Do greedy borrowers need to be protected?

Controlling greed will always be a winning issue for any politician. Sen. Feinstein and Sen. Martinez thinks mortgage brokers need to be licensed, tested, and regulated. They think this will protect the consumer from "unscrupulous" brokers. The Senators refuse to hold the borrowers accountable for not reading a contract obligating the borrowers to repay a loan.

The Senators should be asking why the government schools, with 12 years of teaching, failed to teach borrowers how to read a loan contract.

What the senators are trying to do is protect us from our own greed! It will not happen, but governments always try to control human frailties. The governments destroy liberty and free choice in the attempt to do good. People want to control the greed of others, while allowing free reign of their own greed.

Throughout history people have fallen for get rich quick schemes. Even the buyers in the story below admit to buying a house "out of reach". Buying a bigger house or car, one the consumer cannot afford, is nothing new. What is new with the housing crisis is house prices declined. The buyers thought their house values would continue to increase.

"a friend sent a mortgage broker their way, who pushed them into two loans". Notice the word 'pushed', as if the borrower had no control over their own decisions.

Below are excerpts from the story. http://tinyurl.com/3let2r

Charles Tolleson
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U.S. Mortgage Industry Needs to be Monitored Fresno Bee Thursday, March 6, 2008 By: Sen. Dianne Feinstein and Sen. Mel Martinez

Steve and Valvina found their dream home in Fresno's Fig Garden district in 2006. But at more than $250,000, it seemed out of reach.

They had bad credit, two teens to raise. And Steve's income from the assembly line, and Valvina's as an office assistant, only went so far.

Then a friend sent a mortgage broker their way, who pushed them into two loans, totaling $250,000, with only $1,000 down and an adjustable interest rate.
This broker didn't have their best interest at heart. Valvina says she had questions, but the broker insisted everything was OK.

They signed the papers, and the broker pocketed $10,000. Soon, they were overwhelmed by loan payments, property tax bills they thought were factored into their loan and repairs they couldn't afford.

We believe the time has come for Congress to do something about it, to ensure that the bad actors in the mortgage industry are no longer allowed to operate freely. Today, there are no national standards for mortgage brokers and lenders.

This has allowed unscrupulous brokers to take advantage of borrowers.

We believe Congress should require that all residential mortgage loan brokers and lenders obtain a state license. This would include providing fingerprints and a summary of work experience and consenting to a background check by authorities.

To be licensed, these brokers and lenders must:

Have no felony convictions.

Have had no similar license revoked.

Demonstrate a record of financial responsibility.

Pass a written exam after taking courses in federal lending laws, ethics, consumer protection and subprime mortgage lending.

And brokers and lenders who become licensed should be listed on a database that's easily accessible to the public. This will allow consumers to verify whether or not brokers or lenders they're thinking of working with have the proper credentials and are licensed.

If the subprime mortgage crisis has taught us anything, it is this: American home buyers are vulnerable to unscrupulous brokers and lenders.