Once again Mortgage Brokers are the culprit

Andrew Cuomo, the New York State Attorney General is probing the appraisers to find if they are the root cause of the subprime disaster. Two big Manhattan based appraisers signed statements saying they were improperly pressured by mortgage lenders and brokers. The pressure was based on them not getting any more business from that lender if they were didn't inflate the value of the property.

Why would anyone want to work with someone who wants them to act unethically? Now appraisers want to point the finger at other parties. In effect cutting a deal with the AG's office. Also in the Bloomberg article, Y. David Scharf, the attorney for Mitchell, Maxwell and Jackson (my favorite appraiser) dropped the word "lender" from his statement to focus entirely on the little guy - mortgage brokers. He emailed this statement for the Bloomberg article, "It is clear to me that the targets of the investigation are mortgage brokers along with anyone else who exerts any form of economic pressure on appraisers." He wouldn't want to upset big bad, powerful lenders would he?

I guess the next step is for mortgage brokers to point the finger at the real estate professionals, who will point the finger at their buyers, who will point the finger at the developers, who will point the finger at investors, who will point the finger at....blah, blah, blah.

Of course there a mortgage brokers AND lender loan officers AND appraisers AND real estate brokers AND the consumers themselves who have a vested interest in the rising values of real estate the past few years. To keep these people out of the real estate industry is a must. Those who engage in unethical behavior should be warned, those who commit crimes should be punished. There's no question about that.

What gets me about the statements that these two appraisers is their implied complicity while covering their asses while pointing the finger elsewhere. That's what needs to stop.

Housing v. Human Rights

Yesterday I attended a New York State Banking Department conference on Abusive Lending called HALT.

It was an interesting educational conference for me, though it seemed as though many attendees wanted a forum to air their grievances with the subprime foreclosures throughout the state.

A couple of thoughts about the conference:

First off, is this a human rights issue? I can see that shelter is a human rights issue, but is home ownership? There are most likely some discrimination issues afoot. From the data it seems as though minorities have been placed into subprime mortgage products far more, particularly African-Americans and Hispanics who appear to make up the bulk of the subprime borrowers. There might have been other products for some of these borrowers.

I don't think this is a human rights issue up there with hunger, shelter, false imprisonment and other basic human rights. I'm not trying to lessen the impact, nor mitigate the blame, I just don't think it falls under this category.

The other issue that I heard frequently is a 6 month moratorium on foreclosures. Even Senator Clinton is calling for this in Congress. I don't know if this is a solution either. There are some borrowers who have taken out loans that they cannot repay, if this is the case, these loans should result in foreclosure. I don't know if it's the lender's fault for loaning the money to them. There are others who are victims of fraudulent colusion between real estate brokers, mortgage loan originators and appraisers who may have originally overpaid for their property (how they didn't check on the internet for comparable sales is beyond me), these homeowners should certainly seek some relief until a solution is found for them either dealing directly with the lenders or with a regulatory agency.

Pointing Fingers

Interesting how no one wants to take responsibility. It's all "pass the buck" all the time. I read an article in the Post that Mayor Bloomberg laid some of the blame for the rise in New York foreclosures on the borrowers themselves for taking out loans they knew they could not pay. Housing and consumer advocates say the Mayor is wrong, that the lenders are to blame.

So if the disclosures are confusing to consumers, and they don't understand the Good Faith Estimate and the Truth-In-Lending Disclosure, is more of the same the answer? Wouldn't it be a better response to try to simplify a document that at more than one closing I've attended has been described by the borrower's attorney as "it's confusing, just sign it."

I guess it's one of the those cases of "it's going to get worse before it gets better."

19% of B and C mortgage in delinquency

Not being an originator of subprime mortgages, I enjoy reading the news about the implosion of the subprime lenders. I just saw an article that Countrywide is saying that 19% of their B and C mortgages are in some sort of delinquency. That's almost 1 in 5 loans that aren't being paid back. That's gonna leave a mark.

Decade High On Default Rate

One thing that is a blessing about focusing on the Manhattan coop market is that the board approval process and the down payment requirements don't create a market for subprime mortgages. I've avoided the subprime market for this simple reason, and I'm glad when I read that the default rate has risen to 10% of the mortgages sold to investors. That's up from 6.62% according to a report by investment bank Friedman Billings Ramsey & Co. I saw this report in REALTOR Magazine's Daily News.