Explaining The Obvious

If the entire Subprime/credit crisis disaster would not have had such dire consequences, the following story could be considered a joke as the “Fed plans new rules to protect future homebuyers.” Here is one of the highlights of these proposed revolutionary changes:

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower’s income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower’s ability to repay a home loan from sources other than the home’s value.

[my emphasis]

Wow; these are really earthshaking rules. Somebody will actually have to prove that he has income before buying a home? Ridiculous! And to top it off, the borrower actually has to show that he can make the payments? How low can you go?

We are living in the supposedly most developed and sophisticated nation in the world, and we are now coming up with rules and regulations that have been basic knowledge around the world for centuries. It’s a sad state of affairs that we now have come to a point where we have to state the obvious, that you simply have to be credit worthy to get any kind of loan.

How this fact has been “overlooked” by those underwriters responsible for its implementation during the formation of the housing bubble will always be a mystery to me. On the other hand, this mortgage fraud was one of the greatest pyramid schemes in history and, in my view, a once in a lifetime event. The consequence will be far reaching for years to come, and I sure hope that some justice will be served as it usually is when guilty parties to a Ponzi scheme are caught.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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