PART 1: Mortgage Pros React to “Ways to Fix the Mortgage Mess”by Tim Manni
About a month ago we published a post — titled “We Want to Hear from Lenders!” — that asked mortgage professionals to share their opinions and reactions to the recent changes in the mortgage market.
It may have taken a while, but thanks to another post we published last week — titled “Fixing the Mortgage System…In One Week?” — we finally received some reactions from the mortgage community.
“Fixing the Mortgage System…In One Week?” was based on six suggestions made by nationally-syndicated columnist Peter Miller on what actions “borrowers, lenders and government officials can take now, this week, to revamp the mortgage system.” Miller’s suggestions were met with some opposition by several mortgage professionals.
Here are Mr. Miller’s “six ways to fix the mortgage mess“:
1. Nationwide Mortgage Licensing System: This national system will prevent the “bad actors” in the mortgage business from taking their bad practices from state to state. “In essence loan officers now have unique registration numbers even if they move from state to state,” writes Miller. “This means the name and registration number for a loan officer can be included in mortgage documents — and loan officer performance can then be graded in the same way that we have credit scores.”
2. Fiduciary Obligation: “The creation of a fiduciary obligation for loan officers would mean that aggrieved borrowers could take loan officers and their lenders to court in the event of abuse, a system which seems to work well for virtually every other type of business.”
3. Loans Fully Documented: This would “require that all loans be fully documented and that income and employment are verified. This would do away with “stated income” loan applications where lenders do not verify borrower income claims.”
4. HUD Should Set Rates: Miller says HUD should be responsible for setting the interest rate and points for FHA loans. “There’s no reason this can’t be done. In fact, until 1983 HUD actually did set FHA mortgage rates. Borrowers would then have an easy way to follow the market by using FHA rates as a benchmark.”
5. Predatory Lending Should be a Federal Crime: “Predatory lending is NOT a federal crime. Loan fraud — where a lender is abused — is very much a federal crime but predatory lending where a borrower is overcharged by a lender is entirely ignored by federal laws.”
6. Bring in the FBI: “Every mortgage-backed security which has a high level of foreclosures should be audited by the FBI to assure that all loans were properly underwritten. When that’s not the case then appropriate action should be taken against the lender, the loan officer, the underwriter and the Wall Street securities packager who were paid for such work.”
In “Part 2″ of this series we will explore the reactions of mortgage professionals to Miller’s six suggestions. The pros will also offer their suggestions on how we can improve the current mortgage market.
Mortgage professional or not (but especially if you are!), we want to hear what you think! What are your reactions to Miller’s ideas? How can the mortgage system be improved? Leave us a comment, let us know.