It got nasty between mortgage bankers and brokers were at loggerheads Tuesday over who's to blame for the housing market's woes.
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
