Hi Darth --
Thanks for your note. You raise a number of good ideas, let's go through them individually.
>>>I am going to assume for the time being that your intentions are honorable, and that you really wish to help the consumer. If that is the case then I feel the result of your proposals would be the opposite of your intent.
Fair enough
>>>If you wish to find a villain in this story,please cast the light where it should be placed. Upon the very law itself. HOEPA is bad law.
Absolutely. We agree. That's why I feel changes are needed.
>>>HOEPA effectively drove 85% of the previous competitors (myself included) out of the marketplace, and left it to a small number of huge, consumer finance oriented participants. As competition receded, prices rose. Simple, free market econonmic theory in action. This mind you, at the same time that non-HOEPA, subprime finance was dropping preciptously in cost to the consumer. Loans with similar credit risk characteristics that we had to broker out at a 15% rate in 1993, we could close for 10% by 1997.Pricing for HOEPA credit quality loans are virtually the same price now as they were in 1993. Fancy that, even though the lenders cost of borrowing has fallen sharply since 1993, the cost to consumers has not changed. This I directly attribute to HOEPA.
Interest rates should be market driven, that's not the issue. What is the issue is selling loans to people who cannot qualify with the intent of obtaining ownership, foreclosure, abnormal fees, etc.
>>>I have watched this market develop from its infancy. I have watched while admittedly, certain participants in this lending industry have grown fat off of sucking large amounts of equity out of the homes of a trusting consumer base.
If this is the case, then what do we do about it? My proposal is aimed at these folks.
>>>As I have chosen to refrain from that practice, I have denied my family an increased standard of living on ethical grounds.
You haven't lost a dime by acting honorably and ethically. You ought to be applauded. The obverse logic is that Willie Sutton would have been a better family man if he robbed more banks.
>>>I share the frustration of yourself and the assailants of "predatory" lending. But I must say, the path this group has chosen to combat this scourge is ill-fated, and potentially ruinous to the very group you wish to protect. All the proposals of this ilk will do is fatten the very rats you wish to eliminate.
Here's where you need to be specific. Which of my suggestions is not workable and why? Is there a better way to achieve the same goals?
Please understand that I am not opposed to sub-prime lending, lawful flipping, or to lending in general. I think lenders should make a profit.
My objection is to purposeful fleecing of borrowers. I think Section 32 is useless as a form of consumer protection and that it needs to be re-visited. My idea is to first make clear what is or is not a "predatory" loan, and then do something to limit the damage done by unfair practices.
I understand that fewer loans may result if we end predatory lending, and that's fine. The truth is that not everyone is credit-worthy and not all loans should be made.
From your note I suspect we largely agree on the issues, the question is how best to obtain the results we want. Your suggestions would be welcome.
All the best.
Peter G. Miller
OurBroker(r)
http://www.ourbroker.com
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