Hi Kenneth,
The legislations being rushed through currently are being put in place as an emergency measure to prevent the US housing market from total implosion, and are reasonable given the current situation. However, they would not have prevented the current situation from occurring had they been in place a few years ago. Every state in the United States has extensive predatory lending laws. However, the issue has arisen because of the demand for high yielding mortgage securities, which are sold on to the secondary mortgage note market and have somehow found their way into large, supposedly safe hedge funds. In order to satisfy that demand, lending restrictions became way too relaxed with some lenders and brokers were of course pushing some dangerous products (in particular the option arm product) to gullible home buyers who have over leveraged themselves and not been prepared for rate rises. I think at the end of the day, with the demand for high yielding securities being so high and the due diligence from the institutional investors being so poor, no amount of legislation could have prevented lending policies straying. When this is combined with a public hooked on personal debt a situation has existed that could not be regulated against short of bringing in lending laws that would strangle the market in the way that the current credit crunch is doing.
Kind Regards,
Cameron Perry
Perry Financial Strategies
The legislations being rushed through currently are being put in place as an emergency measure to prevent the US housing market from total implosion, and are reasonable given the current situation. However, they would not have prevented the current situation from occurring had they been in place a few years ago. Every state in the United States has extensive predatory lending laws. However, the issue has arisen because of the demand for high yielding mortgage securities, which are sold on to the secondary mortgage note market and have somehow found their way into large, supposedly safe hedge funds. In order to satisfy that demand, lending restrictions became way too relaxed with some lenders and brokers were of course pushing some dangerous products (in particular the option arm product) to gullible home buyers who have over leveraged themselves and not been prepared for rate rises. I think at the end of the day, with the demand for high yielding securities being so high and the due diligence from the institutional investors being so poor, no amount of legislation could have prevented lending policies straying. When this is combined with a public hooked on personal debt a situation has existed that could not be regulated against short of bringing in lending laws that would strangle the market in the way that the current credit crunch is doing.
Kind Regards,
Cameron Perry
Perry Financial Strategies
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