BLOG VIEW: The Federal Mortgage Czar

The nation's most powerful Democrats huddled in Washington today to urge the Bush administration to tackle the housing market crisis and lasso runaway foreclosure volumes. On tap are recommendations for lifted GSE portfolio limits, more funding for foreclosure prevention and the appointment of what some news sources have dubbed a federal-level "mortgage czar."

Although our offices are not equipped with a crystal ball, MortgageOrb anticipates some lively finger-pointing and, ultimately, ineffectual dialogue. The fact is, the real estate market's woes are probably more deep and profound than Congress and the Bush administration can handle. Perhaps some superficial solutions will be devised. But in the final rendering, the current crisis must be mended by the American real estate finance industry and Americans themselves.

It is doubtful that anyone can pinpoint and implement a plan to speedily rescue such a wide and complicated financial market – one that involves countless players and is affected by local, regional and national economic trends. The availability of capital for home-loan financing cannot be meaningfully enhanced by simply raising Freddie Mac's and Fannie Mae's loan limits, nor can any amount of federal dollars bail all troubled homeowners out of foreclosure. Larger issues are at play.

Nonetheless, during a press conference at the Capitol, high-profile lawmakers such as House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) and Senate Committee on Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) convened to prod the Bush administration into action.

Fundamentally, congressional diligence is welcome. However, the Democrats must be prepared to have the spaghetti thrown back in their faces. It is likely that Bush and company will, reasonably, contend that Congress has been sitting on an administration proposal – which includes FHA modernization, FHASecure and measures intended to help Americans avoid foreclosure – for more than a month.

Moreover, two years ago, the call was for GSE reform. Today, advocates for reform (which never transpired) are asking the GSEs to perform. And a czar? Doesn't HUD Secretary Alphonso Jackson qualify?

Without doubt, both Democrats and Republicans – whose constituents are treated equally in the eyes of foreclosure – are sensitive to today's mortgage-market plight. But it appears that both sides of the aisle are paying lip service to the problem in lieu of pursuing bipartisan solutions. The problem is politics.

But if we turn inward to the core of the issue – Americans in foreclosure – politics is (or should be) irrelevant. Perhaps a response from the federal government is not warranted. Shouldn't homeowners themselves be held accountable for their troubles?

Predatory lending was, and is still, a reality. During the real estate boom and the era of easy capital, many home buyers were snookered into irresponsible and, sometimes, illegal financing packages. These homeowners were they prey of unscrupulous financiers.

But let's not ignore another reality: Millions of buyers took on more home than they could reasonably afford and were quite cognizant of what an adjustable-rate mortgage would mean in three or five years. Buyers just didn't care, at the time. Granted, many mortgage brokers facilitated these deals, but they didn't sign the stacks of paperwork.

So, will the new mortgage czar decide who was greedy and who was hoodwinked when foreclosure-avoidance funds start flowing?

Michael Bates, Servicing Management


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