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What Tight Lending Conditions: Underwriting Standards Mirror Those Before Subprime Crash, OCC Finds
The myth of harsh lending conditions in the US is probably only matched in its disconnect from reality by the just as entertaining narrative of the "one-time, non-recurring" harsh winter crushing Q1 GDP. A narrative which even needed support from none other than former Fed Chairman Bernanke who allegedly was denied a mortgage refinancing on the $672K loan he still owes for his 3-bedroom, 2100 square foot home (a story which is about as credible as 17 year olds making $72 million by cornering the penny-stock market).
For the truth we go to the Office Of the Comptroller of the Currency, which just reported in its annual survey that for the third year in a row, U.S. banks relaxed loan underwriting standards, "a trend mirroring the lax lending just before the financial crisis."
Those who blame the collapse in mortgage (and overall loan) volumes on strict supply limits - usually the same who say the crash in oil is entirely supply driven and has nothing to do with the Chinese slowdown, or the European triple dip, or the Japanese quadruple dip recessions - will be stunned to learn that according to the top US regulator, large banks in particular loosened lending standards as they tried to boost loan volumes.
But... that's goes entirely against the fake and contrived narrative? Can't they at least keep track of the lies they fabricate to boost confidence?
The answer is, clearly, no. But it gets worse, because not only are banks rushing to underwrite anything once again, the pace of underwriting is back to pre-subprime crash levels:
Banks still make high-quality loans, the regulator said, but credit risk, or the danger that borrowers will be unable to pay, is on the rise.
The survey looked at 91 banks and about 94 percent of loans in the federal banking system over the 12-month period that ended June 30.
"This year's survey showed a continued easing in underwriting standards, with trends very similar to those seen from 2004 through 2006," said Jennifer Kelly, senior deputy comptroller for bank supervision.
The surprise is that it took as long as it did to finally admit that it is not a supply issue, but one of demand, and specifically a completely lack thereof. The paradox is that while the OCC is concerned by the trends, it is none other than the Fed who is urging every single bank to become the Countrywide Financial of the New Abnormal: after all it is either lend the reserves, or use them to boost stocks ever higher into a market which even the BIS says is an unprecedented bubble.
Regulators said banks relaxed underwriting standards for credit cards, large corporate loans and leveraged loans, which go to entities that already have significant debt, because they faced more competition and struggled with low interest rates.
OCC examiners also said banks allowed exceptions to their own lending rules for some commercial products.
The punchline: "The combination of looser lending standards and policy exceptions adds extra risk that can crop up during crisis periods, the OCC said. Managers should look into the changing practices and try to reduce credit risk, regulators said."
Yup, managers will get right on with reducing risk, even if - or especially if - it means writing off their bonus for this and however many years in the future, until the whole house of cards comes tumbling down all over again.
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Why is Tangelo Mozillo still a free man?
hmnn. good question.
best,
jon corzine
Because Angelo Mazilo was a made man and paid 67.5 million in fines to the SEC to make them go away.
I love the John McCain photo.
The Administration says that the (fill in your choice of leach) can't get any access to money and terms therefore must be eased. Independent analyses suggest that loans are available in bulk no credit consideration screw the quality nobody cares because they just originate the crap volume.
Whats wrong?
Everybody who wants a house who can afford a house has a house.
Lots and lots of "those who are discriminated against" get rent controlled places, section8 housing whatevethefuckever and have no intention of buying a place.
Younger people earn money (notice I did not say a living) flipping fucking burgers and cannot even dream of moving out of the basement.
So, who's borrowing?
Jumbos are going great guns.
Specs.
Flippers.
Cash deals
And crap. Lots a crap Kinda like the economy. Folks at the top and lotsa folks at the bottom and the disappearing middle class can't afford the shit as they're being squeezed buy food and MEDICAL costs and they wonder what's going on?
Huh?
That is a good question. Why would anybody trust him to begin with is another. Everuthing about him is fake.
And to sum up the article: Banks have relaxed lending standards, but since they've already sucked the middle class dry, there is nobody left to lend to.
He's emulating his dear leader. Tan, iies, slick suits, big FDR smile....
Whodathunk?
He paid off the right people at the DOJ
"Why is Tangelo Mozillo still a free man?"
"Friends of Angelo"
The Portfolio account of Countrywide's VIP loan program names Chris Dodd, early Obama backer Kent Conrad, and Richard Holbrooke as recipients of special loans through the firm's CEO.
http://www.politico.com/blogs/bensmith/0608/Friends_of_Angelo.html
"What is 'Bribery,' Alex?"
Same reason Corzine is.
Wait what? We are debt-free, have great credit, produce a real product (food), and are profitable (have real revenue that exceeds our operating costs), so, where the fuck is my billion dollar loan at 0.25%?
Prolly not at the dollar store.
"Underwriting Standards Mirror Those Before Subprime Crash, OCC Finds"
Gee, you don't fucking say?
Really, I read that and thought they were interviewing Capt. Obvious.
It never ceases to amaze me the level of utter stupidity some of these PhD types put on display. It really does give one reason for pause and wonder how they got past pre-K.
I remember when I was doing my accounting/finance grad degree in 2007, when the financial world was coming apart. The things that the professors were saying made my head spin. They don't live in the real world.
Where's Corzine?
they were smarter this time they used all the loan loss reserves for bonuses before the big bust
Maybe this had something do to with it. Government regulations:
After three years of strong opposition from NAR, congressional leaders, and consumer and industry groups, the six financial regulators released the final version of the long-awaited qualified residential mortgage (QRM) rule. The six regulators listened to NAR when finalizing the rule which now equates QRM with the “Qualified Mortgage (QM)” standard. As originally proposed, the QRM rule would have narrowly defined QRMs to require a 20 percent down payment. REALTORS® were among the most vocal opponents of the originally proposed QRM rule and forged the broad-based Coalition for Sensible Housing Policy, which includes nearly 50 organizations, to draw attention to the regulations onerous 20 percent down payment requirement and other credit limiting features such as strict debt-to-income limits. The coalition asked for and received an extension of the proposed regulation comment period in 2013. During that time, NAR and its coalition partners gathered the support of 44 U.S. Senators and 282 House members, who wrote to regulators expressing their intent on QRM and opposing the sizable down payment requirement.In synchronizing both definitions, the revised rule encourages safe and financially prudent mortgage financing while also ensuring creditworthy homebuyers have access to safe mortgage financing with lower risk of default. In addition, consistency between both standards reduces regulatory burden and gives mortgage professionals much-needed clarity and consistency in the application of the important mortgage standards required pursuant to Dodd-Frank.
After the 2008 financial crisis and subprime mortgage implosion, governmental agencies led by the Federal Housing Finance Agency enacted a series of tougher rules to clean up the overly easy mortgage qualification process.
Of course, tighter lending standards and higher down payments squeezed a lot of marginal buyers out of the real estate market, and that meant fewer dollars for big banks that package the loans and members of the National Association of Realtors that sell the homes.
The drop in income bothered them so much that they formed a big organization called the Coalition for Sensible Housing Policy to push the noble goal of helping first-time homebuyers with a return to the good old days of easing credit.
Big surprise. The lobbying efforts (and no doubt large political contributions paid off. The 20% down payment requirement has disappeared and Fannie Mae and Freddie Mac will now guarantee some loans with down payments of as little as 3%.
Bye-bye credit standards.
http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-139b.pdf
This is my 'shocked' face.
Of course they do. We learned nothing, changed nothing, after the financial collapse of 2007/08. We went back to our football and religion and figured God would take care of it all. After all, Lloyd Blankfein said the Wall Street crowd was doing "God's work", and he - being of the Elite - certainly knows more than we about finance, so if God is having him do His work, then what's to worry?
FICO ZERO, bitchez !! .... you still get you money !
I ran a business that I closed around 16 years ago, but kept the checking account as it helps me with accounting - it sees all the tax deductible stuff and makes my life simpler as a now retired guy when it's time to file taxes (EG I use it to make the bank keep that stuff separate and list it all for me at tax time). For the last week or two, not one day has passed without a robocall offering me a business loan, or multiple same things in the mail. I don't even run a business and haven't for a decade and a half. Now that doesn't say they'd give me a loan for sure, but gheez, it was nice and quiet until just now.
I'm self-employed and I get those two. My business consists of my services, a cell phone, a computer and some other stuff that would fit in a banker's box. There is no reason for me to ever take out a loan. If I can't buy a new computer with the money I've got on hand I'm not in business any more. If I ever sought a business loan it would be to run like hell and defraud the lender. And still I get those calls and mailings as well.
There are just tooooooooooooooooooooooooooooooooo many parasites in the land of ponzi , aka USSA, with the cake getting smaller and smaller.
The 3D crystal ball is showing Death, Darkness, Despair which aptly describes the rotting carcass.
Pitiful to watch Barry and the Goodwill Ambassadors strut around the globe with the dead flesh visibly falling off of them.
NO ONE IS LISTENING ANYMORE!!!!!
Even those twisted satanic elements in the House of Saudomy will no longer stick their tongues into Bushy's mouth.
SEE YOU IN HELL FUCKERS.
While Yes, I will take that $50,000 unsecured loan.
Was that the fastest 50k, or not?
how is this surprising? ever cycle goes this way, stability breeds instability. demand for more paper, the paper creators need to meet that demand but the pool is getting empty, start on the lower credit pool to meet demand.
its the most unsaavy that are the bag holders: finally saved up 4% to "buy" a home, only to see its value stagnate, or go down, while paying more than they expected in repairs and upkeep.
Given the securities-loan programs going on for the rich, and the massive price inflation as a direct result of real estate in the highest end areas, everyone gets to take a bath together AGAIN. given securitized loan balances and margin balances, I'd estimate at about the 11-12% decline from the top, would initiate the calls, and forced selling. the first 5% down is easy, the next 15% happens very fast.
Tangelo Mozillo,
Come back! Wall Street is looking for a few accomplished criminals to make an even larger fiasco.
Never fear, his #2 at Countrywide, Stanford Kurland, is now CEO at Pennymac. Long live Liar/NINJAs and exploding ARMs! Maybe he'll start a spin-off of the "Friends of Angelo" program. Friends of Stanford?
Anybody beside me wanna strangle the likes of these criminals with their own tie.
Currently reading "Franklin Cover-up".
The financial raping severity & timing coincides to the rape of kids in the highest halls of power.
Same as it ever was.
If I could ever get loan approved I'd buy each one of you a nice spray tan
Really? The same as before the crash... This may be against the NARRATIVE on this thread and Maybe it is heading that way, but it sure as hell is not as easy to get a mortgage loan as it was before ...
Man the white-out, razors and correction tape, it's time for a new version of the Cuntrywide Hustle.
So no reason to worry how Linda Green is getting along these days, I guess.
Realtors are one of the prime scumbag groups. I despise their bilateral sales contracts that earn them 6%+ commission on residential property sales, 3%+ from seller and 3%+ from buyer. I buy a lot of real estate, NEVER use a buyer's agent, and I always make offers that lock the seller's agent out of collecting the commission for a buyer's agent when no buyer's agent is involved. They all HATE it and fight it like hooked fish, unscrupulous thieving parasites who want to feed off every transaction, siphoning off the seller's equity while also increasing prices for buyers, after doing almost zero real work. Realtors are one of the top 3 organizations corrupting legislation.