Hello,

I would like to gather up mortgage holders and attorneys who are interested in filing a Class Action Suit against Aurora/Lehman brothers. I would like to put up some kind of sign up sheet on the internet of people that are interested, and see what we can do.

Aurora/Lehman Brothers is suing me for foreclosure in southwest florida, where I put $50k down on a $250k house which is now worth about $89k. It has lost it's value because of their actions and I think they are liable for that. They have damaged me extensively, and many many people throughout this country and it's time for them to be held responsible for their actions.

This company and many other investment banking companies took individual's fees for mortgages, upped the supposed "median price in America" for housing (to $250k in 2005), gave loans to any bum on the street who could sign their name, and created the financial disaster that so many people in Florida, Arizona and California are facing, as well as most of the Country, and foreign countries. And now, they want $200k from me for a house which they have destroyed the value on, in a town where they have destroyed the job market and renters cannot pay anywhere near the carrying costs for the houses they had appraised and approved for these high prices. They failed in their fiduciary responsibilities, are being investigated by the FBI for fraud, and after having destroyed me financially, are further trying to get me to pay them $200k for a house they don't even have a Note for.

Thank you for reading, and let me know if you have any suggestions or would like to list this on your blog as a place for people to add their names.

Liz M.

I am happy to post this with the caveat that TotalMortgageAdvice.com neither endorses nor supports this lawsuit. We are completely neutral.

Fed Wants To Limit Compensation On Difficult Loans

Albeit, sub-prime and Alt-A lending appear to be dead for the time being, both product pools are extremely valuable for the mortgage borrowing community. Yes, there have been abuses, but that does not mean we effectively "throw the baby out with the bathwater". This proposal by Bernanke and Co. simply insures the demise of the sub-prime lending industry. Thus, eliminating a huge pool of potential borrowers and destroying a sector that, until recently, was an extremely important part of lending, "sub-prime". We need sub-prime lending, ironically, to help get us out of this mess.

Yes, abuses have taken place in sub-prime lending over the past several years. The fact is, however, that sub-prime lending (to encapsulate all sub-prime and Alt-A loans) has been a successful part of the lending world going back decades. Remember HFC (NSE:HFC/PB), Beneficial, Norwest, Associates, Avco, etc.? All the aforesaid were vital companies serving borrowers' needs. The key differences in the "old" style of sub-prime lending and the style which helped get us into this mess, are that the old-style maintained higher underwriting standards and priced according to risk.

Obviously, underwriting standards need to be raised. I remember when HFC was considered insane for going to 85% CLTV! Assuming we can re-establish sound sub-prime underwriting standards, we need to price accordingly.

This brings us to risk-based pricing. Higher borrowing costs for sub-par borrowers will achieve two things: 1) It will limit borrowers to those who are willing to pay the price for their inferior credit circumstance(s), and 2) the higher costs and rates to the borrowers will help the offset losses for the lenders due to higher charge-off. Some may argue that this will stifle lending. What lending? Nobody is lending in the sub-prime arena these days anyway. Perhaps we can attract lenders back by allowing them to make profits based on risk?

So how does this relate to Mr. Bernanke, et al? If we limit the compensation for lending to higher risk borrowers, you will simply see loan professionals walk away from that business altogether. The work it takes to get a sub-prime borrower approved is FAR more than the work to get an "A" paper borrower approved, historically speaking. If I were to spend three months working a difficult file, I want to be paid for it. Borrowers understand this as does anyone who charges for their labors.

We need to get back to good underwriting, appropriate pricing, and compensation that make sense. I am not arguing that abuses were committed. I am arguing that we cannot eliminate, by regulation, policies, or compensation structures, the much-needed area of lending called sub-prime. To limit compensation to that of "A" paper compensation is just another nail in the coffin.

Joseph Chatham

I hate to say I told you so, but....

The following relates to the article above:

The Reuter's article reinforces what I have been saying for the past several years. More importantly, it reinforces what I have been saying (and writing) for the past several months; we have a ways to go before the real estate market bottoms-out! Despite all the glowing news from the realtors, mortgage bankers, etc., we need to be leery of the sources and look at the facts. We have a HUGE backlog of REO, a large portfolio of upside down neg am loans which are yet to recast (and offer little in the way of loan mod potential), homeowners who are resigned to the fact that their values will not come back any time soon, tax policy which encourages abandonment, lenders who are unwilling to negotiate, poor policies from a well-intentioned government, and cheap postage to mail keys back to the lenders. The list goes on and on. We will likely see the bottom of the trough at around 45% to 50% of the peak. Not to be too political, but we need to let this bleed and recover rather than use inneffective anesthesia on a wound that is festering: it lessens the pain, but does nothing for the infection.

Joe Chatham