, there isn't money to build houses, and that means there isn't money to pay people in the real estate industry, or the construction industry, and that will trickle down to manufacturers.  That is a lot of people who aren't making money like they were.
• When there isn't any homequity money to use for debt consolidation, there are no credit cards being paid off, because we all know most people in this country aren't making huge payments on credit card debt out of their paychecks. 

While I do believe that most things politicians do is primarily motivated by votes, and they leap to causes that will generate attention that they are concerned with their constituents' well being, these guys are offering some positive changes.  Training and licensing requirements for loan officers is a very good thing.  I've worked for a lot of companies in my 20 years in this business, and mostly, it is self-taught.  Loan Officers learn a lot from the lenders they sell too, also. So, if the only reps calling on your company were from New Century Mortgage, or First Franklin, you got a lot of influence from the sub-prime mindset.  Remember, they were selling too.

Attempting to change the way the market works by outlawing yield spread, and regulating underwriting guidelines is probably not such a great idea.  I'm sure none of these lawmakers learned all the nuances of underwriting and risk management in the months since the sub-prime meltdown, but they want to redo the way the country runs.  Impressive, isn't it?

The market would, if left alone, correct itself.  Stated income loan guidelines are being changed every day.  Stricter reasonableness tests of income have become standard with every lender I work with.  The orchids of the mortgage world, the exotica, like Elvis, have mostly left the building.  If they aren't gone, they are stripped down, and unappealing, so that borrowers don't qualify, or don't want them.

Everyone needs to remember that lenders don't want houses, they want the money.  Since they are stuck with the foreclosures, they are doing everything they can to ensure that they don't write any more loans that fail. 

I'm lately reading Mobs, Messiahs, and Markets, a really GREAT book by William Bonner and Lila Rajiva.  It is hysterically funny, packed with good information, and well written; not like other dry, overly intellectual books on finance and politics. 

There is a line in the Chapter "The Devil Made Them Do It" that reminds me of all the people behind H.R.3915:

"It was not what people did not know that proved their undoing: it was what they thought they knew that wasn't so."

Peace.

Good News and Bad News to cure Sub-Prime woes

Bank of America, Citigroup Inc., Countrywide Financial Corp., Fannie Mae, Freddie Mac, First Horizon National Corp., GMAC ResCap, HSBC North America Holdings Inc., JPMorgan Chase & Co, National City, Option One Mortgage, SunTrust Mortgage Inc., Washington Mutual Inc., and Wells Fargo & Co. have signed up for HOPE NOW, a Bush administration initiative designed to assist homeowners who may be facing foreclosure.

The plan is that HOPE NOW will do national direct-mail to reach at-risk borrowers, with instructions to contact their lenders or a mortgage counselor to work out a repayment plan or restructuring of their mortgage to prevent foreclosure.

They also want to expand counseling capacity to make it easier to communicate with loan servicers.

I'm guessing picking up the phone and calling to ask if there is a way to restructure is too constricting, and that's why more people aren't doing it.

In September, FDIC Chairwoman Sheila Bair spoke at the Lied Center of the University of Nebraska Lincoln campus.  The subject was money and financial responsibility.

Speaking of  Mortgage responsibility she said, "... Regulators need to make sure that borrowers have what they need to fully understand the terms of the loan. And borrowers need to make sure that they fully understand the loan before they sign on the dotted line.”

I've read that she has pushed loan servicing companies to engage in wholesale conversions of adjustable-rate mortgages into fixed-rate loans where possible when borrowers are in danger of default.

Chairwoman Bair said, "Frankly, I'm frustrated that the servicing restructuring has not reached the level that I had hoped it would.  We have a huge problem on our hands. We can't just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs."

Unfortunately, mortgages are labor intensive and consist of legal documents that have to be revised, approved, signed and then recorded.  I agree that they could be converted to fixed rate products, but I don't see a quick or easy way of doing it.

Now the bad news ~~~~~

From a press release on Representative Brad Miller's website:

"Representative Brad Miller, North Carolina, and Rep. Linda Sánchez, California, ... introduced legislation that will prevent hundreds of thousands of Americans from losing their homes in bankruptcy."

Essentially, they want to give bankruptcy judges the authority to rewrite mortgages that are included in bankruptcies. 

Quoting the press release again: "According to the Center for Responsible Lending, a non-partisan, consumer advocacy group, the Miller proposal could help prevent up to 600,000 people from losing their homes in the next 24 months."  That's 25,000 bankruptcies a month. Handling that paperwork will keep a lot of people busy for a long, long time . . .

Rep. Miller goes on to say:

"Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place" That's because responsible lenders don't have any customers who would take unfair advantage of any law that he can put on the books, I'm guessing.

Rep. Sánchez comments: "As the subprime crisis heats up, it's high time we write legislation to help America's working families instead of helping the opportunistic lenders who took advantage of them. I look forward to moving this legislation swiftly through the Subcommittee on Commercial and Administrative Law."

On 10/4/2007 when this bill was forwarded to the Committee, it's sponsors had grown to 14:

Rep Cohen, Steve [TN-9] - 9/25/2007
Rep Davis, Artur [AL-7] - 9/26/2007
Rep Delahunt, William D. [MA-10] - 9/26/2007
Rep Ellison, Keith [MN-5] - 9/25/2007
Rep Frank, Barney [MA-4] - 9/20/2007
Rep Gutierrez, Luis V. [IL-4] - 9/27/2007
Rep Johnson, Henry C. "Hank," Jr. [GA-4] - 9/25/2007
Rep Lofgren, Zoe [CA-16] - 10/4/2007
Rep Maloney, Carolyn B. [NY-14] - 9/20/2007
Rep Miller, George [CA-7] - 9/27/2007
Rep Nadler, Jerrold [NY-8] - 9/25/2007
Rep Sánchez, Linda T. [CA-39] - 9/20/2007
Rep Sánchez, Loretta [CA-47] - 9/27/2007
Rep Watt, Melvin L. [NC-12] - 9/20/2007

Having written about the pawn shop mentality of some borrowers (If I don't pay for it, the bank will get it back), I'd like for these legislators to interview oh, fifty of their constituents who have loans going into default.  And, if they're really interested in the truth, they could interview the loan officers who did the loans, and review the loan files that those borrowers presented when they applied for the loans. 

This is America, where we want it all (and to quote my favorite refrigerator magnet) we want it delivered.  Credit is so-o-o easy.  Every college student in America is offered a new charge card a week (I know it is true, I have two living in my house and I shred their mail most days because COLLEGE STUDENTS DON'T NEED CREDIT CARDS.)

I bought my first house in 1971.  Yeah, I'm over 50.  I made a $3,000 downpayment on a $13,000 house!  That's a 23% downpayment.  I was 20.  Can you count on one hand the number of people you know who have made a 23%  downpayment on a house?  Can you calculate how long it would take the average American to accumulate a 20% downpayment with the price of housing in this country? 

I have clients in Europe who have always made 20% downpayments.  They are buying houses here with 25% downpayments.  Talk about having skin in the game . . . but we've come to expect that we can buy everything  NOW and pay later.  So for all those people with ARMS, it is later, and it is hard to keep that deal we made when we signed the loan docs.

Think I'm heartless?  I HAVE AN ARM.  The payment adjusted (upward) $700 in August.  No, I don't like it, its not comfortable, but I've got to grin and bear it til I finish the renovation on my house and get another mortgage.  I knew it was coming for three years . . . And so did everyone else who has one.

Dave Ramsey, where were you when we needed you??

More on FHA Secure

While the FHA Secure program is going to help people in default because their arms reset, I wonder about those people who took a second job, or a second and third job, and are eating cornbread and beans in order to make their mortgage payments rather than let them go into default . . . When is someone going to let them refinance for some relief?

More on the FHA Secure program:

"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," said President Bush. "Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government."

Homeowners must have 3% equity in their home and demonstrate that the original loan was being paid on a timely basis until it reset in order to qualify under the FHA Secure Program. Previously, the FHA would not guarantee refinances on loans with delinquencies. The loan must be within standard FHA loan limit guidelines, but the administration apparently supports legislation to raise the limits. The FHA plan is to charge slightly higher mortgage insurance premiums to address the additional risk

The FHA estimates that 500,000 of 2+ million arms set to adjust could go into foreclosure. Even with the 80,000 borrowers the FHA will bail out, it still estimates it will only assist about 250,000 with its current FHA programs.

Bush also indicated support for a Democratic bill pending in Congress that would temporarily alter tax law to allow homeowners to forego paying taxes on forgiven debt in loans being restructured by financial institutions. This could turn into a nightmare to manage . . .

In a previous press conference, Bush opposed helping consumers outright out of foreclosure. “We must show an enormous empathy," Bush said, but he didn't think the feds should give financial aid. "If you mean direct grants to homeowners, the answer would be `No, I don't support that,'" said Bush.

Sen. Charles Schumer suggested in a news conference this is a shift for an administration that favors the free market. "The president has gotten out of his ideological straitjacket and seen that in times of crisis, one of the jobs of government is to help," said Schumer.

What else could he do? Sit back and watch the homeless population explode?

Car Dealers Cause Auto Emissions

I read that headline today in an email from Rich Workman, President of the Florida Mortgage Brokers Association.

He goes on to say: Car dealers sell the cars the automakers engineer and manufacture. If it were not for the car dealer then there would be no car emissions. Therefore, it is clear if we simply eliminate the car dealer we can solve global warming.

His point being that Mortgage Brokers are taking the hit for the subprime melt-down in the news and from politicians everywhere.

I, for one, am really tired of hearing remarks like these:

The Bush administration is pressuring the Department of Housing and Urban Development to speed up the issuance of a Real Estate Settlement Procedures Act proposal to improve good-faith estimate disclosures of mortgage broker fees and settlement costs.

Why, when mortgage fees are discussed in the press, and by elected officials, are they always referred to as Broker Fees? It is as if a loan can't be completed by a Mortgage Banker, or a Mortgage Lender, only a Mortgage Broker. . . and that is not the case.

AND, what brokers make, or lenders make, or mortgage bankers make is already on the Settlement Statement. That's the law. It isn't as if we have secret incomes. Whatever we make from the borrower or the lender is on the Settlement Statement.

From the website of Senator Charles Schumer from New York: "Up to 80 percent of subprime loans originated in 2006—the year that lax underwriting seems to have been the most problematic—were adjustable rate mortgages with low “teaser rates” that reset to higher rates that induce payment shock on the borrowers."

How shocked can they be when they knew it was coming for two years?

I have an arm. It adjusted in August. Not only did I know that was going to happen, I got at least ten pieces of mail a week from people trying to refinance my house. And in the last month before it adjusted, the lender called three to four times a day! There was no avoiding the knowledge that my arm would adjust UPWARDS during the month of August.

Those high risk, high loan-to-value loans that were generated from the Sub-Prime industry were designed to help people get into homes. There is not a lender in this country who would just as soon have your house as get the monthly payment. They would all rather get paid than foreclose.

I've had borrowers who couldn't qualify for a loan of any kind ask 'why not? The lender will get the house if I don't make the payments' . . . As if in making a loan the lender becomes part of a quiet side agreement to "buy" the house by default. That's not how it works.

Borrowers who take a two year arm or a three year arm do so based on their plans to sell or refinance in two or three years. In an increasing real estate market, this plan works. BUT, if the property values go down, or even stay the same, there is no refinance to be had, and in a declining market, there is no selling the house to get out of it either.

Paraphrasing Rich Workman again, here: 'When the real estate market pulled back from a 24-month unsustainable growth spurt, people couldn't refinance a house that was worth less than the mortgage, and couldn't make the payment, the Sub-Prime market was left with mortgages that were in default. Then market reacted and the Sub-Prime guidelines got tighter.'

And they got tighter without legislation. They got tighter because the market demanded it. Long before a politician decided to make a to-do about it.

AND, 2/28 and 3/27 arms don't have teaser rates. They are fixed for two years or fixed for three years. After that they adjust, up or down, with caps on how high they can go.

I can't believe that none of the people who got an arm for two years or three years didn't know that payment was going up. In addition to a loan originator's verbal disclosure, there are written disclosures at the application process, and at closing, there is a real estate attorney or title company responsible for explaining every document that is signed by the borrower. Arm Riders are separate and distinct documents in the closing package.

If I didn't understand what I was signing at a closing, I'd ask the guy who was handing me the papers. My pen would hit the paper when I understood what I was signing and I was okay with it.

Teaser rates are those 2% payment rates you see advertised that have nothing to do with interest rates. Totally different animal, but people who aren't in the mortgage business, like politicians don't know the difference and seemingly don't care to learn.

Sub-Prime Meltdown? What About My Meltdown?

I read all the broker bashing going on . . . how lenders and greedy brokers encouraged borrowers to buy houses they couldn't afford and sign up for payments they couldn't make and about the bailout programs states are putting in place to keep people in their homes and I think back to conversations I have had with borrowers over the last few years.

One in particular comes to mind, my client, a well educated and successful business owner, with great credit and lots of assets had completed an application for an investor purchase.

Noting the $20K a month figure he had put in the salary block, with his hand,  I asked "Did your income tax return last year show $240,000 in taxable income?"

"No" he said, somewhat indignant.

"Well, was your gross income before deductions $240,000?"

"No," he says, getting more agitated. "Where are you coming up with that?"

"Well, if we multiply $20,000 X 12 months, my math says that is $240,000 . . . Right?"

"Uh, yeah, but this is a stated loan."

"A stated loan?"

"Yeah, a stated loan."

"But, Mr. Borrower, a stated loan means you state what YOU made last year . . . Not what Will Smith netted on a slow Saturday night."

"Well, what good is it if I have to state what I make?" (I'm guessing this is as opposed to what Will Smith makes . . . )

"You can state your income, and not have to prove it with income taxes, but you have to state YOUR income. Not what you wish it was, or what it might be, or what you think will get you this loan . . . You state your income, truthfully."

Well, he didn't want to do that and I didn't want to not to do that so we agreed to disagree and I haven't done his loan . . . But I can't count the times I've said, "No, if you're not going to live there, you can't have an owner-occupied rate," or "No, having another home in the same subdivision is NOT a second home, even if you do put your ex-wife and children in it," or, "You know, I'd really like for you to have this house" (and I'd really like to close this loan since I've wasted so much time on you) "but what you are suggesting is loan fraud, and I'm not willing to risk jail so you can . . . (fill in the blanks)"

Everyone is responsible . . . Lenders did take loans that met criteria that appeared to be sufficient to cover their exposure and wasn't; borrowers did take loans they wouldn't be able to afford in two years because their wives wanted in a house, and their children needed a good neighborhood. Speculators in the real estate market jumped on the property bandwagon and drove it away, because they could, and because they wanted to.

Because Americans believe in having it all and having it now, and the credit industry (all of it, not just mortgage lenders) encourages the spend, spend, spend mentality and think about it tomorrow, Scarlet irresponsibility.

I've NEVER been a Chicken Little. I'm the extreme optimist . . . but this meltdown, that started out as the "sub-prime" meltdown, and has turned into the CEO of Countrywide mortgage predicting that the major 10 lenders in the country will go to five major lenders soon;

Australian funds that are tallying their losses because they bought real estate securities in the US;

Lenders scrambling to keep people out of foreclosure with forebearance contracts and payment plans and then they go into foreclosure, only it is three months later than they should have.

Massachusetts setting up a $250 million fund to help 1,000 homeowners. . . New York, $100 million to help 500 homeowners?

So now it is My meltdown. I don't worry about my job anymore, or even about my industry.

Now I'm worried about my country