Once again, I was glued to the TV watching Ben Bernanke along with Treasury Secretary Henry Paulson and HUD Secretry Alphonso Jackson testify before the House Committee on Financial Services about the mortgage mess. There were a few of Paulson’s points that I that really stuck out to me beyond the talk of temporarily raising the conforming loan limits.
"many borrowers mistakenly believe that their lender wants to repossess their house in foreclosure…. The vast majority of lenders would rather find a way to help the homeowner stay in their home than foreclose. Yet according to most of the servicers and counselors we have spoken to, 50 percent of those who lose their home to foreclosure never contacted their mortgage servicer or a mortgage counselor for help. Often times borrowers are fearful of foreclosure and not aware that their lender may be able to work out a solution…"
Please don’t wait to contact a Mortgage Professional. Do so well before your ARM adjust or before you cannot meet your financial obligations.
"The borrowers who are facing the greatest stress today are those who have less-than-perfect credit, and also those who have little equity in their homes, due to a decline in house price appreciation or a depreciation in home values. These difficulties are not limited solely to subprime mortgages, but are also surfacing among some prime jumbo mortgage holders."
And who wouldn’t welcome this (regarding the stack of paper work you are the recipient of when you’re obtaining a mortgage):
"The key is not more disclosure, the key is better disclosure and this might be a case where less is more. Taking it as a given that many people will not read all (or even most) of the disclosure documents, we should try to evaluate what type of information is most critical for a lending decision to be consummated. Some of the proposals to create a one-page mortgage disclosure have been designed with this goal in mind."
I’ve got a bone to pick with Paulsen over this statement:
"Mortgage brokers have often been singled out as the main problem, and it appears that many of the mortgages that are currently under stress were arranged by mortgage brokers. But that is not the complete story as in many cases mortgage brokers were arranging loans based on lax underwriting standards developed by mortgage originators who could then fund these loans through securitization transactions arranged by investment banks."
Mortgage Brokers outnumber Mortgage Bankers, so therefore it’s simple math that more stressed mortgages were originated from a mortgage broker. However, everyone seems to forget that mortgage brokers are not the ones who have created the programs that are under scrutiny…they come from BANKS and follow the bank guidelines. Mortgage brokers are simply the source for consumers to obtain their financing from.
"Additional efforts to encourage the development of a more consistent licensing, education, and monitoring system for mortgage originators are worth considering and such a system could help to weed out some of the bad actors."
Presently only mortgage brokers are licensed in the state of Washington…loan originators who do not work for a mortgage broker are not required to be licensed (i.e. LOs who work for bank-mortgage companies like Washington Mutual, Wells Fargo, Countrywide, Chase, Bank of America…etc.). I do hope that the State of Washington will step up to Paulsen’s call and have everyone who originates a mortgage be accountable to the same high standards as that of a Loan Originator who works for a Mortgage Broker.
"I have no doubt that some mortgage brokers and originators engaged in deceptive and predatory practices in marketing loans to people that they did not understand or have the ability to repay. Just as important, and not said as often, I have no doubt that there was an abundance of borrower-level fraud as well. Some people chose to inflate their income or mislead a lender into thinking the property was to be owner occupied as opposed to being an investment property. Both of these practices have a profoundly negative effect on the mortgage market."
Are you still reading this??? To read the entire testimony…click here.