It’s a Wonderful Mortgage

It’s that time of the year again: one in which financial services columnists wax poetic and ponder the Bailey Building and Loan and how if it existed today (it doesn’t really) regulators would sue George Bailey (and Uncle Billy and ‘Old Man’ Potter since he sat on the board) for fraud to go after the DO insurance. Who cares if the good folks of Bedford Falls filled the negative net worth hole with their donations! (Sam Wainwright‘s line of credit would probably be dismissed by the FDIC as sham. Plastics? Hah! Looks like a mixing of commerce and banking to me.) But let’s get down to the profit margin equation and ask this very important and basic question: is borrowing short and lending long any riskier than the system we have today? Why not fund seven year loans (the average life of mortgage paper) with deposits that average two or three years? Someone needs to go and do the math and take a look at the past 10 years and figure out how old fashioned balance sheet lenders would’ve prevailed. I’m not saying (at all) that I prefer the old system. Keep in mind that in the old system the rate paid on savings deposits was regulated by Uncle Sam and thrifts could not offer money market accounts. What happened to change all this? Our good friends at Merrill Lynch had the banking laws changed. Then we had Garn-St. Germain, FIRRERA, Glass-Steagall (torn down), and the list goes on and on. Message: Once you let an industry, any industry, lobby Congress to change the rules of their game, watch out. Message: if it ain’t broke, do not fix it. The Genie is out of the bottle and there is no going back. Hark, the Herald Angels sing…

| Comments

Glass-Steagall needs re-installment As do the Fair Trade Laws instlled inthe Last depression to STOP the Monopolies.

Posted by Jason Fineman on December 20, 2011 at 01:08 PM EDT #

Re-install Fair trade Laws And Reinstall Glass / Stegal

Posted by Bill Stone on December 20, 2011 at 01:11 PM EDT #

Steve Carell had a great peice with his Super Pac. They paid for a vote to say whether Corporations are people or not. Buying the political will in America puts the Corporations in the driver seat. It is a sad time in America. We need someone that can weed through this policial BS and get America back on track.

Posted by DL on December 20, 2011 at 02:03 PM EDT #

Yep, back in the old days things were different alright. For one thing I had more hair :-)Merry Christmas

Posted by PETER SAMUEL CUGNO on December 20, 2011 at 03:29 PM EDT #

I still believe it could be solved simple …i bought two homes 30 years ago and it was so much easier then than today. 20 % down . steady job, decent credit …the key is the down payment.. banks would have less risk, owner would think twice of walking away, and those without 20% would learn to save and when they got there ..it would mean something again.

Posted by Tim K on December 20, 2011 at 08:39 PM EDT #

Back in the days of the local or even regional SL things were “kinder-gentler.” Loans were made in those days based more on the borrower’s character rather than ratios or FICO scores. Rates were a heckofalot higher too. My first mortgage back in 1975 was at 8 3/4% and I thought I was getting a good deal. The “loan committee” approved my loan based on credit and income, certainly, but I’d only been out of college a year, didn’t have much credit and was self-employed. However, I and my family had a good reputation and the folks at the SL knew us – so the loan is no problem. I realize we can’t go back to a time like that but, it just seems there was more “make sense” decision in mortgage lending back then. Now it’s all mechanical. Of course if we had functions in a more “make sense” world over the last decade we wouldn’t have had sub-prime lending in the first plane and maybe no mortgage/economic meltdown.

Posted by Doug Huggins on December 21, 2011 at 08:58 AM EDT #

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