Don’t know if you caught this, but the heads of two of the largest real-estate interest groups traded barbs this week – over the question of “Who’s to Blame?” For the mortgage mess, that is. The head of the mortgage banking industry’s trade group – the folks who underwrite the mortgages — started it, accusing mortgage brokers of making fat-and-easy profits by putting home buyers into loans without any concern for whether they could repay them. While the banks were, you know, just trying to make loans like Jimmy Stewart did when he ran the Building & Loan in Bedford Falls.
this account from the Associated Press, 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 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 battle was on at that point…
According to the AP, the the president of the National Association of Mortgage Brokers responded with a blistering e-mail 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 subprime 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.
My view? A pox on both their houses. Yeah, there were lots of people who probably were selling vacation time shares before, jumped into the mortgage business when the going was good, and now they’re hustling silver bars for some boiler-room commodities firm. That, or hedge fund shares. But the banks were no different – just selling the loans as fast as they could to Wall Street firms like Bear Stearns, who was bundling them into mortgage-backed securities as fast as they could. So in this parlor mystery, everyone killed the butler.
Should mortgage brokers be licensed? Probably. There should be some professional certification, but not sure that would stop an unscrupulous broker from jamming a no-doc Option Arm on a widow. Or enable the bank to track them down when the loan goes sour two years later. The banks and Bear Stearns could have figured out how to put safeguards in place two years ago, but they were too busy shoveling the loans out to investors.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.