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warrior bodhisattva
Super Moderator
Location: East-central Canada
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Quote:
Originally Posted by Cimarron29414
So, there is a strong argument that the current "regulation" is what caused the problem. Why add more regulation? Why not just eliminate the parachute (foreseeable federal bailouts) from the equation and then the banks won't behave so irresponsibly?
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It goes both ways. If you have a culture of bailouts, then financial institutions will be more apt to take risks: the payoff if it works is huge, and failure will get government money to make it all better. On the other hand, if you have adequate regulation, the institutions are restricted by law from taking certain risks in the first place. The latter is what it's like in Canada. Before you can get a mortgage, you have to qualify by measuring up to a set maximum amount of risk.
Have you been watching Canada's banking performance throughout the crisis?
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Oh, and this just in:
Quote:
Foreclosure Rate Rises 17 Percent
By Renae Merle
Washington Post Staff Writer
Wednesday, September 30, 2009; 10:46 AM
The number of homes lost to foreclosures rose about 17 percent in the second quarter of this year despite the launch of an extensive government program aimed at helping borrowers save their home, according to government data released Wednesday.
Completed foreclosures reached 106,007 during the second quarter, compared with 90,696 during the first three months of the year, according to the report by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulates banks. Their quarterly report examines 64 percent of outstanding mortgages in the country.
The increase was primarily the result of various government and industry foreclosure moratoriums, the report said.
Efforts to keep borrowers in their homes increased during that same period, including the implementation of the Making Home Affordable plan. Under that plan, lenders are paid to lower a borrower's monthly payments. Government data has shown that since the program was launched in March, nearly 400,000 borrowers have been helped. The Obama administration aims to complete 500,000 loan modifications by November.
But even as that program ramps up, rising unemployment continues to hamper foreclosure prevention efforts. The level of foreclosure actions started during the quarter stayed steady, while the number of seriously delinquent borrowers -- those who had missed at least two payments -- increased 10 percent, according to the report.
The mortgage data "continued to reflect negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets," the report said.
The report also reflected the risks still posed by hundreds of thousands of risky home loans known as option adjustable-rate mortgages, which reset to significantly higher payments. With these "option ARMs," also known as pick-a-pay loans, a borrower chooses how much to pay each month, often less than the interest due. But the payments on these mortgages eventually rise significantly, putting the borrower at risk of losing the home.
More than 15 percent of these types of loans were seriously delinquent during the second quarter, compared with 5.3 percent of all mortgages, according to the report, and 10 percent were in the process of foreclosure. "The risks of these loans and geographic concentration caused them to perform significantly worse than the overall portfolio," the report said.
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washingtonpost.com
That's quite a hit even in spite of financial aid.
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Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön
Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot
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