Comments on: Wright & Zywicki on the Consumer Financial Protection Agency Act of 2009

By: Audrey

Audrey — Tue, 22 Sep 2009 17:55:48 +0000

Does more government control and less consumer choice sound familiar? The Consumer Financial Protection Agency (CFPA) is a new government agency designed to regulate consumer financial products. We need to support effective consumer protection that ensures concise disclosures about risks associated. Visit http://www.friendsoftheuschamber.com/issues/index.cfm?ID=469

By: John L. Davidson

John L. Davidson — Mon, 21 Sep 2009 22:46:17 +0000

Zoe,

Simple reasoning tells us that you didn’t work in the industry and that you have no idea what you are talking about.

Take a low doc loan. A low doc loan couldn’t hurt a consumer, if the house was worth the amount of the loan. This would be the case, if the house was properly appraised.

The consumer could just sell the house and pay off the loan, as soon as they understood that couldn’t afford the payments, which was generally the first month after closing.

For a consumer to face at loss (at the center of every loan you write about) there had to be a fraudulent appraisal. Without that appraisal, that loan cannot be made, regardless of how many lies are told to the borrower.

If the appraisals weren’t fraudulent, how do you explain the trillons of dollars in difference between the fact amount of the loans and the amount these homes will now bring, if sold?

I have worked in matters where a single appraiser was paid cash for inflated appraisals on hundreds of properties. There were no controls over these activities. Look at Countrywide, etc., The list is endless. Every major loan broker is out of business because of this.

Having worked 35 years in the industry, I know first had that the key to the entire fraud was false, overstated appraisals.

By: Zoe

Zoe — Sun, 20 Sep 2009 18:49:34 +0000

I worked in the mortgage and real estate industry and I completely disagree with you. Loan officers and mortgage brokers made some very unusual products, including no doc loans, seem very normal. They told customers they could afford these loans and related their experiences putting similarly situated customers into these loans. In many cases, they completed the loan documentation, so the consumer had no idea they were applying for loans with false information. You post indicates that you have little experience in this area. I’d suggest you do your homework before you write about something you know little about.

By: John L. Davidson

John L. Davidson — Sun, 20 Sep 2009 02:59:23 +0000

I hate to bother you with the facts, but the principal cause of the financial crisis was fraudulent real estate appraisals, which permitted the writing of billions of dollars in bad loans. Because of three or four legal doctrines, the consumers to whom these loans were made have no legal recourse against either the lenders or appraisers who worked this fraud. In no particular order, the legal doctrines were: (1) lack of privity–the appraisers are hired by the lender, not the borrower; (2) lack of duty, by both lender and appraiser to he borrower; (3) state laws that protect lenders, unless the promise is in writing; and (4) the gutting of the securities laws in Central Bank of Denver.

Hopefully, a new Consumer Financial Protection Agency can attack this pernicious legal doctrines.