Distributed Credit Without Distributed Income IS - By Default - The Definition Of Distributed Control Fraud.

   (Commentary posted by Roger Erickson)

"My New Loan Shark Is Great. She Lumped 10x More MiddleClass Debt Into One Permanent Beating - Spread Out Over 30 Generations!"

And, of course, liars auto loans and liars student loans also can't hurt.

What's next? Liar's Private Social Security Loans? Just imagine the marketing options.

"Borrow for retirement NOW! Get taxed until you're 70, and then enjoy free lodging in a debtors prison."

Sounds like a helluva deal! TINA says the only way to retire is to rob some other class?

A "study" says a return to Liars Loans (extending distributed credit, but NOT distributed income) would be "no big deal." Bullshit.

Why offering 3 percent downpayment mortgages is not a return to lax lending

"... researchers at the Urban Institute – and, more recently, the chief executive of Fannie Mae – said [a bad] outcome is unlikely. 

The researchers -- Taz George, Laurie Goodman and Jun Zhu – analyzed the performance of low down payment loans backed by Fannie Mae in the recent past. (Fannie accepted 3 percent down until late 2013.) They found that the default rate for loans with 3 percent to 5 percent down were very similar to the default rates on loans with 5 percent to 10 percent down. They also found that very few borrowers got the lower down payment loans (peaking at 3.4 percent in 1999). And nearly all of those who did had top-notch credit. 

Their analysis concluded that the proposed change would be “no big deal.”

This article misses the point completely, and therefore does more harm than good. The REASONS they give for arguing for low mortgage down payments and rates actually enable Control Fraud while not helping the aggregate at all.

All distributed citizens need is enough distributed income to purchase what they are capable of producing.

Distributing credit but not income IS - by default - one definition of Control Fraud.

"Let*s look at the substance and not the shadow"

Define "recent?" How about "similar?" At least "very few?" Nah! Don't bother. The ex Middle Class seems convinced already. They're still as gullible as ever. And, of course, no mention of distributed net income (gross income minus net taxes) whatsoever.

Decide for yourself. There are additional self-serving statements by bankers in the article.

Let's publish our own 'study.'

Why NOT listening to banksters about Fiscal Policy is a return to aggregate sanity.

After all, we're now all experts on that topic. Without enough feedback, posters here easily forget that 99% of the electorate are not on board with what we already consider obvious.

Randy Wray — Setting the Record Straight One More Time: BofA’s Rebecca Mairone Fined $1Million; BofA Must Pay $1.3Billion

It doesn’t have to be this way. Stop the fraudsters. Stop the foreclosures. There should be an immediate 5 year Country-Wide moratorium on foreclosures. Investigate the fraud. Jail the fraudsters. Put the biggest banks into receivership. Begin to clean-up the document mess created by the banks and MERS (the banks lost or destroyed all the records of property ownership). Our economy will not recover until this is done.

Economonitor — Great Leap Forward
Setting the Record Straight One More Time: BofA’s Rebecca Mairone Fined $1Million; BofA Must Pay $1.3BillionL. Randall Wray | Professor of Economics, University of Missouri at Kansas City
Crossposted at New Economics Perspectives

Dr. Housing Bubble — FHA loan guarantees now amount to $1.1 trillion: Upcoming changes to FHA mortgage insurance premiums and the cost of low down payment loans.

FHA insured loans stepped in to take up a lot of the slack when other low down payment loans exited the market in 2007. FHA insured loans are still a low down payment option requiring only 3.5 percent down but at least with these loans, some level of due diligence is done when looking at potential borrowers. Yet over the last few years, FHA insured loans have gone from a tiny piece of the housing market to now being up over $1.1 trillion in loan guarantees outstanding. The housing market is now becoming largely bimodal with all cash buyers picking up better properties while those with barely any down payment funds opt to go the FHA route. Given how expensive FHA loans have become, it is apparent that a large portion of the population doesn’t even have enough to enter the housing market without 30x leverage. Changes are also coming to FHA insured loans that will make them more expensive in a few months. Why are these loans getting more expensive when the housing market is supposedly robust?

Dr. Housing Bubble
FHA loan guarantees now amount to $1.1 trillion: Upcoming changes to FHA mortgage insurance premiums and the cost of low down payment loans.

Costco Offers Mortgages

Costco wants to be your one-stop shop for everything you need in life, from groceries and cell phones to diamond rings and mortgages.

That's right: Costco wants to help you buy a home.In partnership with First Choice Bank and 10 other lenders, Costco is now offering mortgages, CNN Money reports.

After issuing more than 10,000 mortgages over the past year while testing the program, Costco now plans to market the mortgages more aggressively to its 66 million members, according to CNN Money....

Lauren Kutschka, Costco's manager of financial services, told CNN Moneythat Costco is also looking into offering auto and student loans. 

Read it at The Huffington Post
Costco Offers Mortgages To Homebuyers
by Bonnie Kavoussi

"Mortgage QE?"

There has been more and more speculation that the Fed is getting ready to launch a new QE program, this one targeting residential mortgages. With the data coming in better than expected, stocks back up, and Plosser and Bullard both chiming in that improving data would make them hesitate or question the need for more QE, there is some fear that it is off the table.

I don’t think it is off the table, and if anything see growing signs that they are trying to create the political will to get it done. Obviously some Fed members have been vocal about doing more, so the dissenters do have competition. Some of the usual “leak” sources have been indicating that it is possible, but that is not what got me more curious.

Today at least 5 commentators on Bloomberg were downplaying good data and stating that things can’t get much better without housing. I agree, but it seemed like a weird day for so many people to refer to housing. There was no housing data out today, and the jobs report was okay so it wasn’t obvious to point out the continued weakness in housing. Maybe after weeks of Europe and deficit talks, it was time for a new subject, but it just struck me as odd how often it came up. 2008 was easier, back before Bill Gross fell out of favor with the White House, because you knew whatever he said was an attempt to prepare people for a new policy. It is harder now to figure out who is setting the market up, but I find it hard to believe that it is a co-incident that “the need to fix housing” was on everyone’s lips.

So I think Bernanke is trying to lay the groundwork of why it is so important to buy mortgages.

Read the rest at TF Market Advisors

Mortgage QE?

(h/t Zero Hedge)