The Fair Mortgage Collaborative ?
The Fair Mortgage Collaborative, a consortium of lenders, brokers and mortgage technology providers, made its debut in June with financial backing from the Ford Foundation, among other groups. Its purpose, the organizers say, is to make only those loans in a borrower’s best interest and to identify and certify the lenders that adhere to certain strict standards. The group . . . must ensure that the lenders are suitable for borrowers.
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Really? You call this a Watchdog — another Self-Regulating (SRO) Entity?
This looks more like a group of concerned foxes volunteering to watch the hen house.
I guess the threat of losing certification (top) will really keep these firms focused on doing the right thing: Responsibly making loans to qualified borrowers. After all, the threat of going belly up (350 mortgage companies and counting) was far too intangible — what they really needed was something more concrete.
Like a gold shield.
Pardon my cynicism, but why should anyone believe that a “consortium of lenders, brokers and mortgage technology providers” are going to be anything more than a trade group?
I seem to recall a similar consortium of lenders, brokers and mortgage technology providers being one of the main causes of the credit bubble and the housing boom and bust.
The timeline goes something like this: Greenspan cut rates to 1%, ignored non-bank lenders whose banking model was “lend-to-anyone-then-sell-the-mortgages-to-securitizers.” Boom, bust, economic collapse, bailouts, 2008 Election, new administration, blahblahblah.
Fast forward to recent months. The White House proposes a new Consumer Protection Organization that is designed to protect the public from, well, a “consortium of lenders, brokers and mortgage technology providers.”
I like that idea. Do away with biased industry owned arbitration, enforce usury rules, make sure terms are properly disclosed, and transparent, written in plain English. And include biting penalties for transgressions.
I have two big dogs, and they both have powerful jaws. Woe to the burglar who finds himself under 300 pounds of canine fury. These are real watchdogs, they have sharp teeth.
But an industry based consortium? Puh-leeze. I don’t see much in the way of enforcement.
This smells an awful lot like an attempt to head off oversight to me.
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Sources:
Fair Mortgage Collaborative
http://fairmortgage.org/default.asp
A Mortgage Watchdog Group Is Born
BOB TEDESCHI
NYT, August 2, 2009
http://www.nytimes.com/2009/08/02/realestate/02mort.html
Consumer Financial Protection Agency: an overview
The proposed agency’s powers and oversight would go beyond mortgages and real estate. Here’s a rundown of what the agency could do, who’s for and against it, and how it might affect you.
Kenneth R. Harney
L.A. Times, August 2, 2009
http://www.latimes.com/classified/realestate/news/la-fi-harney2-2009aug02,0,7083818.story
Consumer Groups Back Obama Regulation Changes
Consumer Affairs, June 18, 2009
http://www.consumeraffairs.com/news04/2009/06/reg_react.html
August 2nd, 2009 at 10:37 am
though, past that, let us forget, of course, that this: “a similar consortium of lenders, brokers and mortgage technology providers being one of the main causes of the credit bubble and the housing boom and bust.”
Could/Would apply, equally, as well to the Granddaddy of all of it: The FedRes.
August 2nd, 2009 at 10:50 am
Societal death by a thousand cuts of the nanny state. You want a good loan? Get your own damn good loan. News flash to the uninformed: salesmen, and this includes anyone in the financial industry, are trying to separate you from as much of your money as they can. Shop around, maybe even defer the purchase. The best regulation is a content and intelligent populace. We have oceans of desire and want, but a shortage of intelligence. Oh, for the return of rugged individualism….
August 2nd, 2009 at 11:01 am
There was a deadly combination of poor decision making, misleading financial products, and outright fraud.
We need to protect the financially illiterate from themselves.
Especially when the rest of us have to pay for their bad choices and/or ignorance.
August 2nd, 2009 at 11:07 am
@Cursive
But what happens when the same borrower goes to three different lenders and each offers him a lower quality loan than he qualifies for, because the bank pays loan agents a bonus to do so?
August 2nd, 2009 at 11:20 am
PS–Woot for Larry Summers, offering a very strong and spirited argument for investment in future prosperity on Meet the Press this morning! The money line, in response to David Gregory asking if he’s worried about the deficit: Yes, the budget deficit is a worry, but “so is the deficit in what this country has done to education.”
August 2nd, 2009 at 11:37 am
How appropriate that the group’s executive director’s name is “Mr. Banker”, and it is funded by the Ford Foundation – the organization where Timmy Geithner’s family made its name…
August 2nd, 2009 at 11:43 am
“This smells an awful lot like an attempt to head off oversight to me.”
Exactly. “Oh, you don’t have to go to all the trouble and expense of creating an agency to keep us in line. We’ll do it ourselves. We’ve changed. Really. Trust us.” Said the spider to the fly.
August 2nd, 2009 at 11:47 am
To the above rugged individualist, you want to become an expert in the new ailment you suffer from as you “choose” the “best” cure? You’re an expert in investments too? And which books to read, before reading them? How about fixing your PC. You know everything tech too? Diet? Nutrition? You going to evaluate all the hundreds of thousands of new products created each year? Cleaning solvents? Appliances etc… etc…
The Reagan stuff is a fantasy designed to separate you from your vote. People who believe in that nonsense can’t possible practice it in the modern world.
August 2nd, 2009 at 12:17 pm
More new drapes to cover the broken windows and run down house and everyone either shrugs or winks and nods at each other. This is what it’s sadly come to……
August 2nd, 2009 at 12:19 pm
@Franklin411
“Woot for Larry Summers, offering a very strong and spirited argument for investment in future prosperity on Meet the Press this morning! The money line, in response to David Gregory asking if he’s worried about the deficit: Yes, the budget deficit is a worry, but “so is the deficit in what this country has done to education.”
—
Larry Summers + Education + Money
Hmmm…considering Mr. Summers involvement/track record with the Harvard Endowment, your comments strike me as quite curious…
August 2nd, 2009 at 12:30 pm
I like that idea. Do away with biased industry owned arbitration, enforce usury rules, make sure terms are properly disclosed, and transparent, written in plain English. And include biting penalties for transgressions.
What happens when you get a group(ie. Bush and Greenspan) that don’t believe in enforcing rules that are already on the books?
August 2nd, 2009 at 12:43 pm
@CJ & the 13th
“What happens when you get a group(ie. Bush and Greenspan) that don’t believe in enforcing rules that are already on the books?”
Answer: Backlash…(& as is the case to about 99% of the cases regarding backlash, they are hastily arranged and not well thought out)…
August 2nd, 2009 at 12:48 pm
Thanks lenders. But I think I’ll wait for Ralph Nader or someone with at least one shred of consumer interest credibility to take the lead on this one. How about an annual Consumer Reports credit card/mortgage lender rating issue?
Testing could include lender executive survival in head-to-head collisions going 30, 45, and 65 mph. Or how flame-retardant their clothing is. Or how well tar and feathers stick to their skin with minimal loss of feathers.
August 2nd, 2009 at 12:54 pm
This doesn’t seem like a terrible idea to me, if enforcement is strong enough. This is probably something like a Better Business Bureau, or organic foods certification. If the enforcement is actually strong, and then this certification actually means something, you could see financial advisor types, including big names like Suze Orman, recommending to people “only take a mortgage if it’s certified by the Fair Mortgage Collaborative.” Most people can’t be bothered to understand all the minutiae of an exotic mortgage loan, but if they can say to themselves “okay, this is a certified mortgage, so it’s probably similar to the mortgages all my friends have etc” maybe that’s an appropriate choice.
That’s if the enforcement is strong. If not, then the certification means nothing. But I’d bet that going forward there are now a lot of prospective home buyers who are a little spooked by all the exotic mortgage types out there, and would love to be able to lean on a certification like this. Which means that it will be in the best interests of some (not all) mortgage companies to make the certification substantial.
August 2nd, 2009 at 1:03 pm
@Hwang
That’s a great suggestion [snark]…
Americans can’t be bothered with DETAILS so let’s just put a crappy collaborative together, fund it, and get Suze Orman to bark it on TV…(rolls eyes)
August 2nd, 2009 at 1:06 pm
I’m beginning to think that anyone with the first 4 letters F-R-A-N in their handle needs to get locked in a closet and forced to listen to Fran Drescher talk for 6 hours straight…
August 2nd, 2009 at 1:10 pm
Wow, we’re teasing people for their names now? And BTW cvienne, if the best you can do to make something snarky is to actually type “[snark]” at the end of it, Gawker ain’t hiring you any time soon.
If anybody else cares to actually substantively discuss (and/or disagree with) the point I was trying to make, please do so. I’m genuinely trying to have a discussion of issues and I try to treat differing opinions with respect. From what I remember Barry appreciates that sort of attitude more than knee-jerk sarcasm.
August 2nd, 2009 at 1:21 pm
Francis
I think you’ve missed the point here. This is “a consortium of lenders, brokers and mortgage technology providers.” They have an obvious conflict of interest and have shown themselves to be terribly untrustworthy over the recent past; although that wouldn’t necessarily matter either because you should never just take the salesman’s word for the quality of goods/services.
Now if it was a third party service from a disinterested group with no conflicts of interest and a transparent purpose, then that would be helpful.
Don’t trust the fox.
August 2nd, 2009 at 1:31 pm
OK Francis…
I’l leave it to all you, Suze Orman, & all the intellectual types to discuss the ramifications…While I, the class clown, bow out…
Sergeant Hulka (Stripes) here signing off…
August 2nd, 2009 at 1:49 pm
Speaking of enforcement, this one is straight out of the tin foilers but I found it to be extremely interesting…do NOT try this at home. If you log onto cars dot gov, the government legally owns your computer and can access it at any time via downloading of the malware application. http://www.youtube.com/watch?v=bWs12ccbOiE
At Cars.gov, you will see the following message:
“This application provides access to the DOT CARS system.
When logged on to the CARS system, your computer is considered
a Federal computer system and is the property of the U.S. Government.”
August 2nd, 2009 at 2:06 pm
Onlooker from Troy ,
Thanks for the response.
Certainly the devil’s in the details, and there aren’t many details yet. I would definitely say this will be worthless if they let in some of the worst offenders, or some of the worst practices (i.e. interest-only, negative-am, etc.). But you can’t write off the entire industry: A small minority of mortgage companies have actually acted responsibly throughout the past decade–they’re the ones by and large that haven’t blown up. And the involvement of both the Ford Foundation and the non-profit Neighborhood Housing Services make me cautiously hopeful that such a certification could actually have some teeth in it.
I believe that before there was federal certification of organic food, California had a non-profit certification scheme for about a decade, and it worked reasonably well. I think it can happen if there is demand on both sides, from customers who want an easy way to identify a product that is safer, and companies that are eager to be seen as offering that safer product.
Of course, these are all big ifs, and maybe I’m being Pollyanish. We’ll see how this turns out. It’s quite possible that in the near future this certification will be gutted and meaningless, but maybe it won’t.
August 2nd, 2009 at 2:28 pm
@Francis H
I’m going to go ahead an apologize for my previous comment…I read through your later reply to OT, and “at least” I can say you have high hopes for it (and have furnished some possible examples that had mixed results)…
You have to understand that [snark] is sometimes the way that topics are debated here on the TBP…Other blogs end up simply being “snark for snark’s sake”…Not here…
I can state with reasonable certainty that, on first glance, anytime the name ‘Suze Orman’ is brought up with respect to a SOLUTION, the “snark-o-meters” are going to spike wildly and perhaps even go off the scale…
Same is true when one such as FRANklin411 mentions the name “Larry Summers” in connection with a solution (as appeared earlier on this thread)…
…and thus were born the origins of my first comment.
August 2nd, 2009 at 2:56 pm
cvienne ,
Apology accepted. Thank you.
And I’ve been around long enough that I’ve had disagreements on Suze Orman before, sure. But I’ve said it before and I’ll say it again: On balance Suze Orman does more good than harm. Some of the specifics of her advice is bad, but it isn’t fair to lump her in with some like Jim Cramer. I think of her as the Oprah of personal finance: She makes the topic approachable and unintimidating to a lot of people who would otherwise completely ignore it and hope it goes away. A lot of those people are women, too.
If the entire country were made up of finance nerds like TBP readers, Suze Orman would be out of a job. But the level of ignorance and fear of personal finance in this country is pretty staggering. Not long ago I had a conversation with a friend whose girlfriend was in big credit card debt, and she didn’t even realize that making monthly payments at less than the monthly interest was going to result in the principal growing forever. When he tried to talk to her about it they almost broke up as a result. This story has a happy ending, as she is now taking concrete steps to cut down her living expenses, but many such stories do not.
There are a lot of people in this country who wouldn’t feel empowered (I know that’s a fuzzy, annoying word) to take on their finances without someone like Suze Orman. Not TBP readers, but a lot of other people. You can make fun of her, but if you want her gone you should suggest how those people would reasonably be expected to take control of their financial situation without someone like her making it feel manageable.
But I totally agree with you regarding Larry Summers. The man’s a tool.
August 2nd, 2009 at 3:02 pm
@Francis
When you get the “octabox” going here on TBP, sometimes good things come out of it (unlike CNBC)…
Let’s put Larry Summers & Suze Orman together as co-hosts of a TV show
…Now THAT would be a hoot!
August 2nd, 2009 at 4:14 pm
@BR
WRT, “We need to protect the financially illiterate from themselves.”
That’s what got us into this mess in the first place. We need to stop changing everyone’s poopie diapers. Until we get back to the idea of growing up and actually facing the consequences of our decisions, we are on Hayek’s road to serfdom. What we need is for the financially illiterate to wake up and engage in a little due diligence. The prospect of failure is a great motivator in that regard.
WRT, “Especially when the rest of us have to pay for their bad choices and/or ignorance.”
Why IS everyone footing the bill? Why are there no investigations? Why is the FR still in charge? Why has Congress ceded control of our economy to the creature from Jekyll Island? I think of myself as a proponent of free and open markets. We’ve had nothing of the sort in this country for the last century and look what it has gotten us. Before the repeal of Glass-Stegall, we had the S&L debacle. We are not suffering the current crisis because of a failure of regulation, we are suffering it as we do all crises – because we have ceded control to a group of elites and their supposed watchdogs who are needed only because the rest of us are “financial illiterates.”
August 2nd, 2009 at 7:29 pm
Cursive,
Here’s wagering U$D 50, or equivalent value “Box of Clams”, that BR has No Direct Response to your Supposition and supporting Q:’s..
http://www.thefreedictionary.com/supposition
August 2nd, 2009 at 8:38 pm
MEH,
If I’m ever in PA again, I’d love to buy you a hamburger anyway. If Helicopter Ben has his way, they may be 50 quid by the time I get back there (though I’m a near-to-intermediate term deflationist). BR is the Man and, to paraphrase a term of the day, it’s his blog and we’re all just living in it.
August 2nd, 2009 at 9:33 pm
They could form a coalition with the NAR?
August 2nd, 2009 at 11:13 pm
Francis Hwang Says: “But you can’t write off the entire industry: A small minority of mortgage companies have actually acted responsibly throughout the past decade”
Any potential conflict of interest should be assumed to affect behavior. Period. That something so obvious needs advocating by anyone, anywhere, ever makes my head desperately want to find a wall to beat itself against.
August 3rd, 2009 at 10:30 am
Cursive,
Anytime. Though, in effort to clarify, the Wager was ‘against the board’, not v. yourself..
August 3rd, 2009 at 4:09 pm
I was skeptical until I went to the website and looked at the list of partners and the board. It includes some of the most socially-responsible lenders in the industry, and also advocacy groups that spent years trying to regulate the rest of the industry before everything collapsed.
These are the good guys. The big challenge facing the Collaborative is not conflict of interest, but rather lack of interest.
August 6th, 2009 at 2:30 pm
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