One of my employees ask me yesterday how this bailout bill affects us. I acutally had to think for a minute. How does this affect this industry and us personally?
As for the industry, I HOPE that it will allow some of the lenders to loosen up the lending practices. Congress and the President says it will free up credit. However, for the lenders that keep their own paper, it does not affect them at all because they do not rely on the secondary market to buy loans and free up their lines of credit. Now, for the lenders that originate loans and sale their paper, it should immediately allow them to free up the credit lines and make more loans.
What really scares me about this law is the part where a judge can change a contract between a lender and borrower (i.e. the note and deed of trust). Under the new law, a bankruptcy judge can throw out the terms of the loan and reconstruct the terms. For instance, if the current loan terms are not favorable to the borrower, the judge can lower the interest rate or lengthen the term. Whatever it takes to make the borrowe able to make the loan payments. THIS IS INCREDULOUS! In America, we have the freedom to contract. There is not any uneven barginning power between the parties. By federal law, the borrower always has three days to rescend the loan FOR ANY REASON! If they did not like the terms of the loan, they could back out. Now, a judge is going to say that the borrower is too stupid to know what they were doing! As I have said before, over the last six years, I have closed over 5000 loans. Every borrower was told what the terms were; and I told them that they could cancel the loan for any reason. I am truly concerned that a judge can have such power.
With the bill in general, I have a HUGE problem with the amount of pork attached to it. The Senate added so much pork to it that it overwhelmed the original intent. There is pork for wooden arrows and wool research. John McCain lost a great opportunity. He should have voted "NO"; and, exposed all the wasteful pork and earmark spending. He should have said that he knows that we need to do something; BUT, this is not the way to do it. Either pass the bill as is; or, write a new bill that will pass.
How does it affect me and other households personally? I really do not know, yet. I hope that it will help my business with more closings; more home sales; and more refinances. But, that remains to seen. Hopefully, I will be able to blog about that later and be pleasantly surprised. However, I do not see in this bailout law.
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