More Government Bank Beatings - 09.23.10
Today's Poll: Should the banks have to buy back FHFA's loans?
Yes
No
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Chuck@HRC: (September 24, 2010 11:33am)
Jteller: This is one of the great dangers for small correspondents... oppressive contractual conditions! With Fannie/Freddie hunting for the $ 11 billion it claims is owed it on outstanding repurchase demands in the first half of this year, you can go to the bank (pun intended) all the big banks (add Chase, Citi, WFB) playing this same game. YOU NEED A REALLY GOOD ATTORNEY that knows broker/correspondent agreements and the case law that supports your counter-position. I can't emphasis too strongly that the mega-banks will try every trick in the book to hang you with the buy-back. The problem is that, in some instances, the broker/correspondent has little choice (other than go out of business) other than attacking this aggressively. Take a look at your various insurance policies for litigation expense coverage. [PS- you want to talk to your lawyer about the correspondent denial due to BofA's actions. Might allow an assertion of contract interference as a counter-claim.]
jteller: (September 24, 2010 11:12am)
I am dealing with BofA on repurchase issues. Their behavior borders on extortion. They won't negotiate or discount, they are not interested in our rebuttal. If we don't pay what they want, we are put on a list (already have been) called "The do not do business with." I could live without doing business with BofA, we currently do not, but this list is sent to most if not every mortgage banker who sells loans to BofA. We have already had three fundings pulled & had a correspondent approval pulled. In speaking to a VP of Risk Management, she said that BofA didn't care whether the broker went out of business and BofA got nothing, as long as BofA could prove to the regulators that they were aggressive with every company that owed them money. I was also told that these actions were a result of Fannie Mae dumping Alt-A loans bought from Countrywide on BofA, so BofA was going after the originating brokers. As Washington blamed us for the meltdown, it has come back around for us to pay for
gcall: (September 24, 2010 9:41am)
Caught a seminar put on by my local RE Board. Panel of lawyers, one of whom had worked with Fannie a lot when a US attourney. Now he and partner RE Lawyers specializing in doing mods and short sales. Fannie and Freddie have issued a directive to servicers to not extend foreclosure sales. The logic they gave him was that they are loosing too much intrest on the money "out" on these properties. This logic very clearly demonstrates why government bodies running and regulating something never work. My personal example reffered to in previous post: Fannie balance $65K. Cash buyer ready and able and expecting to close within 15 days of approval--Citi reccomending to Fannie to close--all was ready. Fannie forecloses. If transaction would have closed Fannie would have missed around $110 of intrest. Their intelligent decision to foreclose so they wouldn't lose that $110 has led to thousands out of pocket (clean up etc.) and no sale yet. Privatize!!!! Kick em out on their Fannie!!
gcall: (September 24, 2010 9:40am)
Caught a seminar put on by my local RE Board. Panel of lawyers, one of whom had worked with Fannie a lot when a US attourney. Now he and partner RE Lawyers specializing in doing mods and short sales. Fannie and Freddie have issued a directive to servicers to not extend foreclosure sales. The logic they gave him was that they are loosing too much intrest on the money "out" on these properties. This logic very clearly demonstrates why government bodies running and regulating something never work. My personal example reffered to in previous post: Fannie balance $65K. Cash buyer ready and able and expecting to close within 15 days of approval--Citi reccomending to Fannie to close--all was ready. Fannie forecloses. If transaction would have closed Fannie would have missed around $110 of intrest. Their intelligent decision to foreclose so they wouldn't lose that $110 has led to thousands out of pocket (clean up etc.) and no sale yet. Privatize!!!! Kick em out on their Fannie!!
barryl: (September 23, 2010 8:06pm)
the year was 1976. Dallas cowboys playing vikings. the winner is in the superbowl. 4 seconds left on the clock, and roger is on his own 4 yard line, and shoots back into the enzone as the birth of the shotgot was announced by howard cosell. talk about rules, you cant even stick your toung out at the opposing team and say (na na na na na) without getting a penalty. talk about rules and regs, NFL should be as light as the financial banking system or whats to come. anyway, Drew Pearson goes right,Preston Pearson goes left, newhouse up the middle, hollywood henderson center, roger shoots the ball, and wins the game! so to can we win, all we need is the final rules in place, and money to earn is to follow.
barryl: (September 23, 2010 8:01pm)
you think coumo jr. has juice now, waite till he gets elected. "you aint seen notin yet! banks get the last laugh, even if bluto aligns with popeye, delmonte couldn't package enough spinach. hvcc/mlo/bonds/buybacks, thats a rinky dink and no issues for the big boys who never liked epoint appraisals anyway..
5pence: (September 23, 2010 6:55pm)
Appraisers - Do write to Paladino! Owl Tree is right, Sir Cuomo needs his ass kicked.
5pence: (September 23, 2010 6:53pm)
What it comes down to is the GSE's are $5 trillion in the hole. $5 trillion. That's due to financial terrorists in high offices in investment banks that acted together to conspire to take down the worlds financial systems. We taxpayers are paying for their continued corrupt existance - and that includes the GSE's. $18 billion is really a drop in the bucket for them. Make it more like a couple trillion dollars and then we can discuss the merits. Till then, it's only $18 billion, pocket change.
Owl Tree: (September 23, 2010 6:33pm)
OFF TOPIC / REPEATED FROM THE OTHER DAY.....If anyone is upset with how Andrew Cuomo has screwed over appraisers and mortgage brokers, he is running for governor, and the race is alot tighter than he expected....Call Paladino's office, and urge him to use HVCC as a campaign issue...CONTACT: Paladino for the People.. PO Box 447... Buffalo, NY 14205... TEL: 716-783-9400... EMAIL: [email protected]
barryl: (September 23, 2010 4:20pm)
piss of the banks and watch what happens. Michael, 'their bigger then US Steel" (quote from the godfather". wholesale and correspondence was invented by the banks, and can only be cancelled by the banks, with or without "bluto. those chanels work becuase we get to do all the work, and they get all the money. kind of like heads i win, and tails you loose.
michael: (September 23, 2010 4:12pm)
If I buy a product that has a written guarantee, I certainly have the right to return this product. it is no difference in the mortgage industry. having seen how the banks have been operating for at least the last twenty five years, it has always been let's sell what we can, have someone else do the work, and let someone else have the liability. It's about time someone stuck them in their place, because the poor consumer, who doesn't know what is going on around them got stuck.
hiltont: (September 23, 2010 4:11pm)
Thanks for wasting 4 minutes and 50 seconds of my life...that was a complete waste of the time God gave you boys today...you should be ashamed. Let's be honest, who gives a crap about FHFA, Fannie Mae, Freddie Mac or any of these other clowns?
Valuequestor: (September 23, 2010 3:40pm)
Face realities, Licensing hasn't done much for the appraisal profession. It flooded our ranks with marginally qualified pseudo-appraisers then turned them all loose as self employed business entities whether or not they were ready or not to operate on their own. Good Job Feds!
barryl: (September 23, 2010 3:29pm)
right on! "the man running everything... tony montana, montana realty company. you want me to come in and start over again. where you have your stuff. "
Valuequestor: (September 23, 2010 3:22pm)
Chuck: I know, I know, but how long can we keep piling on regulation on top of Agency on top of Dept. on top of Bureau. It has to end. We are nearing total gridlock. Next thing will be Govt. run evrything. Nobody else will be able to navigate the rules and regs.
Chuck@HRC: (September 23, 2010 3:00pm)
Valuequestor: Your suggest of a sunsetting mechanism would work if not for every Washington politician's desire to protect their own power base. Remember that committees (and a whole bunch of subcommittees) actually control Federal agencies. Make a law sunset and an agency loses power, make an agency go away and a bunch of politicians lose power (ahhh!). Amtgwiz: You're right about greed as a motivator, but the banks didn't throw out the guidelines, they negotiated better agreements with Fannie/Freddie! You walked, as did I, away from unsound and unsafe loans only to see them made by someone else. Take heart, we don't have to worry about getting a visit from the guys in black suits, mirrored sunglasses and earwigs. The same can't be said for those that played fast and loose in the past (asked Angelo!).
barryl: (September 23, 2010 2:56pm)
great day for ropa vieja con ensalada. thats shreaded beef with a salad, nobody makes it better than Rolando's, when your visiting orlando area, they are the number one cuban restaurant in central florida.
barryl: (September 23, 2010 1:58pm)
g turner from central florida, is rolando's still open in maitland, they were on semoron..
GTURNER: (September 23, 2010 1:56pm)
Unbelievable that we are still debating the fault. We know the fault. Mr. Frank, Mr. Dodd and Acorn wanting everyone to be financed. Yes, bad players through-out the industry. But they opened the doors, waved a welcome sign, then cried foul when the unscruppulous and uninformed stampeded in.
barryl: (September 23, 2010 1:53pm)
Steroid induced regulations will help remove fraud (the f word) but will not remove greed from the equation. to remove greed, we need global warming to induce evolution. who knows maybe we can become dolphins instead of sharks!
GTURNER: (September 23, 2010 1:48pm)
I did like the Fannie/Freddie FHFA commentary, but, I really LOVED the shirt. Gale Turner Past President, FAMP Central Florida
amtgwiz: (September 23, 2010 1:44pm)
The problem was that the banks throw out the Fannie and Freddie guidelines because they could make more money. GREED was pervasive and it was greed on the borrowers who thought the could get something for nothing, it was greed on the part of the loan officers who did these crappy loan because they could make more money and it was greed on the lenders who sold these loan because they could make more than on Fannie or Freddie, and it was greed on the part of lenders who bought them because they could securitize them for more money than they could make on Fannie or Freddie. So it was greed all up the line. I was underwriting loans at that time and loans I denied because I would not put my name on them went down the street and someone else approved the, but my name was not on them. If the loan did not make sense I didn’t do it. In 36 years in the industry this is my 6th boom and bust, but the pervasive greed in this one was the undoing of this industry. Maybe now we have learned to follow the rules and we can all make a good living in a healthy market again.
barryl: (September 23, 2010 1:11pm)
wheres Olive Oil!
Nuke 'em Until They Glow and Shoot them In the Dark: (September 23, 2010 1:05pm)
Brian's Right. Eat a Can of Spinach and Kick their Arse in November. Change the Government.
Chuck@HRC: (September 23, 2010 12:50pm)
ParkCityMortgageGuy: I accept your position regarding what regulators SHOULD be doing however, if you look at the Fed's latest proposal on TILA reform, as an example, I think you'll agree it IS a price-setting mechanism. You might also recall that HUD specifically said that RESPA wasn't intended as a pricing scheme. I don't know about you, but a lot of mortgage brokers have taken "hits" on their compensation because lenders won't concede anything (in fee) and under RESPA the borrower can't more than what's been disclosed (for items without tolerance)! This will be the next overarching issue to be dealt with. As to the rating agencies and insurers, you're absolutely correct that the regulators should ensure a level playing field however, your suggested "pricing evolution" can't/won't happen as long as regulators see their roles "constrainers of risk".
Valuequestor: (September 23, 2010 12:46pm)
Slightly off topic, but reading all of the posts I found mysef overwhelmed by all of the Gov. Agencies mentioned and these are just the ones in the financial arena. I think of all their overlaping areas of resposibility. What is the real cost to taxpayers, consumers and businesses for all of this regulation and protection? We have reached or are very close to the point where you can't possibly know every rule or law in your OWN business let alone the other guys that you work with or for. We need to strip away many of these needless agencies and regulations. Agencies and regulations should go through a review period after a year or so to see if they are beneficial to all concerned. If they're not, dump them! agencies
ParkCityMortgageGuy: (September 23, 2010 12:15pm)
Chuck@HRC: I did NOT mean to imply that government regulators should set pricing - what I said and meant was that regulators needed to make sure that market participants are not scamming the entire system and all investors (including the GSE's)by being allowed to improperly influence rating agencies and insurers, etc. Reasonable risk based pricing policies will then evolve in a properly regulated "free market" because the real risk is being addressed instead of fraudulently covered up.
Analyst 1: (September 23, 2010 12:15pm)
Fannie and Freddie have been completely off base in many of their accusations with regard to the original loans being based on "fraudulent" appraisls. I have peersonally reviewed numerous retrospective reviews that have been performed by appraisers for these entities on loans going back as far as 2004. Invariably the reviews are completely self-serving and devoid of any credibility. I have in fact suggested to the original lenders that the reviewers be referred to state appraiser licensing regulators and have in fact referred one myself due to a totally fraudulent misrepresdentation of market conditions and sales data. I recommend each and every lender carefully review the contentions of Freddie and Fannie and refuse to give in to these bullies. I have seen far more fraud being perpetrated by the GSI's than by the lenders.
Chuck@HRC: (September 23, 2010 12:00pm)
Gcall: Lets be real clear... Fannie DOES NOT control the actions of the trustee (for CA) or the Courts in judicial foreclosure states. I suspect loss mit at Citi was telling you one thing and their foreclosure management unit was doing another. The policy change you're talking about hasn't even been implemented yet (See the 9/20 National Mortgage News article)! This is just one of many problems created by assembly-line handling of foreclosures.
gcall: (September 23, 2010 11:17am)
Bluto is making several appearances. I run a real estate brokerage. Fannie & Freddie has implemented a new policy with servicers that if they don't have a complete file 10 days before foreclosure sale, they will not allow them to postpone. Have lost two transactions that way. Most aggegious was being serviced by Citi. Citi had done everything right--processed timely, had all steps done, etc. Had asked for postponment to allow cash sale to close in plenty of time. Fannie blew them off and foreclosed. Spent thousands to clean, re-key, get utilities on etc. Listed for $7K more than Offer--month later no sale. Thousands of tax payer dollars blown--Seller, Buyer, neighborhood, two agencies all beat up by Bluto just because he can. We need to kick Fannie out on its Fannie and privatize the whole operation! Right now it is typical government operation. On paper it is to serve. In reality it is a leech sucking out blood to feed only themselves.
gcall: (September 23, 2010 11:16am)
Bluto is making several appearances. I run a real estate brokerage. Fannie & Freddie has implemented a new policy with servicers that if they don't have a complete file 10 days before foreclosure sale, they will not allow them to postpone. Have lost two transactions that way. Most aggegious was being serviced by Citi. Citi had done everything right--processed timely, had all steps done, etc. Had asked for postponment to allow cash sale to close in plenty of time. Fannie blew them off and foreclosed. Spent thousands to clean, re-key, get utilities on etc. Listed for $7K more than Offer--month later no sale. Thousands of tax payer dollars blown--Seller, Buyer, neighborhood, two agencies all beat up by Bluto just because he can. We need to kick Fannie out on its Fannie and privatize the whole operation! Right now it is typical government operation. On paper it is to serve. In reality it is a leech sucking out blood to feed only themselves.
Chuck@HRC: (September 23, 2010 11:13am)
ParkCityMortgageGuy: I agree that government agencies rightfully control regulatory functions. It IS NOT, however, a proper regulatory function to "price" risk for the private market(if there is such a thing today)! Mandate certain disclosures, sure. But dictating "pricing" of risk needs to be left to the market. If risk is mispriced, then the lender/issuer/investors, not the taxpayer, needs to take the hit. Fannie/Freddie appropriately priced risk for the whole loans acquired but screwed up on a massive scale with the inherent risk on the securities it took on. Lets not be naive, the LLPA's were never intended to adjust "risk pricing". Instead, they look like nothing more than yield-enhancers (a hidden tax on every borrower whose loan does to them) to stem the hemoraging on their bottom lines.
ParkCityMortgageGuy: (September 23, 2010 10:29am)
Yes, and Bluto looks a lot like a wallstreet banker. Chuck, I'm not sure anyone should be averse to risk - but it needs to be regulated so that it is priced correctly to reflect the risk and to also make sure that the wallstreet fraudsters don't hide their risk with phony ratings and fake insurance coverage from AIG. This regulatory function is the rightful domain of government agencies - but regulatory power has been so diminished in the past decade under the guise of "free markets" that is became completely ineffective. Free markets only work if all participants play by the same RULES. What chance would any of us "people" have if we blatantly defrauded people with phony ratings and fake insurance policies? If corporations are allowed to have the "rights" of people, then they should be subject to the same civil and criminal laws. How many people from AIG or Moody's are in jail?
Sea2Summit: (September 23, 2010 10:14am)
Look out the window, guys. Bluto just pulled up.
Chuck@HRC: (September 23, 2010 9:58am)
Bekk13: Godlike is on the right track. Fannie/Freddie guidelines are, in fact, developed with significant input from their regulators (HUD, FHFA and the congressional oversight committee staffs). One need look no farther than the guidelines for agency jumbos. Remember the Fannie presentation with GOI-MO (Get Over It- Move On)! It's disingenuous, at best, for Fannie/Freddie to claim they had no track-record with jumbos considering the loan limits for Alaska, Guam and the Virgin Isalnds since the early-1990's (150% of conforming). If the city center banks really wanted help clearing up some of their problem [i.e. "underwater"] home equity loans, they wouldn't have lobbied Congress so hard for the 60% cashout limit however, HELOC's are just too profitable for them. The real problem appears to be Congress's assault on and their mineon's (the regulators) adversion to any RISK taking!
DaKid: (September 23, 2010 9:38am)
So explain something to me here: the people who best know how the loan was processed would be the underwriter. If an underwriter took on a liar's loan or did generally shoddy job in qualification, why WOULDN'T it be the responsibility of of the lender and not Fannie or Freddie? I'm all for keeping the government out of my business, and I recognize that there are probably a higher number of loans where there was no fraud - and the analogy would apply. I'm not saying lenders should necessarily buy back job loss or strategic default files, assuming the underwriting is up to par. But when lenders do a terrible job on verifying a borrower's ability to pay because someone essentially said "trust me" on a no-doc loan, shouldn't they be responsible for passing a toxic asset on to another buyer?
GODLIKE: (September 23, 2010 9:20am)
WRONG bekk13, Fannie and Freddie didn't invent the guidelines, they are told by their evil overlords, the govt, what the guidelines will be.
bekk13: (September 23, 2010 9:17am)
All guidelines were created by Fannie and Freddie Banks only follow there quidelines.
bekk13: (September 23, 2010 9:16am)
All guidelines were created by Fannie and Freddie Banks only follow there quidelines.
Divedude: (September 23, 2010 9:04am)
I did a lot of appraisal reviews during the boom period. On the real stinkers, I submitted the report and got the client on the phone to reinforce my position regarding the blatant fraud. They basically said, "Thank you" and the loans closed. The should have said, "Who cares". Most of the properties foreclosed and the client is out of business. I don't want to say their name but it rymes with Sloption dung.
MortgageAngel: (September 23, 2010 8:56am)
Evict Career Politicians! www.GOOOH.COM GET OUT OF OUR HOUSE!
Evil Genius: (September 23, 2010 8:43am)
BITE BACK http://realestatemarbles.com/newgeneration
ParkCityMortgageGuy: (September 23, 2010 8:32am)
Chuck@HRC: You're partially correct. The biggest WS banks and those with retail channels have been trying to get rid of broker competition for years - and have been quite successful because of their ability to manipulate the political system. However, several of the more "broker friendly" ones were simply greedy bullies who made "business decisions" to increase their profits rather than accept responsability for bad loans that they clearly had reviewed, underwritten and accepted in the first place. GREED usually overrides integrity - THAT is why we need to heavily regulate these industries, because big corporate America acts purely out of self interest, often ignoring the best interest of society or their country. Bullies are bullies because we allow them to be bullies, and we often provide financial incentives for them to do so. GREED may be good for some private industry but is NOT GOOD for a society.
Artisan: (September 23, 2010 8:30am)
Liability should stick with the underwrite. If you underwrote the loan you should be responsible for quality of the loan file.
Fundem: (September 23, 2010 8:21am)
Pay attention to the wisdom from Washington's Mall October 2. A progressive agenda with campaign finance reform is our best way out of the mess that has been created by the hijacking of our government by multinational corporations lobbying efforts.
Bono Vox: (September 23, 2010 8:20am)
The Bluto analogy is a good one. I have friends from Cuba and Venezuela who say, "This is how it starts." Thank God there is a wave election coming. No more Republicans, no more Democrats, just fiscal conservatives who realize it's not the government's money, it's Frank's money! Stay the hell out of my way and I'll refi loans to increase family cash flow so they can spend more and pay sales taxes and I'll put people in homes so property tax revenue increases. Shoot, I may even hire some folks. BLUTO - go away!
Fundem: (September 23, 2010 8:19am)
Please vote out corporate special interests this Fall; no more conservacrats and definitely no more GOP corporatists! Bechtel is a small business? Are you kidding me?!
amtgwiz: (September 23, 2010 8:15am)
One thing that you have failed to mention about tthe bad loan at Fannie Mae and Freddie Mac is that Congress MADE them buy these loans. I found this out when I was trying to get a modification on a option ARM and it showed as being a Fannie Mae loan. Fannie never made these loan nor would buy them. I called my contact at Fannie Mae and was told that they wer part of the loan that Congress required Fannie to purchase when the crisis began. So don't punish them for doing what Congress told them to do!
amtgwiz: (September 23, 2010 8:14am)
One thing that you have failed to mention about tthe bad loan at Fannie Mae and Freddie Mac is that Congress MADE them buy these loans. I found this out when I was trying to get a modification on a option ARM and it showed as being a Fannie Mae loan. Fannie never made these loan nor would buy them. I called my contact at Fannie Mae and was told that they wer part of the loan that Congress required Fannie to purchase when the crisis began. So don't punish them for doing what Congress told them to do!
Chuck@HRC: (September 23, 2010 8:11am)
JoeParsons: You've pointed out one of the main contributors to our current housing problems, the rating agencies. The "quants" only looked at spreadsheets and, for being "the smartest guys in the room", never accounted for declining property values in their analylistics. Chukster: Exactly right! I have no doubt that the government (FDIC, the Fed, etc.) has been protecting the banks to everyone else's detriment.
bucco: (September 23, 2010 8:03am)
It's liek a big hot potato game, it has been fro the last 10 years, some places went bust when they got caught holding their potato. I think Fannie and Freddie should too. I mean those NIV loans were done long before FAnnie got involved, btu the BC companies were able to charge more in rate and make up for the higher default rates and then some genius at fannie came in, and took all those loans away and didn't charge any more than what fannie did for "good" loans. Now here she sits... Could have just stuck to business as usual, me might not have had a mortgage melt down at all. The bc lenders would have held those loans and with the way they WERE priced might have had enough profit in them to take a samll decline. Seriously whoever allowed fannie and freddie to do those loans should have to step up and pay some of that towards them. The lawmakers, overseeers and fannie/freddie themselves. UNGHHHH!!!
Chuck@HRC: (September 23, 2010 7:51am)
ParkCityMortgageGuy: You're talking about the rep's and warranty issue. Under your correspondent agreements, you were obligated to provide financials. This allowed your warehouse lenders to assess your ability to pay their buyback demands. You might recall one of the first implosions was Bill Dallas's Own-It Mortgage and it was unwound by Merrill's demands. You're right, these guys are the bullies! You got caught by the bullies desire to eliminate all origination-channel competition. More than likely, Fannie and/or Freddie won't just go away. It makes better sense for them to be consolidated for cost-savings and their authority curtailed to issuing guarantees. This might also should lead to the authority to create covered bonds.
Chukster: (September 23, 2010 7:47am)
All these regulations they are putting on the appraiser is BS. They have been trying for years to get rid of the appraisers. Realtors hate us, banks hate us if we are honest. They are making the appraisal process rocket science. Without the appraisers they can do whatever they want with all of our money.
Chukster: (September 23, 2010 7:43am)
I am an appraiser and worked in D.C. on small business loans for a company that reviews the loans for the government. This is a joke. The government and banks are all in cahoots. I have a friend that was fired because he was finding too many mistaked on the appraisal. If you are honest it doesn't work, but you can sleep at night.
Funrunners: (September 23, 2010 7:38am)
The Alabama Appraisal Board who leads the nation in ignorance and mass confusion along with a mass misleading ability, has been the poster child for the misuse of Fraud, ANd will tell you that if you make a mistake it is Fraud. So my question is what is the difference in a mistake and an appraiser that purposely reachs for values and pass over comps on the same street. Well to the director who should be working at wendy's and knows nothing of the appraisal business, there is no difference. I know my opinion is hard but they ruined my life, took 90% of my business and tehn said sorry we made a mistake. Right Now in Alabama Bingo Bob is best supporter of the Democrats, Who I have never voted for but will this year..yeap, feels better , ranting a beautiful thing.
JoeParsons: (September 23, 2010 7:38am)
While there certainly was fraud in the marketplace, the job of the bank's underwriter is to make sure the loan matches up with the investor's guidelines so the investor will buy it. The Perfect Storm was created when the investors agreed to buy 100% LTV, Stated-Income loans made to borrowers with 585 credit scores. For the most part the mortgage bankers were doing what the investors had told them was acceptable. Those guidelines clearly made no sense, but the consequences of the investors' insanity should not be visited on the banks who simply made loans by those guidelines. Two of the biggest culprits are S&P and Moody's who rated the complex CDOs as AAA without even looking under the hood to see what they were rating. They were insured by AIG, after all. No one seems to be pointing any fingers at them, but they should.
frankgaray: (September 23, 2010 7:38am)
Wow.. a lot of differing opinions today.. I LOVE IT!
Chuck@HRC: (September 23, 2010 7:36am)
Everyone, including the media, continues to attribute the losses at Fannie and Freddie to "bad loans". This is truly an inconvenient truth. The vast majority of losses are coming from the devaluation in various tranches of the RMBS's (CDO's, synthetic CDO's, etc.) they hold (bought!) not whole loans. I've wondered, since the problems at Fannie/Freddie came to the forefront, exactly what authority Fannie/Freddie thought they had to, effectively, run government-sponsored HEDGE FUNDS! What seems to get lost in discussions about Fannie/Freddie are its negotiated rep's and warranties. We now know that "custom" deals were done with the largest sellers (read here BofA, Countrywide, New Century, etc., etc., etc.) for greatly reduced guarantee fees and lighter rep's and warranties. Now Fannie/Freddie want to have these same sellers buyback loans under their general (full) r's & w's. It's totally consistent that these sellers be held accountable. Is this fraud? Maybe...
ParkCityMortgageGuy: (September 23, 2010 7:32am)
You guys have been drinkung too much of the "government is the problem" kool-aid. The practice of shoving bad loans back down the chain has been going on for many many years in the private sector. I decided to close a small mortgage bank in 2006 because Merrill lynch, Deutsche, GMAC, RFC, IndyMac, etc were shoving loans back down our throat that THEY underwrote, reviewed appraisals, etc. If we protested they would simply sue us and cut us off from warehouse lines, correspondent agreements, etc. THEY were the bullies! Then THEY fraudulently got them (over)rated and sold 'em to GSE's or directly to bond aggregators or the GSE's. Do you guys want the GSE's to disappear? Then watch what happens to this industry - it will be GONE! You want the GSE's to run more like businesses, then complain when they do the same things "private" businesses do - like hold people "down the line" accountable. These "poor" private industry wall street banks, by the way, made record shattering profits.
5pence: (September 23, 2010 7:05am)
78% is saying no in your poll? They obviously know little about what's going on. The GSE's have every right to demand the banks take back bad loans. And if it's only $11 billion, they must be so blatantly bad there is no question about fraud.
B4: (September 23, 2010 6:44am)
FNMA, FHLMC and GNMA all have the same policy, if a loan tanks, they have the option of putting it back on the lender who sold it to them. If this means some of the mega-banks go under... good riddance! FNMA and FHLMC are in trouble because they borrowed money from the Fed and bought sub prime Wall Street crap to increase their earnings, not because of loans produced under their standards.
5pence: (September 23, 2010 6:39am)
I'll tell you what, if they really want to find fraud, have a real appraiser look at all those appraisals used for the loans. Fraud is easy to spot for an experienced review appraiser. I'd be willing to bet the majority of fraudulent appraisals came from AMC appraisers.
Chukster: (September 23, 2010 6:28am)
Well, I guess you really don't know the loan process. All loans are review by private companies that are employed by the government. If the reviewer finds to many mistakes he is told by the banks to fire them. The banks and government have always worked together. Do you really think they didn't know what was going down?
5pence: (September 23, 2010 6:23am)
Are you guys suggesting that the taxpayer alone should keep paying to support the GSE's? With this incestuous mortgage market there's bound to be some infighting among the inbred brethern and sistern. Are you guys forgetting Sir Cuomo and 262,000 inflated appraisal across the country from just 1 AMC - Eappraiseit? All the AMC's were doing the same thing to gain market share pre-HVCC. I can see his point though, the banks basically bribed the ratings agencies to rate crap AAA so they could unload it on the GSE's. We're talking $5 trillion in bad debt guys. $11 billion is a drop in the bucket compared to that and asking for only that much is a little too merciful IMO. Don't lose sight that the investment banks were running a scam on us all getting even the unemployed in mortgage debt. Make the banks pay, I'm with DeMarco on this one. Who's whining about the $11 billion anyway? The banks that didn't care about any underwriting at all? No, if they play they pay in this incestuous market.
GaryP: (September 23, 2010 6:11am)
Also, did you see that Barnie is holding hearings on legislation to increase CRA lending? What a joke. On one hand they are tightening FHA standards that disproportionally impact low income buyers and on the other they know want non-depository banks to be covered by CRA. FHA is the only viable product available for low income, affordable lending. What is Barnie planning to do, force the banks to start doing 100% My Community and Flex loans again? Wasn't that the justification for those products in the first place, to make the agencies meet their CRA goals. When was the last time anyone out there did a conventional loan for a low income, first time buyer, much less a My Community loan? This just reinforces my belief that the folks on the hill are totally clueless as to what is happening out in the real world. It's right up there with outlawing extinct loan products such as subprime and NINA.
33 yearsinthebiz: (September 23, 2010 6:10am)
like the way you are finishing show
33 yearsinthebiz: (September 23, 2010 6:08am)
maui0007
GaryP: (September 23, 2010 6:02am)
Frank & Brian: Let me pose another question for you. If FNMA and FHLMC eats the losses from these "fraudulent" loans, then who pays for them. The answer is the US tax payer, you and me. The treasury continues to pump money into the agencies to cover their losses. I agree with your analysis of the situation but at the same time I think te flip side of that situation needs to be covered. Obviously this has led to rediculously tight documentation standards we are dealing with now. At a time when the housing market has a shortage of buyers, we're eliminating an increasing number of highly qualified buyers for ever more ridiculous reasons, especially self employed, high FICO, high income borrowers.
grademaker: (September 23, 2010 5:49am)
Frank and Brian – I’d really like to get your opinion on a NY Times article written by Glenn Hubbard, the chairman of the Council of Economic Advisers under President George W. Bush and dean of the Columbia Business School, and Chris Mayer, a senior vice dean at Columbia. Over the past few months I have heard rumblings of this type of proposal, but it doesn’t seem to be getting a lot of traction. It seems this proposal could have an enormous impact on our economy overall, and significantly and swiftly impact business and job growth , as well as the housing market– with NO tax dollars spent on another “stimulus package”. I’d love to hear your thoughts. Here's a link to the article: http://www.nytimes.com/2010/09/19/opinion/19hubbard.html?_r=1
milandman: (September 23, 2010 5:48am)
Hey Guys!! Your image of Bluto the bully with the Obama logo is great material!!! This should be the wake up messenger for what the current administration stands for. How about T-Shirts, Hats, Signs, media materials, etc. for the upcoming elections. Your contribution to "Wake Up America": The 800 lb Gorilla in the room is "OUR Gov"(Bluto)!!! The folks need a little subliminal message or sledge hammer!! Our current administration is not "fixin" anything!! They are so "IN BED" with the creators of the mess, it is criminal. Yep, Bluto is the "MAN"!!
em811: (September 23, 2010 5:06am)
Great show today guys! i agree with you, they keep pushing loans back at banks and lenders, when there is nothing wrong, except "an interpretation". they are pushing back on appraisals from 5 years ago, saying the value wasn't supported then??? why didn't they tell the banks and lenders then?? it is all a money grab, and they are taking from the ones that have it.
FLRealEstate: (September 23, 2010 4:58am)
What if the grocer agrees to sell you only good fruit and then they sell you bad fruit? Fannie and Freddie were sold garbage "liar" loans so I think there are issues on both sides...the lenders that approved these loans for not having any criteria before lending billions of $$$ and Fannie/Freddie for not having tougher criteria for what they'd buy. The banks should be buying back loans that didn't meet Fannie or Freddie's guidelines and Fannie and Freddie should eat the loans they bought that met their criteria. The fraudulent loans are hard to call. We know they are out there but probably will never agree of which are fraud and which were caused by permissive lending guidelines and easy money.
Mike H: (September 23, 2010 4:13am)
Mostly disagree with you comments today. I have a real problem with the banks underwriting the bad loans and then walking away scot free. They created this mess and they should clean it up.
pacostacos: (September 23, 2010 4:08am)
Fraud is a part of it as there will always be unscrupulous players in any field, but the huge sub-prime mess was brought on by investors lending to people that shouldn't have been lent to in the first place. I remember seeing a sub-prime lender offering a stated income deal to a borrower with a 560 credit score! They can't offer that unless there's an investor willing to buy that deal, correct? That's not fraud, that's just greed, plain and simple. As far as Fannie and Freddie, you've gotta see this, in case you haven't already: http://www.youtube.com/watch?v=ENBdqiMvJ7A&feature=related
barbara: (September 23, 2010 3:57am)
I teach a class on mortgage fraud & predatory lending for Realtor MCE credit. Throw away seconds and large "decorating allowances" were common with the agents and certain loan officers for years. It was encouraged and taught by the wholesale reps. An FBI agent who spoke to us told of her loan officer telling her to get a "lease" for her current home so that she could qualify. The culture of corruption accepted this stuff. Our MLS history shows sales prices being bumped up $100,000+ prior to going under contract many times, and these people are still in business even though I turned 6 cases worth several millions into the FBI. Sigh.
PerspectiveRealtorAL: (September 23, 2010 3:30am)
kkric, you are completely correct. I'm assuming from your comment that you are in the mortgage industry. You viewpoint is a little bias to that industry though, because I'm not sure if you realize that fraud and sub prime mortgage practices ARE what lead to the bubble bursting in the first place. No it is not the current problem, but they are trying to keep it from happening again. I just don' think the government knows how yet. But it is coming. It has to, or there will be another bubble and it will burst and who knows what that will mean for the whole economy. Let's be positive and get business where we can and do WHATEVER it takes to make it work.
PerspectiveRealtorAL: (September 23, 2010 3:25am)
I am so glad I finally figured out how to comment on y'all's video. Well, now that I have expect to hear some good comments from me. To start off with, you made some really great points in this one. I absolutely love the analogies you always use. They make things for relative to people (like me) who want to know more, but are new to the business and just now getting involved. Anyway, keep up the GREAT work. I watch you every day and forward to my facebook anytime there is info relevant to my fans. THANKS!
kkric: (September 23, 2010 3:24am)
The buybacks and threats of buybacks is the reason we have to jump through the rediculous hoops we do just to get a good loan through. No longer is it good enough simply to have an 800 score, twice the provable income, and a million or so in the bank. You have to resubmit "the moon is made of green cheese" certification form in the correct font, and get the divorce papers from someone who has been divorced for 15 years in order to prove they are not paying child support for their 30 year old children. None of this has anything to do with good loans, just the lender trying to make sure Fannie/Freddie can't make them buy the loan back if it goes bad two years later. All this crap about sub-prime and fraud being the problem is bull. People will default when they are significantly upside down. Studies showed the biggest predictor of loan loss is equity. Sure loose standards helped create the bubble that burst, but it was the bursting that caused people to stop paying.