Tuesday, December 2, 2008

And let's throw good money after bad...

"Give me give me give me."
Who am I? I'm either a 3 year old or a self-entitled liberal. There's really not much to differentiate.

Another frivolous lawsuit: This was lifted from and in turn from an article of the Los Angeles Times.

In what is apparently the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street rating firms, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers across the country.

The complaint, filed by the National Community Reinvestment Coalition, alleges that Moody’s Investors Service and Fitch Ratings enriched themselves by assigning high ratings to bonds backed by mortgages “that were designed to fail” because of “unfair payment terms and insufficient borrower income levels.”

The firms “knew or should have known” that subprime loans disproportionately were marketed to minority consumers—a process known as “reverse redlining”—and that those borrowers would ultimately default and go into foreclosure at high rates, according to the coalition’s complaint.

Fitch Managing Director David Weinfurter said the NCRC’s filing “is fully without merit, and Fitch intends to defend itself vigorously.” Moody’s had no immediate comment.

The filing cites multiple studies that found that African Americans and Latinos received a disproportionate share of subprime loans during the housing boom years. A Federal Reserve study in 2006 estimated that 45% of mortgages extended to Latinos and 55% of loans to African Americans were subprime—a utilization rate “three to four times that of non-Hispanic whites.”

Because the loans themselves often came with terms that increased borrowers’ probability of default—upfront teaser rates followed by unaffordable reset payment adjustments, no required documentation of applicants’ incomes or assets, plus hefty prepayment penalties—African Americans with subprime mortgages are projected to lose $71 billion to $92 billion through foreclosures, while Latinos are projected to lose $75 billion to $98 billion, according to one study cited in the complaint.

“Had subprime loans been distributed equitably,” the complaint estimates, “losses for whites would be 44.5% higher and losses for people of color would be about 24% lower.”


The civil rights complaint is the latest in a series of lawsuits, regulatory investigations and congressional criticism of the rating firms’ roles and conduct during the mortgage bond heyday years of 2003-05. In dollar terms, subprime and so-called Alt-A no-documentation loans accounted for 32% of all mortgage originations in 2005. Their share had been 10% two years before. Virtually all of those high-risk loans were sold to Wall Street firms for inclusion in complex bond structures that were resold, often in bits and pieces, to pension funds and financial institutions.

Let's recap:
So, first they complain that the housing industry discriminates by making people meet "unfair" prerequisites, such as a "credit history" and "having a job." So...housing laws were changed to enable low and moderate-income, normally unqualified borrowers obtain $0 down, 100% financing mortgage, in some cases where they didn't even have to pay CLOSING COSTS. Talk about skewed reasoning. How are these people EVER supposed to be happy? You are damned if you do and damned if you don't, and if you're don't, you're a damned racist. Why do I feel that liberals love Catch-22s? If you say no, you're racist. If you oblige, you set yourself up for the worst economic downturn since the Great Depression....and you STILL get called a racist! Gee, I wonder why FEMA isn't tripping over themselves to give you more handouts. You know, the reason that so many of you received NINJA and ARM mortgages is because you were already overextended and didn't meet any minimum requirements. Home ownership isn't exactly a right, it's a privilege. Kind of like health care, but I won't get into that. In any case, maybe some of these people should have stayed in an apartment until they saved a "down payment" or paid off their credit cards...but then again, asking them to live up to the same standards as everybody else is racist.

The thing that infuriates me the most about this flagrantly frivolous lawsuit is...aren't we already cash-strapped enough? Why flood the courts with a costly, asinine lawsuit that is just going to cost already strapped taxpayers, who are already paying so much in terms of higher taxes imposed by states to cover budget shortfalls due to decreased home values, and because of the bailout which was ultimately a result of these same peoples' poor judgment? Why is it always somebody else's fault when you get yourself into trouble and somebody else's responsibility to make it better for you? How can you still feel entitled? I'm just too racist to understand, living within my means and all, and not suing somebody for extra cash. The silver lining? At least these people are filing lawsuits instead of waiting outside Long Island Wal Marts ready to trample innocent employees to death because of their avarice and thrift.

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