It should be said that the starting point of American subprime mortgage is good, and it has also achieved remarkable results in the previous 10 year. From 1994 to 2006, the housing ownership rate in the United States rose from 64% to 69%, and more than 9 million families owned their own houses during this period, which was largely attributed to the subprime mortgage. More than half of the people who got houses with subprime loans are ethnic minorities, and most of them are low-income people. These people can't get ordinary mortgages because of their poor credit records or their inability to pay the down payment. Sub-prime mortgage loans provide low-income people with the right to choose, rather than directly refusing to provide them with mortgage loans.
However, the high risk of subprime mortgage is accompanied by its availability. Compared with the interest rate of 6% ~ 8% of ordinary mortgage loans, the interest rate of subprime mortgage loans may be as high as 10% ~ 12%, and most of them are in the form of adjustable interest rate (ARM). With the Federal Reserve raising interest rates for many times, the repayment rate of subprime mortgage loans is getting higher and higher, which eventually leads to the increase of debt default rate and foreclosure rate, leading to today's crisis.
Lending impulse
From 20065438+0 to 2004, the low interest rate policy implemented by the Federal Reserve stimulated the development of the real estate industry, and the enthusiasm of Americans for buying houses continued to heat up. Subprime mortgage has become the choice of buyers whose credit conditions can not meet the requirements of preferential loans.
The intensification of competition among lending institutions has spawned a variety of high-risk subprime mortgage products. For example, interest-free mortgage is different from the traditional fixed-rate mortgage, which allows borrowers to pay only interest but not principal in the first few years of borrowing, and the repayment burden of borrowers is much lower than that of fixed-rate loans, which makes some low-and middle-income people buy houses in the market. But a few years later, the borrower's monthly repayment burden is getting bigger and bigger, leaving a hidden danger that the borrower may not be able to repay in the future.
Some lending institutions have even introduced "zero down payment" and "zero documents" loan methods, that is, borrowers can buy houses without funds, only need to declare their income, and do not need to provide any proof of repayment ability, such as salary slips and tax payment certificates. In April 2006, the Institute of Mortgage Assets, a consultancy in Virginia, conducted a follow-up survey on 65,438+000 such "zero-document" loans. The researchers compared the income declared by lenders when they applied for loans with their tax returns submitted to the IRS, and found that 90% of lenders exaggerated their personal income by 5% or more. According to a report by Deutsche Bank, in 2006, such "swindler loans" accounted for 40% of all subprime mortgages, while in 2006 it was 5438+0, which was 2 1%.
These new products are all the rage. On the one hand, the continuous prosperity of the housing market makes borrowers underestimate the potential risks; On the other hand, the risk control of lending institutions is not in place, and the intensification of competition makes lending institutions only focus on promoting these products, but deliberately ignore the link of explaining risks to borrowers and confirming borrowers' repayment ability. According to the Federal Reserve, the proportion of subprime loans in all mortgage loans rose from 5% to 20% in 2006.
Loose loan qualification examination has become an important driving force for the unprecedented activity of the real estate trading market, but it has also planted the seeds of the crisis. In the past two years, with the Federal Reserve 17 raising interest rates, the US real estate market has gradually shown signs of cooling down, but the subprime mortgage market has not stopped.
When making a subprime mortgage loan, both the lender and the borrower believe that if it is difficult to repay the loan, the borrower only needs to sell the house or refinance the loan. But in fact, due to the continuous interest rate increase by the Federal Reserve 17 times, the housing market continues to cool down, making it difficult for borrowers to sell their houses. Even if they can, the value of the house may drop to the point where they can't repay the remaining loan. At this time, there will naturally be overdue repayment and foreclosure. Once the number of cases increases significantly, it will inevitably lead to pessimistic expectations in the subprime mortgage market, and the secondary market may experience serious shocks, which will impact the capital chain of the loan market and then affect the entire mortgage market. At the same time, the real estate market price will continue to decline because of the owner's stop-loss psychology. The superposition of the two factors forms Matthew effect, which leads to a vicious circle and aggravates the secondary market crisis.
"hunting" loan
On March 22, 2007, the Banking Committee of the United States Senate held a hearing entitled "Mortgage Market Crisis: Causes and Consequences". At the meeting, consumer representative Jennie Haliburton told her story: When she borrowed money a few years ago, she told the lender that she could only pay $700 a month, and the lender suggested that retirees make up $800 a month. She accepted the loan, unaware that the monthly payment would increase. "I learned later that I had to pay $65,438+000 a month." Consumer Iger said that he asked for a 30-year fixed interest rate. "But when I signed the document, I found that I couldn't get a fixed interest rate. The loan officer said don't worry, the interest rate may fall again. " As a result, he watched the monthly payment rise from less than $2 100 to more than $2,300, fearing that it would continue to rise.
Like most industries, most subprime professionals are honest and decent people, and many borrowers' problems are indeed caused by their own negligence or irresponsible consumption impulses. However, it is undeniable that in the past few years, driven by huge interests, some black sheep in the industry have used various means such as home visits, telephone calls, mailing materials, emails, and online pop-up advertisements to lure consumers into taking the bait by various fraudulent means, including deliberately concealing information, providing false information, instigating or even falsely reporting income instead of consumers. The victims of "biting the hook" are often the most vulnerable among the vulnerable groups: poverty, low education, old age, single mothers, ethnic minorities, new immigrants and so on. -Their financial situation may be completely destroyed, their house may be completely lost, and even their "American dream". There are many bad behaviors of subprime mortgage loans, which are spectacular, but they can be summarized into two categories:
■ Predatory loans: Lending institutions or their agents fail to disclose complex information about loan terms and interest rate risks to consumers in a true and detailed manner in accordance with the relevant provisions of American law. In this case, the victims are often consumers;
■ Mortgage fraud: a criminal act directed by a professional criminal to defraud a loan, and the victim is usually a lending institution.
According to senator Christopher J. Dodd, chairman of the Senate Banking Committee, the so-called "hunting and lending" are:
"In recent years, the loan type that dominates the subprime mortgage market is the hybrid adjustable rate mortgages. Usually, the interest rate is fixed for the first two years, and then it is raised every six months. The increase is usually very large, and many lenders can't afford the monthly payment, so they have to refinance at a higher cost, sell their houses, or stop repayment. Any kind of loan should not force the borrower into this dilemma. When issuing these loans, the lending institution is based on the value of the property, not the borrower's solvency. This is the basic definition of' hunting loan'. "
As early as 1968, the US Congress passed the Lending Truth Act of 1968 to protect consumers. Lending institutions are required by law to clearly disclose all terms and expenses of loan transactions. That is to say, when lending, if the loan intermediary provides wrong information or fails to fully explain all the risks of the loan to consumers, it should be punished as fraud.
In view of the fact that in the United States, mortgage intermediaries are mainly regulated by States, and the federal government has not made an overall statistics on fraud and irregularities in this industry, so its distribution is still unclear. However, according to figures released by the Federal Bureau of Investigation (FBI), from 2004 to 2006, the number of "suspected" mortgage fraud cases reported by banks and other lending institutions doubled. People in the legal profession believe that. With the intensification of the subprime mortgage crisis, related criminal and civil lawsuits will also increase substantially.
At present, the institution most similar to the "mortgage police" in the United States is the Office of the Inspector General of the Federal Department of Housing and Urban Development, which has about 650 investigators and auditors and is responsible for tracking down mortgage fraud and "loan hunting" cases. In the past three years, the agency has conducted 65,438+090 audits of mortgage institutions and intermediaries, prosecuted 65,438+0350 cases, and recovered losses of $6,543,803 billion. But even the agency is not clear whether it touches the heart of the problem. Chief inspector Kenneth Donoghue said in an interview with MSNBC:
"You almost have to have a crystal ball to predict the future. It is too early to say whether what we are seeing now is the whole iceberg or just the tip of the iceberg. " In fact, judging from the information available through Google, unethical behaviors such as "loan hunting" in the subprime mortgage market have occasionally appeared in newspapers since 1999 at the latest. This brings us to our next topic: What have financial regulators been doing since this period?
Lack of supervision
On March 22, 2007, at the hearing of "Mortgage Market Crisis: Causes and Effects" of the Banking Committee of the US Senate, Dodd, the chairman of the Committee, made impassioned accusations against the inaction of the US financial regulatory authorities, especially the Federal Reserve:
"Our financial supervision department should be a vigilante to protect hardworking Americans from irresponsible financial institutions. But unfortunately, they have stood by for a long time. " Here I want to list how financial regulators have been inactive for a long time:
Financial regulators told us that they first noticed the lowering of credit standards at the end of 2003. At that time, Fitch Ratings had listed a major subprime mortgage institution on the "Credit Watch" list, expressing concern about its subprime mortgage business.
The data collected by the Federal Reserve Board clearly show that by the beginning of 2004, lending institutions began to relax their lending standards.
"Despite these warning signs, in February 2004, the leadership of the Federal Reserve seemed to encourage the development and use of adjustable rate mortgages. Nowadays, it is this kind of loan that is full of bad debts and causes many borrowers to lose their foreclosure. At that time, the chairman of the Federal Reserve said in his speech to the National Credit Union Administration (NCUA) that "American consumers may benefit if lending institutions provide better alternative mortgage products than traditional fixed interest rates." Shortly thereafter, the Federal Reserve raised interest rates 17 times in a row, raising the federal funds rate from 1% to 5.25%.
"Therefore, in short, as early as the spring of 2004, the financial regulatory authorities have begun to pay attention to the relaxation of loan standards. At the same time, the Federal Reserve continued to raise interest rates, while continuing to encourage lending institutions to develop and sell adjustable rate mortgages. In my opinion, it is this contradictory behavior that has caused the storm that is currently sweeping millions of American homeowners. "
In May 2005, the media began to report that economists warned about the risks of new mortgages.
In June of the same year, Chairman Greenspan said that he was also worried about the proliferation of new mortgage products.
But it was not until June 5438+February 2005 that the financial regulatory authorities began to put forward regulatory guidelines aimed at curbing irresponsible lending. It was not until nine months later, in September 2006, that this belated guide was finalized.
"But even now, the regulatory response is still incomplete. Three years after recognizing this problem, it was not until early March 2007 that the financial regulatory authorities agreed to extend the protection measures in the guidelines to those more vulnerable lenders. These lenders are even less likely to understand the complexity of the products pushed to them before, and once trouble comes, they have less resources to protect themselves. We are still waiting for the final implementation of the guidelines. "
Dodd plans to urge legislation to protect subprime mortgage borrowers and suppress those high-risk lenders. Hillary? Clinton called on the federal government to set up a "foreclosure delay period" to give lenders more time to repay, and hoped to reduce the "prepayment penalty". The American Community Reinvestment Association (NCRC) hopes that the Ministry of Housing and Urban Development will be authorized to refinance subprime borrowers, and that the federal government will set up a fund to help low-income homeowners.
But is this crisis really serious enough for the government to solve? Many economists hold a negative view: delaying repayment does not mean defaulting, and many borrowers can finally repay without government help. Moreover, according to past experience, loan companies often renegotiate loan terms with borrowers to reduce the repayment pressure of borrowers. Joseph Gyourko, a professor of real estate finance at Wharton Business School, believes that the government does not need to take any measures at present, and the market will adjust itself. If the government intervenes in this uncertain situation, it is likely to lead to moral hazard and lead to greater market volatility.
Harvey Rosen, an economist at Princeton University who was President Bush's economic adviser, pointed out:
"Should we make it more difficult for low-income people to get subprime mortgages, or simply make them unable to get mortgages, or let people make their own choices and know that they sometimes make mistakes? One of these three will be the final policy choice of the government.