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The Mortgage Mess: Repeat Offenders

Readers responded with frustration and outrage to "The Subprime Wolves Are Back," our Dec. 1 Cover Story about former subprime lenders and brokers reinventing themselves as purveyors of government-insured FHA mortgages. Many who commented asked why more isn't being done to stop the repeat offenders who helped create the current crisis and could create another. And some wrote to remind us there are honest subprime lenders out there. —Chad Terhune

I propose we put some unemployed accountants and auditors back to work paying surprise visits to FHA-approved brokers.

Howard Schubert

SOUTHERN PINES, N.C.

I've been in the mortgage business for over 20 years . . . . Until there is legislation that punishes these people by getting them off the street and behind bars, this pattern will continue.

Morris Capouano

MONTGOMERY, ALA.

It's time for some positive reporting on our business. A mortgage professional for over 17 years, I did not put my clients into toxic pay option ARM loans. My office works tirelessly with low-to-moderate-income clients, helping them get down-payment assistance grants and originating affordable, sustainable loans. I hope your future reporting will feature homeowners who have been the recipients of these programs.

Linda Ayres

LAS VEGAS

Another $100 billion taxpayers will have to pay.

Screen name: Just amazed

As commissioner of the Federal Housing Administration, I take issue with the article. It did a great disservice to a storied federal program, FHA employees, and readers. Comparing a safe, affordable FHA-insured mortgage to a subprime loan reveals a deep lack of understanding about the fundamental differences between these two worlds. And they are worlds apart.

FHA loans are neither high-cost nor high-risk. We require all borrowers to fully document their ability to pay their mortgages. Our longtime most popular product is a 30-year fixed-rate mortgage with no "teaser" rates, prepayment penalties, or balloon payments. We require our lenders to help troubled borrowers at the first sign of trouble.

Quite simply, there is no safer mortgage in America.

FHA-approved lenders and their partners are subject to rigorous underwriting requirements and reviews. We reject the bad apples that put people into homes without regard to their ability to pay. Since its inception in 1934, FHA's single-family insurance program has never cost taxpayers a penny: We protect our insurance funds against lenders that are poor performers or abusive.

Insuring mortgages inherently involves a degree of risk. But any assertion that we are not doing everything we can to protect our insurance funds and our borrowers ignores the facts.

Brian Montgomery

Federal Housing Commissioner

Housing & Urban Development

WASHINGTON

The Upside of Stifled Innovation

In "Get Credit Flowing, Heal Housing" (The Election, Nov. 17), Ernst & Young's CEO said: "[It] would be a mistake to regulate so strongly as to stifle innovation." Let's think about that for a minute. Recent financial innovations have included junk bonds, derivatives, interest-only loans, mortgage-backed securities, and credit default swaps. Recent financial innovators have included Michael Milken, Enron, and Long-Term Capital Management.

Perhaps innovation in finance causes more harm than good.

Victor Riley

POINT ROBERTS, WASH.


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