Friday, June 15, 2007
High of the Day
The percentage of U.S. mortgages entering foreclosure in the first three months of the year was the highest in more than 50 years —Mortgage Bankers Association as quoted by Dina ElBoghdady and Nancy Trejos in "Foreclosure Rate Hits
Reporters ElBoghdady and Trejos go on to say—
The most dramatic fallout took place in the subprime market, which caters to people with blemished credit or other factors that make them a risk to lenders.
Those borrowers entered foreclosure at a rate of 2.43 percent, up from 2 percent the previous quarter. The percentages seem small, but they are far above norms, particularly in a healthy economy. The concern is that the mortgage industry's troubles could damage the economy if they are not contained.
The high translates into about 254,591 mortgages, or one in 172 loans, the association said.
It is simply stupefying that neoliberal economists and their media mouthpieces refer to the current state of affairs as a "healthy economy." The economic statistics that underlie that interpretation merely reflect the well-being of the well-off—who are very well off indeed, thank you.
Subprime mortgages were just one more free-market device for bilking the lower middle class while the good times rolled for their betters. As journalist Bill Moyers quoted multibillionaire Warren Buffett, "If there was a class war, my class won.”
Moyers countered, "Well, there was, Mr. Buffett." The problem with that is Moyers' use of the past tense. There is a class war. The media conspire to hide it, and to the extent that word leaks back from the frontlines, they characterize the carnage as an inevitable consequence of the "free market"1 rather than of the ongoing predations of their superiors.
1Any time an opportunity in the "market" is turned upon the predators, the market is quickly restricted without a peep from the "free market" cheerleaders in the press. Such opportunities are quickly regulated out of existence or criminalized.
For instance, here's how to get yourself a better deal on a mortgage—
Only a low credit score stood between Alipio Estruch and a mortgage to buy a $449,000 Spanish-style house in Weston, Fla., a few miles west of Fort Lauderdale.
Instead of spending several years repairing his credit rating, which he said was marred by two forgotten cellphone bills and identity theft, the 37-year-old real-estate agent paid $1,800 to an Internet-based company to bump up his score almost overnight.
The result was a happy ending for Estruch, but the growing practice is sending shivers through the mortgage industry. Federal regulators are also reviewing the practice.
And after being contacted by The Associated Press for this story, Fair Isaac Corp., the developer of the widely used FICO score, said it will change its credit-scoring system beginning later this year in a way it contends will end this little-known but potentially high-impact mortgage-loan loophole.
Why, it's only one of those little "market miracles" right-wing economists trumpet by way of making sure you're a true-believer! But when the market works against the moneyed interests words such as "loophole" and "aberration" begin to appear in the press accounts.
Instantcreditbuilders.com, or ICB, helped Estruch boost his score by arranging for him to be added as an authorized user on several credit cards of people with stellar credit who were paid to allow this coattailing. Parents also use this practice when they add their children to their credit cards to help them build solid credit.
Starting the children of credit-card holders off to a good credit rating is of course a practice that will somehow have to be preserved as the rules are changed.
The pitch to those who are essentially renting their credit history for pay is seductive: You don't need to worry about users of this service receiving duplicate copies of your credit cards, account numbers or any of your personal information. It's essentially free money, they are told.
In the highlighted sentence above notice how the AP writer implies that something underhanded or immoral (even sexual!) is being perpetrated.
Actually the results of renting out your credit history appear to be more beneficial and more guaranteed than paying up the property taxes at delinquent tax sales—
Brian Kinney, 44, a retired Army officer in Glendale, Calif., pulls in more than $2,500 a month by lending out 19 credit-card spots on two old Citibank cards with strong payment histories. Kinney, whose FICO score is above 800 on the scale of 300 to 850, quit his job working at a Farmers Insurance agency and uses the ICB income to tide him over until he starts his own insurance agency.
But the jig is up. When the banks don't like the market, the market must be destroyed—
... after discussions with lenders and industry officials, Fair Isaac said it intends to announce this week that all future versions of its FICO score methodology will no longer consider authorized user accounts, said Tom Quinn, Fair Isaac's vice president of scoring solutions.
The next version is slated to roll out in September to one of the three main credit-reporting agencies — Equifax Inc., Experian Information Solutions Inc. or TransUnion LLC — with the other two agencies receiving the new version sometime in 2008.
So we are compelled to wonder why it is all right for financial institutions to manipulate the free market whenever activities therein collide with their interests, but it is not all right for a supposedly sovereign people to do likewise. [back]