BLOG VIEW: And The Winners Are…

Before 2007 drifts into the history books, let's take a page from our friends in college football and motion pictures by using the end of the year to hand out awards in recognition for the unique accomplishments of the past 12 months. So here is one last shout-out to these prominent individuals and organizations with the following honors:

The Nostradamus Award: The Center for American Progress and the National Urban League. These organizations deserve recognition for their uncommon prescience in warning about the potential foreclosure disaster back in March, when talk about a looming crisis was dismissed as foolishness.

The Center for American Progress, a self-described ‘progressive think tank,’ issued a report on Mar. 12 called ‘From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures’ – and it was thoroughly ignored by both the industry and the federal regulators, who kept insisting there was no looming crisis.Â

In the same month, the National Urban League, a highly respected civil rights group, pointed out a disproportionately high number of African-American and Hispanic borrowers were being steered into subprime loans when they should have qualified for traditional mortgages. That complaint was also ignored by the industry and the federal regulators. Today, however, the danger to homeownership among African-Americans and Hispanics is acknowledged as a reality. Too bad that few people were listening last March.

The United We Stand Award: The nation's banking trade associations. These rival groups joined together in a rare display of unity to vigorously lobby against the effort by the Farm Credit System (FCS) to expand its mandate through broader parameters relating to rural residential lending. The trade groups successfully argued such a plan would wreck the state of community banking in rural America, and the FCS' proposal never made it to a congressional vote.

And a special round of applause goes to the other rural-related government-sponsored enterprise (GSE), Farmer Mac, for not joining the FCS in its ill-advised scheme.

The Wish You Were Here Award: Sen. Chris Dodd, D.-Conn. While pursuing his party's presidential nomination, Dodd has neglected his duties as the chairman of the Senate Banking Committee. Dodd's absence from Capitol Hill has generated grumbling within the industry that he is not vigorously pursuing the much-needed reforms in the financial services sector.

However, if the current polls are any indication, we suspect that Dodd will spending much more time on Capitol Hill during 2008.

The Too-Low Priority Award: The Federal Bureau of Investigation (FBI). It seems strange, but the FBI has been very slow in acknowledging the depth and scope of mortgage fraud issues. Last March, Walter W. Grattan Jr., a supervisory special agent with the FBI, told a meeting of the Connecticut Mortgage Bankers Association that mortgage fraud was not the first priority in his agency – or the second, third or fourth priorities, either.

According to Grattan, white-collar crime was the seventh priority within the FBI, and within that category, mortgage fraud was considered to be far less significant than the investigation of public corruption, corporate and securities fraud, healthcare fraud and civil rights violations. For lenders who were badly burned by rampant mortgage fraud, the FBI's priority listing is more than a little troubling.

The Charlie Brown Football Award: James Lockhart, the director of the Office of Federal Housing Enterprise Oversight. Lockhart spent all of 2007 arguing for stronger regulatory control over Fannie Mae and Freddie Mac. As we all know, it didn't happen. Dramatic changes within the GSEs and the national fraying economy altered Lockhart's goals.

Today, GSE reform is not a prime issue on Capitol Hill. In fact, Lockhart even acknowledged that Fannie and Freddie may need to expand their business beyond current constraints if the current economic environment frays further.

The Bounced Reality Check Award: Alan Greenspan. Neither gone nor forgotten, Greenspan's gift to 2007 was his autobiography ‘The Age of Turbulence: Adventures in a New World,’ and that self-congratulatory book left plenty of readers with shock-dropped jaws.

For mortgage bankers, Greenspan took hubris to a new low with this astonishing statement: ‘I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk. But I believed then, as now, that the benefits of broadened homeownership are worth the risk.’ As the mortgage banking industry struggles to regain its footing while America teeters into 2008 with the threat of a recession, it would appear that Greenspan's risk wasn't quite worth it.

The Don't Lose Hope Award: HOPE NOW. The current mortgage industry crisis sparked the creation of HOPE NOW, a cooperative effort among counselors, investors and lenders to maximize outreach efforts to homeowners in distress.

Through an aggressive outreach program, this national endeavor is working hard to keep people in their homes and to stave off foreclosure. Here's a clap of applause for this wonderful organization and the good people making it happen – we're rooting for their success in the new year!

– Phil Hall, editor, Secondary Marketing Executive

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