Posts Tagged ‘Mortgage Bankers Association’

The future revealed

If you want to see what the future of home mortgages looks like, it’s lurking somewhere in the testimony the Mortgage Bankers Association presented to Congress this week. In a reasoned policy document that the mortgage bankers should have thought of writing about 15 years ago, the MBA’s Council on Ensuring Mortgage Liquidity lays out principles for how a home finance system should work as well as nine different models that could get it there – everything from covered bonds (aka the Danish system) to a public utility to keeping Fannie Mae and Freddie Mac as the main forces generating funds.

Creating a fully privatized finance system is on the list of options, but not something the mortgage bankers, homebuilders or Realtors (I don’t dare lowercase the “r”) support – why should they if they can benefit from government subsidies and guarantees through a strong government role? Indeed, some of the backing the mortgage bankers are asking the feds to provide would hand additional risks on the public sector, in the name of stabilizing the mortgage markets and maintaining credit for the biggest number of borrowers possible – a bargain Congress ought to be wary of.

As recently as last summer, in the breath between Freddie Mac’s collapse and the Lehman implosion, the calls for privatizing Fannie Mae and Freddie Mac came loud and often. What a difference less than a year makes. This week’s hearings featured just one token opponent of keeping Fannie and Freddie as public entities at the heart of the mortgage market, Dr. Lawrence J. White of NYU’s Stern School of Business. He called for the privatization of the agencies, along with a “program of targeted assistance to low- and moderate-income households to encourage them to become homeowners.” I can’t think of a more reckless combination – it’s like turning the clock back to 2003.

Friday, June 5th, 2009 | Tags: , ,
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Lobbying for failure

Thursday is the Mortgage Bankers Association lobby day in Washington, and at the top of its agenda is the defeat of “cramdown” legislation that would empower bankruptcy judges to reduce the amount of principal owed on a home mortgages. Sen. Richard Durbin has been working with the top three loan servicers — Bank of America, Chase and Wells Fargo — on compromise language, but in the meantime the mortgage bankers are pressing for defeat. (Servicers are in theory open to cramdowns because they can help keep a homeowner paying the bills; mortgage bankers hate the proposal because it could compromise their big advantage in the marketplace, which is access to cheap money to lend.)

To make their case the mortgage bankers will be spreading lies all over Capitol Hill, judging its briefing book to members:

Providing mortgage modifications is less costly [than cramdowns], does less long-term damage to the borrower’s credit, and rate modifications can actually reduce payments more than principal modification.

They forgot the most important part: “and doesn’t prevent foreclosure in most cases.” The Dems who are planning to vote against cramdowns (right now they include Thomas Carper of Delaware and Jon Tester of Montana) had better be prepared to explain why they’re standing up in favor of foreclosures.

Tuesday, April 28th, 2009 | Tags: , , ,
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Oh, boy

What’s more troubling than a world in which all home loans come from Bank of America and Wells Fargo? One where Fannie Mae and Freddie Mac guarantee lines of credit for smaller mortgage bankers, which is what the Mortgage Bankers Association is now asking the Federal Housing Finance Agency to do.

Today’s Journal also has a story about how default rates for FHA-insured mortgages are rising fast, and that should give you an idea of what’s at stake here. Most FHA lenders are the very kinds of institutions that are now seeking the Fannie/Freddie guarantee on their credit lines — mortgage banks, which don’t do any other kind of business and therefore don’t have deposits or any other sources of funds to turn to. While many mortgage banks are solid and valuable institutions, over the last few years mortgage brokers seeking to increase their profit margins have also opened up their own banks, and quite a few mortgage banks are basically new incarnations of sleazy subprime loan mills.

So let me get this straight: the credit markets won’t take the risk of guaranteeing warehouse lines of credit for mortgage bankers, but the federal government should?

Tuesday, March 31st, 2009 | Tags: , , ,
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