Debt Consolidation

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Good morning. One of the challenges of writing about real estate in Los Angeles is that national stories about the bursting of the bubble ring somewhat false here -- it feels to us that the bubble, if there is one, hasn’t burst here. That said, the national bubble story has clearly moved into the finger-pointing stage. A top Treasury Department official is now blaming the mortgage industry for relying too heavily on stated-income loans -- ‘liar loans’. This from Comptroller of the Currency John C. Dugan: ‘Sound underwriting and, for that matter, simple common sense suggests that a mortgage lender would almost always want to verify the income of a riskier subprime borrower to make sure that he or she had the means to make the required monthly payments. But the norm appears to be just the opposite.’ Roughly half of all subprime loans last year were ‘liar loans,’ he said, although he called them ‘stated income’ loans. The mortgage industry, though, generally gets what it wants out of Washington, and here is one reason: the industry has spent $210 million in the past seven years on lobbying and campaign contributions. The Common Cause report says in part: ‘In 2001, the Mortgage Banker’s Association organized a meeting with eight major subprime lenders and several other trade associations in an effort to develop a ‘unified battle plan’.... They hired a powerful public relations firm to spin a campaign and a positive national message. They also hired a ‘SWAT team’ of lobbyists to speak with mayors, city councils, and other entities who were contemplating further lending regulation.’ Comments? Thoughts? Send email to lalandblog@yahoo.com.