Banks Make More $$ Not Modifying Mortgages

Just when we thought we understood what was going on we find that banks are taking advantage of their investors. Well, they do not call them banksters for nothing. There is a great article titled Mortgage servicers perverse incentives from Reuters Blog that illustrates how lenders make money by not negotiating. This bundle comes from the investors. Let's take a look -

Last month, I wondered whether banks’ seeming inability to effectively modify mortgages was a function of “greed on the part of the banks — that while they pay lip service to the idea of modifying mortgages, they actually make more money by being recalcitrant and obstructive and unhelpful.”

It turns out that the answer is yes, it is — and the NYT’s Peter Goodman has chapter and verse:

Many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

In a sidebar, Goodman examines the case of a mortgage servicer, Countrywide, which refused to let Alfred Crawford sell his house for $620,000 in settlement of mortgage debts exceeding $800,000. The latest offer on the house is now just $465,000, and still no short-sale is being allowed.

In the meantime, Countrywide is paying itself lots of fees — fees which will ultimately come out of the pockets of the investors who bought the mortgage-backed bonds which Crawford’s loan was bundled into. The minute that Countrywide allows the house to be sold, that fee income dries up.

The claim is that lenders are looking out for investors. But if you read the whole post you will see that the lenders are really just looking out for themselves. That is why short sales do not work out. That is why foreclosures seem to lag on and on. The lenders are able to extract every penny out of the situation as possible. How is the housing plan going to compete with that?

Bake Sales for Mortgages

We have heard it all now. A bake sale for raising the mortgage money. We are just surprised no one has thought of it first. Or maybe they did and did not know how to generate publicity for it. But we do think that $40 for an apple cake is a bit expensive. Maybe it is just us. But it raised enough for a local Teaneck woman to save her property. In this Associated Press article titled NJ woman's bake sale helps make mortgage payment gives us the details. Let's take a look -

New Jersey woman's bake sale has helped her forestall foreclosure.

Angela Logan raised the $2,559.54 due Sunday under a federal program to help homeowners in financial trouble.

The divorced mother of three sons in Teaneck wanted to sell 100 "mortgage apple cakes" at $40 each. But as of Tuesday, she had more than 500 orders, including one from Hong Kong.

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Logan tells The Record of Bergen County she won't stop baking until people stop ordering.

It sounds like she may have next months mortgage payment as well. Now lets see a review of the cakes...

Sub Primers in Charge of Mortgage Mods

Since the sub prime mortgage market has died the formers employees need to do something. So what better than starting mortgage mod companies to try to work out the loans that they sold a few years ago. Who knew the loans better, right? They already know the lenders that they sold the loans to as well. Plus they are making money in the process. So it must be a win-win situation, at least for the ex sub prime employees. For those that bought the loans a few years ago it sounds more like a lose-lose situation. They are paying the mods money to still lose their house anyways. And what are the new mod employees doing to help the poor folks facing foreclosure? Why laughing at them! That is what just happened in California according to this New York Times article titled Subprime Brokers Back as Dubious Loan Fixers. Let's take a look -

By Mr. Soussana’s own account, his customers fared less happily. He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure, leaving many now scrambling to save their homes.

Yet the dangers assailing Mr. Soussana’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a loan modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.

“We just changed the script and changed the product we were selling,” said Mr. Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.”

Mr. Soussana’s partners at FedMod, as the company is known, were also products of the formerly lucrative world of high-risk lending. The managing partner, Nabile Anz, known as Bill, previously co-owned Mortgage Link, a California subprime lender, now defunct, that once sold $30 million worth of loans a month.

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FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.

And of course there is a Mozilo involved - Angelo Mozilo's nephew.

This company figured out how to work the system the best ways possible. Get a lawyer in charge so they could charge up front fees. Once they got the money they did little else - even pay their employees!

The article is long but it does a great job of portraying the build-up and downfall of the company. Definitely worth the read. And worth remembering not to pay someone, anyone, up front to modify your mortgage!

Foreclosure Summary

We knew that yesterday's numbers were bad, overall. But reading a summary of the numbers makes things seem even worse. This New York Times article titled Foreclosures Rise puts thing into perspective. Let's take a look -

One in 84 American housing units received at least one foreclosure filing in the first half of the year, according to RealtyTrac, the online marketplace for foreclosure properties.

Altogether, that makes for a total of 1,905,723 foreclosure filings — default notices, auction sale notices and bank repossessions — reported on 1,528,364 American properties in the first six months of 2009. Compared to the same period last year, the number of total foreclosed properties rose nearly 15 percent.

No green shoots in this direction. And not for some time to come. Almost 2 million homes in distress. With unemployment numbers still rising. And since there is a lag time from when people stop paying their mortgage to when the default notices start this will continue to rise for some time.

Gloomy indeed!

Foreclosures Down in NJ but Up Nationally

Another round of foreclosure numbers are out. A sign of good news for New Jersey but nationally the news remains grim. First let's take a look at the national numbers from MSNBC's article titled Foreclosures up 15 percent in the first half of 2009 -

The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.

The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.

The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year.

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More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes.

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On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.

Those are some grim numbers. That coupled with the projections that foreclosure will not peak for another year is very ugly economic news.

Now on to one sign of good news locally; a Star-Ledger article titled New Jersey foreclosure rate falling. Let's take a look at how the Garden State is fairing -

Initial foreclosure filings on New Jersey homes have fallen through the first half of 2009, and government programs are getting some of the credit.

Foreclosure activity has dropped up to 30 percent across the first half of the year compared with the same period the previous year, according to data being released today by RealtyTrac, a private company that monitors foreclosure data. The company watches activity across a number of stages of the foreclosure process.

Initial foreclosure filings in the first five months of the year fell nearly 20 percent, according to the New Jersey Judiciary, although May data was not complete.

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Still, industry watchers think the state's foreclosure rate is falling for a number of reasons: New Jersey was not as exposed to the plague of subprime mortgages as other states, Trenton and industry groups have been pushing foreclosure prevention programs and home prices have not fallen as much here as in other areas of the country.

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There are mixed opinions about whether the numbers will stay lower than last year or whether foreclosures will come back up.

"It's hard to tell at this point what's going to happen," said James Silkensen, the co-president of the New Jersey Bankers Association. "We're certainly hopeful it will be a continuing downward slide."

One interesting part of the article not above is that the state's foreclosure counseling programs are reporting that they are as busy as ever. Perhaps that is a good thing - people are aware and proactive. Fighting to keep their property or at least not lose it to foreclosure is much better than the walkaways or people feeling so beat down by the system they are apathetic.

Mixed Messages

Citizens get such mixed messages. Do not get in debt. But spend, spend spend. Consumers need to spend to get us out of the recession. But you need to save for a rainy day. And you need to have enough to get by, pay your full monthly mortgage payment and a little more. These mixed messages thrust on us can be very confusing. So we get some good news that consumers are now saving - but this is also bad news since it means consumers are not spending, huh. So says this article from Brookings Institute titled Economic Fears Lead to a Surge in Household Saving. Let's take a look -

For many years, economists and other experts have bemoaned American consumers’ unwillingness to save. Now Americans are saving once again, and observers worry that too much saving translates directly into too little consumer demand. Was consumer saving too low in the past and, if so, why? Is it now too high?


The personal saving rate has soared in recent months. As a percentage of disposable income, the 6.9% rate recorded in May was the highest rate in over 15 years. According to the national income and product accounts, personal saving in 2007, the last year before the start of the recession, was $57 billion. In the January-March 2009 calendar quarter, the annual rate of personal saving was $464 billion, an eight-fold increase. In May 2009, the rate of personal saving rose still further, reaching an annual rate of $769 billion, nearly fourteen times the annual saving rate in 2007.


It may seem puzzling that personal saving would soar at a time of surging unemployment and falling wages and profits. U.S. consumers are worried, however, that their private incomes could fall still further in the future. Even Americans who hold secure jobs have experienced a dizzying drop in wealth over the past 18 months. Since reaching a peak in 2007, household net worth fell almost $14 trillion, a drop of more than one-fifth. The huge loss in wealth has induced many consumers, including those with secure incomes, to cut back on buying in order to bring their consumption back into line with their long-term ability to spend.


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In the second half of the 1990s and much of the current decade the ratio of U.S. household wealth to household income was rising in spite of the fact that households were saving very little of their incomes. If capital gains on your home and in your stock market portfolio are doing so much of the heavy lifting, why should you make any consumption sacrifice to add to your savings? Asset price deflation turned capital gains into huge capital losses over the past 18 months. Households now need to save in order to rebuild their wealth holdings.


A second contributor to low household saving in the past two decades was a series of innovations in consumer and mortgage lending. The wider dissemination of credit cards made it easier for households to borrow without any collateral. Innovations in mortgage finance made it easier for people with poor credit records to buy a home and for people with good credit histories to borrow on their home equity. These innovations relaxed borrowing constraints that once limited households’ ability to obtain loans when they were temporarily short of funds. Households saw less reason to accumulate or maintain a stash of liquid savings for emergencies. But the financial crisis has cut off many households’ access to credit. If they want to protect themselves against future financial emergencies, households must accumulate precautionary savings. In a future emergency they may not be able to rely on credit cards or home loans to tide them over.

If your house value was increasing by double digits every year why save. Many of us felt rich just owning a house. While that wealth that we felt was just an illusion the debts we owed were real. And now, to many of us, they are painful. But the big problem is this push to live within our means but spend every penny we have. But since on a personal level saving is good - on a national level this level of saving is not so good. Our advice is to worry about the personal levels only...

NJ Mortgage Mod Scams

Getting into trouble with your mortgage is bad enough, but then getting ripped off in the process of trying to straighten it out is even worse. We hear story after story of people falling for scams. Yesterday in The Record, in an article titled Lending nothing but woe, they try to help people steer clear from some of the more common scams. This article is helpful due to the focus on NJ specific issues. Let's take a look -

[I]t’s not even legal under New Jersey law to charge for loan modification work.

State and federal regulators have cracked down, saying these companies often:

• Falsely suggest they are linked to the Hope Now Alliance, a federally sponsored program of free mortgage counseling by non-profit agencies.
• Charge fees to help clients modify their loans.
• Fail to get mortgages modified, as promised.
• Refuse to give clients refunds.

Any request for payment is a big red flag.

"I try to tell people: Do not pay anybody," said Shirley Robertson, a housing counselor with the Paterson Task Force.

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Under state law, only non-profit social service and credit counseling agencies can serve as "debt adjusters."

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According to the FTC, homeowners struggling with their mortgages should avoid any company that:

• Guarantees to stop the foreclosure process, no matter what the homeowner’s circumstances.
• Instructs homeowners not to contact their lender, lawyer or credit or housing counselor.
• Collects a fee before providing any services.
• Accepts payment only by cashier’s check or wire transfer.
• Encourages homeowners to lease their home so they can buy it back over time.
• Tells homeowners to make mortgage payments directly to the company, rather than the lender.
• Tells them to transfer the property deed or title to the company.
• Offers to fill out paperwork for them.
• Pressures homeowners to sign paperwork they haven’t had a chance to read thoroughly.

Pretty clear and straight forward advice. Hopefully this will get out there enough so that the people in need can get hold of it. Unfortunately it was in the Real Estate section - the section people often read when looking for properties but not really the go to place when you want to hold onto your current property. Maybe a front page type of story would get the info to the right people.

July's Loan Mod Meeting

So we now that the new housing plan is working about as good as the old housing plan (Hope Now) which means that it is not working. So a meeting will be convened on July 28 where Treasurer Geithner and HUD secretary Donovan will discuss (read force) the top 25 mortgage lenders to adopt modify mortgages. This article from the New York Times titled From Treasury To Banks, an Ultimatum on Mortgage Relief discusses some of the details. Let's take a look -

... Thursday night when I was shown a letter that the administration had just sent out calling for yet another big meeting at Treasury with yet another sector of the financial industry. Signed by Treasury Secretary Timothy Geithner and Shaun Donovan, the housing and urban development secretary, the letter demanded that representatives from the top 25 mortgage servicers assemble in Washington on July 28. It is likely to be every bit as painful for them as that Paulson meeting last October was for the bank C.E.O.’s.

The subject of the meeting is going to be loan modifications. Specifically, the government is going to be asking — in none-too-friendly fashion — why the nation’s big servicers aren’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages. Back in the spring, after all, they all signed onto the administration’s new Making Home Affordable program, which uses a series of incentives — not the least of which is $1,000 to the servicers for every mortgage they modify — to help keep people in their homes and prevent foreclosures.

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So far, however, the results have been disheartening. As of July 6, according to some internal Treasury data I was given a peek at, a total of 131,030 mortgages had been modified under the program, on a three-month trial basis (the Obama program calls for three-month trials before the new loan terms are locked in). That may sound good — but it’s a drop in the bucket compared with those 3.5 million potential foreclosures this year.

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Many institutions also are reluctant to do large-scale mortgage modifications because they will hurt the balance sheets. After all, if a loan is modified, the bank has to take a write-down on the portion of the loan it is swallowing. If lots of loans are modified, that means a lot of write-downs.

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Sure, foreclosure ultimately costs the bank more money than a modification would. But foreclosures these days take a long time — as much as 18 months in some states. And all that time the banks can keep the loans on their books at inflated values. Daniel Alpert, the managing partner of Westwood Capital, calls this practice “extend and pretend.” In fact, he said, he has been hearing that banks aren’t even willing to conduct so-called short sales anymore. Those are sales where the borrower asks the bank to sell the house for whatever it can get, and the bank in turn lets the borrower walk away from the loss that results from the sale.

Will anything really change? Or will foreclosure keep rising or will lenders try to re-write the loans. We can not see many ways the government can force this onto the lenders. So it is really just a wait and see...

Not Making Payments

Apparently the number of HELOC that have payment delinquencies is increasing. With rising unemployment rates we can expect this number to continue climbing. And with allowing HELOCs just for having some equity in the home, as during the bubble, there were many people who could never really afford their lines in the first place.

More delinquencies also means more loss and write-off for the banks. The big question is what are the lenders breaking point. They already have government funds propping them up - but will that be enough? Probably not for some. So let's take a look at this Washington Post article titled Delinquencies On Home-Equity Loans, Credit Cards Hit Historic Levels -

Delinquencies on home-equity loans and credit card payments hit record highs in the first quarter of this year, according to data released today by the American Bankers Association.

Home-equity loans were one of the major culprits of the current crisis. To recap: Cheap credit caused a housing boom in the first part of this century. Skyrocketing home values led homeowners to take out home-equity loans -- essentially, treating their homes like ATMs -- to buy consumer products. Then, when home values started flattening then falling, it all collapsed, debt upon debt.

According to the American Bankers Association, delinquencies on home-equity loans climbed to 3.52 percent from 3.03 percent in the fourth quarter of 2008, with late payments on the loans jumping to a record 1.89 percent.

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This is even worse news: It means people are living off their credit cards with 28 percent interest rates now that their home-equity loans have run out.

This is why smart people are skeptical that the U.S. is in a real recovery. Many believe there's more bad news to come until unemployment starts dropping and home prices stabilize.

Things are interconnected - if people are not working they can not pay their bills - including HELOCs. We wonder were the new historic highs will be. Close to 5%? Maybe more?

Reverse Mortgages By The Numbers

We have always felt that Reverse Mortgages were another type of gambling with the future. Especially when the homeowner is young, well young for taking the RM, say in their 60s. Who knows what the future will hold and how long they will live. Through the RM program we are encouraging seniors to take all their savings now and pay a hefty price for doing it. Sure it will be great if their short term needs are met or they live even better than before, but what is the cost. Finally we found someone who ran some of the numbers in this article from The Northern Star titled Reverse Mortgages Come With Danger. Yes this is from an Australian paper, it appears not many in the US actually acknowledge the problems with reverse mortgages. Let's take a look -

The idea behind reverse mortgages is that older homeowners can cash out part of their home's value, with the funds received either as a lump sum, a series of cash payments or a combination of both. The money can be spent however the homeowner chooses, be it to buy a new car, take a holiday or simply meet living expenses.

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A strong point of appeal with reverse mortgages is that no repayments are required until you sell the property or die. However, interest is charged from day one, so it doesn't take very long for the overall debt to escalate, potentially outpacing the increase in your home's value.

To see just how quickly the debt can snowball, let's say that a retiree aged 65 takes out a reverse mortgage, receiving an initial lump sum of $50,000 at the start of the loan, with a further $500 a month paid for the first five years. By the time the homeowner is in his or her mid-80s, the debt plus interest will have grown to $400,000.

The mounting debt may alarm family members, but it should also concern our homeowner.

That is because around 50pc of both men and women currently aged 65 have a 50pc chance of living to their mid-80s.

What is going to happen to the 80 year olds with no equity left? Their savings depleted so they can buy their grandchildren ice creams? Which is what some are suggesting -

Meg Burns, director of the FHA's office of single-family program development, said she's heard only positive feedback.

“One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their grandchildren to get ice cream,” Burns said.

How great will that work out in the end? Sure it feels good now but if it costing seniors their savings and really costing about double due to all the fees and interest how good will that really taste?

We are also wondering about the clause to keep up the property. How is the homeowner going to keep up the property in their 80s when they have no equity for maintenance? And how are we going to evict people whose houses are in disrepair but their Reverse Mortgage requires the house and property to be maintained? If these are not maintained properly the value will decline. The problem is already messy, and the strong push for Reverse Mortgages will make things even messier.

Renters Market

More good news for renters - it's a renters market. There is a glut of apartments in Jersey and many landlords are willing to negotiate in order to rent their space. While some parts have not changed, people still need first months rent and a hefty deposit. Also going in with knowledge of a credit score is a good start. But for other things like rent price and terms landlords are willing to negotiate. Things like lowering the monthly rent, allowing pets and throwing in other perks are apparently taking place. This article from The Record titled It's a renters market; so shop around describes the current action in the rental world. Let's take a look -

A recent survey by Rent.com, an online rentals search site, found a number of signs that the recession is affecting the apartment market, including:

* A larger percentage of tenants searching for two- and three-bedroom apartments — apparently a sign that people are living with roommates or relatives to cut housing costs.

* A larger percentage of tenants using search terms like "bad credit apartments" or "no credit-check apartments," apparently because their credit records are not as clean as they'd like.

* Visits to more Internet apartment sites, apparently because tenants now have a larger inventory of apartments to choose from.

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Apartment vacancies are up, for several reasons. For one thing, there's a larger supply of properties because of building, especially near the Hudson River, during the housing boom. In addition, many homeowners who have failed to sell their homes are renting them out instead.

At the same time, rising unemployment rates mean fewer people are looking for apartments. For example, recent college grads struggling to find work are now more likely to live with their parents than to get places of their own, as they might in a healthier economy.

We wonder if the larger units are due to roommates or families living together. If a family can not buy a house they will be looking at the bigger apartments. We wonder if anyone tracks the rental units - who is renting for how much.

Expanding the Obama Housing Plan

Since the housing market is still falling, there is hope that expanding the plan will slow the pace of foreclosures. It may help some. But the big problem now is the ripple affect from unemployment levels. In addition, for all the controversy about the original housing plan, it had very little impact. This article in the US News titled Obama's Housing Rescue Expands: 6 Things to Know describes the loosing of some of the rules. Lets take a look at the first five -

1. Fannie/Freddie only: Despite the higher loan-to-value ceiling, the original framework of the program remains in tact. For example, only borrowers with loans owned or guaranteed by government-controlled housing finance giants Fannie Mae or Freddie Mac can participate. At the same time, borrowers need to be current on their mortgage to qualify.

2. Falling prices, less equity: The expansion of the qualification parameters comes as the real estate market continues to erode. Home prices in 20 major metropolitan areas fell by more than 18 percent in April from a year earlier, according the Case-Shiller home price index. Among other things, sliding home prices suck equity out of homes. Because of plunging values, more than a fifth of American homeowners were considered "underwater"—meaning they owe more on their mortgages than the property is worth—in the first quarter of this year, according to Zillow. This evaporation of home equity threw sand in the gears of the administration's refinancing initiative. That's because the original terms of the program precluded borrowers with mortgages exceeding 105 percent of their home's value from participating. But by expanding the loan-to-value cap to 125 percent, even borrowers who are significantly underwater will be eligible to refinance through Uncle Sam.

3. Efforts so far: When it rolled out the initiative earlier this year, the Obama administration said the refinancing program could reach up to 5 million homeowners. But in its release yesterday, HUD acknowledged that only "tens of thousands" of refinancings have occurred so far.

4. Expanded reach: The new standards could make up to 2 million additional borrowers eligible to refinance through the program, according to the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. "This program could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices," FHFA Director James Lockhart said yesterday.

5. Mortgage rate hurdle: But not all of those 2 million additional borrowers will end up refinancing. Some won't meet other program requirements, such as being current on their loan. But it's the recent upward trend in mortgage rates that represents perhaps the biggest threat to the program's success. Refinancing applications surged last fall and winter, after the federal government engineered mortgage rates of below 5 percent. But as bond traders became rattled by sharp increases in government spending, they sent yields on 10-year treasury notes—which fixed mortgage rates typically tack—skyward in recent months. As a result, mortgage rates surged, hitting 5.81 percent on June 11, according to HSH.com.

We are surprised that the housing plan has made such a small impact. But just like Hope Now really did not make much of an impact. Sometimes it seems like nothing will stop the downward spiral other than hitting the actual bottom.

Protecting Consumers Against Lenders

The Obama administration is looking to start a regulating agency protecting Americans regarding various financial instruments such as home loans, pay day loans, credit card fees as well as others. If it does half of what it promises we are off to a good start. Which means the lending industry is trying to kill the agency upon proposal. When your income is based on excessive fees there is little incentive to reduce them. And since the bubble burst we are seeing new and interesting ways to add the excessive fees to consumers. The new agency is described in this New York Times article titled Banks Balk at Agency Meant to Aid Consumers. Let's take a look -

The Obama administration fired an opening shot on Tuesday, sending Congress a detailed, 150-page proposal for an agency that would set new standards for ordinary mortgages, restrict or prohibit risky loans, investigate financial institutions and enforce new laws aimed at protecting credit card customers.

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The industry’s heated reaction presages an intense lobbying battle that is already beginning. Opponents include JPMorgan Chase and Wells Fargo as well as thousands of regional and local banks that have close ties to lawmakers in every part of the country. But the opposition could also include countless mortgage lenders and independent mortgage brokers.

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“We know the optics are bad,” said Scott Talbott, vice president for government affairs for the Financial Services Roundtable, a trade association in Washington. “If you are against a consumer regulatory agency, then everybody will say you’re against consumer regulation.”

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It would give the new agency marching orders to set standards for traditional mortgages, and the agency would have the authority to demand that lenders offer those kinds of loans or give consumers the chance to opt out of riskier products.

It would also give the new agency the power to restrict or prohibit mortgages that come with hidden fees and steep penalties for borrowers who pay the loan off early. It would also be empowered to interpret and enforce the new credit card law that Congress passed last month, aimed at restricting banks from arbitrarily raising interest rates.

It would also have examiners, much like existing bank regulatory agencies, who would have the authority to go into specific institutions, issue subpoenas and scrutinize their practices, demand changes and seek penalties.

While some may argue against any new regulations - we would argue that any industry that is powerful enough to take the country requires some oversight.

Hopefully the proposal does not get watered down.