We hear on and on, as the mess in the sub prime mortgage market continues, about relief for the people who are in a world of hurt.  I have reviewed plans and proposals here, and not one offered any real hope to those that are one paycheck away from living in the streets.  I have to think at the grass roots level, many people are as aware of this as am I, and are doing what the banks are fearful of - walking away from mortgages.  I read daily about appeals from banker who are giving sound advice to homeowners in trouble, and yet when you check out their guidelines, you see nothing there that you don’t already know - they will help if you are current on your mortgage, but if you are behind, forget it.

I understand that the banks are not willing to take a risk right now.  I am curious to see how things turn out for Bear Stearns, for example, who was highly leveraged in the sub prime market.  They of course will not be allowed to fail, even if it means a take over from a larger company, such as JP Morgan.  I have to ask myself, however, why it is that there is relief for banks such as Bear Stearns, who also made the big mistake of getting in deep with the sub prime market, yet no relief is in site for them many homeowners who are on the verge of losing their homes.  Let’s face it folks, a misguided position is just that - whether you are a blue collar worker or one of the Wall Street darlings.

Today I read about a banker in the Boston area - Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston.  His message was loud and clear to homeowners.  Call and make arrangements to insure you don’t lose all in a foreclosure.  In his article he gave the web address and phone numbers for www.MortgageReliefFund.com.  Out of curiosity, I checked out the site.  The link is here, so see it for yourself.  Their guidelines for relief?  I quote from the site: “This Fund is aimed at helping homeowners who are in good standing with their current mortgage loan(s), but who may be experiencing difficulty making payments now and who expect to have greater difficulty making payments when their rates reset.”  I have to ask myself - how many of the thousands of homeowners facing foreclosure will these apply to?  And I come up with a grim outlook - not many.

I get the distinct feeling that it is let the chips fall where they may, that is, unless you are a big Wall Street bank that is tied to a lot of fortunes.  I see no relief for the average Joe who would rather just walk away…

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HUD has proposed new legislation that would insure that lender’s paperwork is understandable and fully explained to prospective homeowners.  Although I feel that if you are making a big decision to buy a home, it is your responsibility to know what you are getting yourself into.  Anyone, unless you are a lawyer, that has tried to wade through the legalese of any lender documents knows what I am talking about.  The proposal also encourages borrowers to shop around for the best available deal.

Although I have to take this with a grain of salt, housing officials said borrowers’ confusion about loan terms and closing costs has contributed to the current mortgage crisis.  Certainly, it hasn’t helped, but I fail to believe that this is the cause.  If a person is making this big of an investment, the least thing that they should do is to take a lawyer with them to the closing table, so that there are no surprises.  Leaving nothing to chance would go a long way to prevent being hornswaggled.  I honestly think that it is not the paperwork, but the lenders themselves who have created this mess.  If lenders throw out a rate of say, 2 or 3% to an unsuspecting buyer, then chances are good that the person, unless well in the know, will jump at it.  Over the course of a loan’s lifetime, a lot of money would be saved.  Oh, did we tell you about the resets?

Transparency in lending practices would have gone a long way in preventing the current mortgage market debacle.  Yes, a person should know about closing costs, and all charges tied to the loan, and know it upfront.  With every bank I have ever dealt with, a statement has been giving outlaying the terms and conditions of the loan, what charges would be, and all necessary conditions before I signed a thing.  Reading this statement has always been clear cut and readily understood.  I did, however, get a peak at what has happened in the market when I bought my current commercial property.  I dealt briefly with a company that showed all signs of a classic scam, and was a hair’s breadth from signing until I did my due diligence.  Such things as modifying our income to reflect a higher rate was mentioned, and I was asked to sign paperwork before it was filled out for the sake of expediency.  I am truly thankful that I didn’t go with this company, for I would be now in the same position as so many other people are.

Here are some of the things HUD proposed:

1.  Disclose the terms of the loan, along with all interest rates, payment, penalty for early pay off, etc.

2.  Display settlement charges prominently, including fees paid for outside services.  Anything that is extra is brought to the table.

3. Require lenders to reveal what they pay mortgage brokers.

4.  Require a “closing script” that would be read at the closing table, insuring everyone understands the terms of the loan.

Prospective home buyers should not need a degree in finance to be able to go to the closing table and understand what is going on.  In the wake of all that has happened, I once again must say “a day late and a dollar short.”

On Thursday, some of the nation’s top lawmakers released a plan to help bolster the economy by proposing a broad series of reforms aimed at tightening oversight of financial institutions. This is a plan that should have been in place from day one.  It is kind of like locking the barn door after the horse has been stolen, don’t you think?  Tougher disclosure requirements for banks and Wall Street firms, a nationwide licensing system for mortgage brokers and new rules for credit rating agencies are part of the agenda.  One would think that these safeguards would already be in place, but it is obvious by the state of the economy and the huge debacle in the mortgage market that this just isn’t so.

Lawmakers are doing everything they can to stay away from the dreaded word “bailout”.  It is understandable - even I feel that it is not up to the government and the American taxpayers to bail out people who made bad choices.  This not only includes homeowners, but lenders and Wall Street banks alike.  Tonight the NBC Nightly News reported that Bear Stearns is in the crapper, and looking for a bailout.  The consensus seems to be that they will be helped out.  That is okay, I suppose, but the reasoning behind that doesn’t sit well.  The fear is that if allowed to go under, the fallout from this could further hurt the economy.  So, instead, we see the government and other agencies giving Bear Stearns a handout.  Nice.

The Treasury Secretary, the chairman of the Federal Reserve and the government’s top financial regulators, have come up with the plan.  Led by Paulson, it is hoped that “greater transparency” and stronger risk management will be the watchwords of their proposal.  It appears to me that they are a day late and a dollar short.  Once again, we take a wait and see attitude.