I was in the audience at the opening session of last week's Mortgage Bankers Association (MBA) Annual Convention, and I have to admit that I cringed somewhat when John Courson, the chief operating officer of the MBA, used that well-worn line from ‘The Wizard of Oz’ to describe where the industry is finding itself. C'mon, you know the line: ‘Toto, we're not in Kansas anymore!’
I didn't cringe because of Courson's choice of an obvious movie quote. I cringed because the quote showed the industry is still having problems acknowledging the genesis of today's crisis. Whereas the fabled Dorothy found herself blown over the rainbow, the mortgage banking industry dug itself into a deep pit.
Does it matter whether the industry acknowledges what it did wrong? Of course it does. Nothing is gained by pretending that the industry was the victim of circumstances beyond its control.
David G. Kittle, the MBA's new chairman, added to the confusion in his opening session speech when he rhetorically asked, ‘Who could've predicted the recent astounding events?’
Not be self-serving, but Secondary Marketing Executive was raising red flags for some time. I looked over back editions of our magazine, beginning with the November 2006 cover story, ‘Who's To Blame For Today's Fraud Crisis?’ (That was nearly two years ago!) Our April 2007 Front Office editorial, titled ‘What's Wrong With This Economic Picture?’, outlined the alarming spike in consumer debt coupled with historically stagnant wages (that was the most obvious warning that borrowers were going to have problems paying their mortgages, among other bills). In May 2007, we ran a Front Office piece entitled ‘Washington's Silence On Subprime's Woes,’ which cited then-current statistics that estimated that upwards of two million people with subprime mortgages faced foreclosure. At the time, the problem was still being called a ‘correction’ and no one wanted to admit there was a crisis brewing.
Let's see: out-of-control fraud, disastrous consumer debt statistics, hemorrhaging foreclosure rates…somehow, this doesn't sound like the rest stops on the way to the Emerald City.
Kittle, to his credit, stated that today's industry needs to face its problems head-on. ‘As we put our own house in order, we need to be our own brother's keeper,’ he stated, later adding, ‘Everyone deserves a roof over their head, but not everyone should be a homeowner.’ Both statements earned applause from the convention audience.
But, ironically, the biggest applause in Kittle's speech came after his mild slam at mortgage brokers' role in precipitating what occurred. Yes, the brokers are still being blamed for the crisis.
Please don't think I am here to smack the MBA or its officers. The organization has worked tirelessly during the crisis and continues to provide a level of leadership that should inspire other trade groups.
Besides, the real whopper statement of the convention belonged to James B. Lockhart, head of the Federal Housing Finance Agency (FHFA), who spoke of Fannie Mae and Freddie Mac during the opening session with this observation: ‘We need to get them to do their mission.’
Oh? And what was Lockhart doing when he was running FHFA's predecessor agency, the Office of Federal Housing Enterprise Oversight (OFHEO)? If he was able to ‘get them to do their mission’ in the OFHEO days, the federal government wouldn't have Fannie and Freddie in conservatorship today.
To ensure that the industry doesn't repeat the mistakes that brought it to the current situation, it needs to be cognizant of just why this situation came about in the first place. And with that crucial principle in place, the industry will be able to return to its goal of successfully helping borrowers say those golden words that, not ironically, got Dorothy back to normalcy in Kansas: ‘There's no place like home!’
– Phil Hall, editor, Secondary Marketing Executive.
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