Where we are and how do we get out of it
The growth for our economy since the 80s has resulted from increasing reliance on the service sector of the economy. The increase in the service sector has primarily rested upon consumer spending. The consumer spending has been fueled by credit - mortgages, home equity loans, long term car loans and, of course, credit cards. Everyone has been encouraged to not only spend what they earned but to use credit to mortgage their future earnings to provide an immediate impact on the economy. It is good while it lasts.
Now that we have mortgaged our future earnings to the breaking point what can we do. The world is in a panic because it now realizes that the debt service on past spending will continue to grow and mean not only will the consumers not be able to spend more than what they earn but even the consumer's earnings will not be available for spending since an increasing portion will be needed for debt service.
The only way to resolve the problem is reigning in the debt and more specifically the cost of that debt to every person who finds themselves owing more on a house than what it is worth, a car payment that is out of line with their income and credit card balances that will take 34-52 years to pay off if minimum monthly payments are made. The only answer is that the debt must be reduced and the cost of repaying the debt must be reduced as well.
In the 2005 debate over so called Bankruptcy Reform, an amendment was offered to limit interest rates to no more than 30% - it failed. (The reasons it failed were astonishing but that is for another time). Consumer bankruptcy comes down to a fight over who gets the consumer's earnings. With a negative savings rate, the consumer will spend everything he or she earns so the question is who will get that consumer's money - the prior creditor who advanced credit or the future creditor who wants to make a sale to the consumer. That is the central issue here.
Will the country make some decisions which will limit the amount claimed by the existing creditors by placing a limit on the amount of interest that can be charged for interest (I have seen default rates on credit cards in excess of 45%), over limit fees and various other charges? My belief is that the unregulated charges that have been permitted have caused the "crash" to occur sooner and be more severe than if there had been reasonable limits. It does not matter in determining the solution given where we are now. What does matter is where do we go from here.
The only way this crisis will be resolved will be by limiting what the existing creditors can get from consumers. This will include a need to reduce mortgages to house values to stop the tidal wave of foreclosures causing housing prices to continue a downward spiral. Credit cards will need to pare down debt and by all means have to be regulated to limit interest rates and fees. Without these changes, and allowing past creditors to pursue their claims against consumer's earnings with unregulated, unlimited fees and costs, we will see a downturn in the economy that will be devastating.
Now that we have mortgaged our future earnings to the breaking point what can we do. The world is in a panic because it now realizes that the debt service on past spending will continue to grow and mean not only will the consumers not be able to spend more than what they earn but even the consumer's earnings will not be available for spending since an increasing portion will be needed for debt service.
The only way to resolve the problem is reigning in the debt and more specifically the cost of that debt to every person who finds themselves owing more on a house than what it is worth, a car payment that is out of line with their income and credit card balances that will take 34-52 years to pay off if minimum monthly payments are made. The only answer is that the debt must be reduced and the cost of repaying the debt must be reduced as well.
In the 2005 debate over so called Bankruptcy Reform, an amendment was offered to limit interest rates to no more than 30% - it failed. (The reasons it failed were astonishing but that is for another time). Consumer bankruptcy comes down to a fight over who gets the consumer's earnings. With a negative savings rate, the consumer will spend everything he or she earns so the question is who will get that consumer's money - the prior creditor who advanced credit or the future creditor who wants to make a sale to the consumer. That is the central issue here.
Will the country make some decisions which will limit the amount claimed by the existing creditors by placing a limit on the amount of interest that can be charged for interest (I have seen default rates on credit cards in excess of 45%), over limit fees and various other charges? My belief is that the unregulated charges that have been permitted have caused the "crash" to occur sooner and be more severe than if there had been reasonable limits. It does not matter in determining the solution given where we are now. What does matter is where do we go from here.
The only way this crisis will be resolved will be by limiting what the existing creditors can get from consumers. This will include a need to reduce mortgages to house values to stop the tidal wave of foreclosures causing housing prices to continue a downward spiral. Credit cards will need to pare down debt and by all means have to be regulated to limit interest rates and fees. Without these changes, and allowing past creditors to pursue their claims against consumer's earnings with unregulated, unlimited fees and costs, we will see a downturn in the economy that will be devastating.
There are over 4 times MORE foreclosures in the horizon. . .these are homeowners that are late at least 30 days on their mortage. Once you've fallen behind and seeing the value of your home thousands of dollars below market. . you can imagine the tidal wave of foreclosures coming soon.
4 times as many. .
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There are serious decisions confronting us. The recent activity of the government which is designed to "unfreeze" the credit markets is off the mark. The problem is not the lack of credit - we have had more than enough credit made available - we cannot afford more credit. The credit that was extended to consumers was often predatory and unsecured debt, notwithstanding teaser rates or terms, excessively expensive.
We need to deal with the debt; not try to cure the excess credit issues by throwing more credit at the problem. The stock market reaction is a realization that there will be difficult times ahead since consumer spending will grind to a halt if the past debt must be paid.
The net effect of the excessive and expensive credit is that the middle class in this country has been left insolvent. Insolvency exists when a person cannot pay their debts as they become due and/or the person's liabilities exceed assets. The excess credit has left many in the middle class insolvent since the middle class is unable to pay their debts as they become due. The drop in both housing prices and the stock market has now also rendered many in the middle class since their liabilities now exceed their assets.
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MARYLAND MORTGAGE FRAUD TASK FORCE HOLDS INAUGURAL MEETING
Seventeen Local, State and Federal Agencies Coordinate Their Efforts
to Combat Fraud and Seek Restitution
BALTIMORE, Maryland – Representatives of seventeen local, state and federal agencies today attended a meeting of the Maryland Mortgage Fraud Task Force to discuss recent prosecutions and ongoing investigations and to coordinate future civil and criminal enforcement actions.
U.S. Attorney Rod J. Rosenstein said, “Local, state and federal regulatory and investigative agencies are working to coordinate our mortgage fraud enforcement actions, identify appropriate cases for investigation and devote resources to pursue them. Today the Maryland Mortgage Fraud Task Force received briefings about recent cases in which we have pursued civil and criminal remedies for mortgage fraud, and we developed plans to hold even more con artists accountable and deter mortgage fraud in the future. We are going to seize cash, bank accounts, jewelry, artwork, houses, cars, boats and other assets that were purchased with ill-gotten gains, and return the money to the victims.”
The goals of the Task Force include: (1) streamline the procedures for criminal mortgage fraud referrals; (2) develop and implement a training program for state and federal investigators and prosecutors who handle mortgage fraud cases; (3) share useful information with and facilitate cooperation among the many agencies that have a stake in these cases; (4) track open investigations to ensure that partner agencies do not duplicate their efforts; (5) pursue asset forfeiture and secure restitution for victims; and (6) communicate information to the public in order to warn people about common schemes and help prevent them from becoming victims of mortgage fraud and related financial crimes.
Law enforcement objectives include prosecuting lawyers, accountants, appraisers and mortgage brokers who generate fraudulent loans and targeting schemes spawned by the mortgage crisis and economic downturn, such as so-called “foreclosure-prevention specialists” who prey on homeowners who fall behind on their mortgage payments.
The agenda for today’s meeting included briefings about recent mortgage fraud cases prosecuted in Maryland, an overview of mortgage fraud schemes and investigative strategies, a summary of civil and administrative remedies pursued by state agencies and a discussion of the Task Force’s objectives.
The following agencies participated in today’s Task Force meeting:
Maryland Department of Labor, Licensing & Regulation
Maryland Office of the Attorney General
Maryland Insurance Administration
Maryland Department of Human Resources
Maryland State Police
State’s Attorney’s Office for Baltimore City
State’s Attorney’s Office for Baltimore County
State’s Attorney’s Office for Mont
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