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Paul Kiesel
Paul Kiesel
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Ed McMahon Faces Foreclosure

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Ed McMahon, Johnny Carson’s sidekick on “The Tonight Show” for 30 years, is facing foreclosure on his home that is situated just north of Beverly Hills. Jose Canseco went through the same ordeal last month. And many prime borrowers could be in the same situation very soon, as their Option ARM loans will be resetting later this year.

Critics of government bailouts for homeowners attempt to make the claim that the subprime mortgage/foreclosure crisis is the result of people purchasing homes that shouldn’t have been homeowners or using their home as an ATM. However, both of those arguments shouldn’t even be classified as generalizations; the lenders need to be held more responsible for loans like McMahon’s (whereinthe interest rate resets (teaser rate or Option ARM) it balloons the monthly mortgage payment amount to double or triple the prior month’s payment amount) from even reaching the mortgage market.

Many borrowers took out a mortgage or refinanced their existing mortgage based on misleading, false and sometimes fraudulent information by lenders, such as Countrywide, which incidentally is the lender that wrote McMahon’s loan. Countrywide has had one of the highest default and foreclosure rates per the subprime loans it originated in the country. Yet, the company and Angelo Mozilo have done little to alleviate the situation. It should not be seen as a coincidence that Countrywide has had so many borrowers default on its loans.

All of these recent foreclosures indicate that poor judgment was made on the lenders’ behalf, and it’s becoming more and more obvious that lenders, like Countrywide, knew what they were doing when they were issuing these loans, as they sold most of the higher risk loans off (packaged with A-paper loans), in an attempt to wash their hands clean of the end result: the wave of foreclosures which has adversely affected the economy since last August. This hubristic attitude has led to so many long-time homeowners, like McMahon, having to give up their homes due to improper lending practices.