We need financial reform - but hold off on any more “consumer protection”. Consumer protection legislation contributed to the last financial meltdown. Here are three consumer behaviors that added to the problem and need repair:
1) Too many consumers lied on their mortgage applications - with no downside. Let’s prosecute for this fraud.
2) Once these consumers stopped paying their mortgages they were allowed to stay in their homes for far too long while the banks were restricted on how fast they could foreclose on the property. Many folks were living in their homes over a year after they stopped paying on their mortgages. Let’s make it faster and less expensive for a lender to foreclose on a property when the borrower is not paying the loan.
3) In many states it is so expensive or simply not allowed to go after home owners that have defaulted on their mortgages. If your car gets reposed, the bank sells the car and goes after the borrower for the difference between what they collected and what was owed on the car. That rarely happens in the home loan process. That is why we are seeing so many “strategic foreclosures” today. A strategic foreclosure is where the homeowner can afford to make the monthly payment but simply walks away from the home because the home is worth less than the mortgage and he passes the loss onto the bank. Who makes up the difference - fellow tax payers like you and me. Let’s enable the banks to more easily pursue defaulting borrowers when they walk away from their obligations.
It is not popular to criticize the little guy but much of the damage in the housing meltdown was caused by the behavior of the home buyer. Fannie Mae, Freddie Mac and AIG fueled the fire and need reforming but they are not the only culprits; your friends, family and yes maybe even you were part of the problem.
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