Thursday, February 19, 2009

The Flip Side -- is anyone in D.C. actually listening?

Here's a different perspective from Bill Cara's blogs Cara Community -- Capital Markets and Social Equity; Perspective and Discussion -- regarding a guest article he posted from Susan Templeton, branch manager of Loannetter here in Bellingham. Mr. Cara is a strong advocate for replacing the present banking system. Below, I've posted an excerpt from his blog posted earlier today.

"We need more Susan’s and more Rick’s to turn up the volume. If President Obama is actually listening to the people, I think we can agree that nobody is telling him that the present banking system needs to be repaired. It definitely needs to be replaced.

Independent mortgage, insurance and stock brokers and money managers are either under-utilized or unemployed, and ready to serve. If America is going to get back on track, these are the people who are going to do it. It’s not going to come from that place called DC.

All those hundreds of billions of dollars being spend will just go down the drain if they are put back into the hands of the eight bank CEO’s and the Fannie & Freddie CEO’s who recently testified. Their model was killed by their advent of the Credit Default Swap and the securitized mortgages and the rest of the financial engineering products that Wall Street is so proud to have given us.

I hope the President is listening because, unless he takes action soon, this could get ugly."

Susan Templeton kindly granted me permission to re-post her article regarding how mortgage brokers and planners in Washington are faring during the recession.

I own my local mortgage branch, licensed under a medium size broker network, based in Everett, Washington. My background is corporate marketing (prior to mortgage brokering) and I've traveled around the world, lived in Australia and New Zealand for some years and I've never seen an angry mob like this in my entire career.

The systemic and systematic poisoning of our ranks has been carefully plotted. Not to be too paranoid!

I wrote this plea for sanity back in September '08 which seems an age ago. Things have only gotten curiouser and curiouser since then.

Our effective strangulation has progressed along quite a planned strategy. By my estimate, in Washington we are down to less than 20% of brokers and loan officers still standing since the beginning of the public floggings of brokers began in mid 2007.

Every few weeks we get a new list of impending tighter guidelines from Fannie Mae and Freddie Mac. These days, FHA lenders can demand even higher FICO scores than some conventional lenders! These are the very institutions charged with assisting home ownership as their charter.

The obvious first signs of a strategy to shut down brokers were cut backs of wholesale lines by the likes of Washington Mutual. Odd since we originated a higher percentage of loans than they did in-house.

As banks started tumbling, blogs with 'implodometers' filled with bad news and rumors sprang up, gleefully watched by the big banks and national press. The blabbermouths including Kramer seemed to take particular interest in debasing mortgage brokers for originating sub prime loans as if that were all we ever did.

Followed a barrage of bad press blaming brokers as the cause of all 'bad loans'. (The very loans WAMU, Wachovia and Countrywide were pushing) A very bizarre period ensued fueled by massive national PR that all mortgage brokers were sleazy greedy crooks. Naturally, many of us stopped going to cocktail parties. I was asked at Christmas dinner how many 'toxic mortgages' I had stuck my unsuspecting clients with.

Our own state and federal lending laws have for some time now been pushing (bank lobby) to force brokers to give up our yield spread premium (rebate) as predatory. We are limited to how much we may charge on origination fees and yield spread. We must disclose every dollar. Banks are neither limited nor do they have to disclose their profit because it's 'their money'. Laws were passed to forced brokers to return a ysp fee and all commissions if any lack of disclosure can be found even years later by some disgruntled party. The same banks, while also taking a premium, do not legally have to declare ysp (we do of course)-this debate continues.

Our National Association of Mortgage Brokers is under funded by the likes of independent contractors on the ropes so their voice is a weak cry against the bank lobby. Our state Department of Financial Institutions, a regulatory body, took on investigation and prosecution as their tasks, outside their legal charge according to a very seasoned senior broker who helped write the state law.

A witch hunt ensued: the DFI investigated every brokerage in the state--literally every file-- to find paperwork amiss, issuing public lists of criminal acts and exacting fines, without court hearings (!) putting these firms out of business.

Our legalese disclosures grew from eight pages to thirty pages during this time frame. One such page has an FBI logo big as life proclaiming that mortgage fraud is investigated by the FBI. Rather alarming to an applicant to say the least!

Ender the national system of Loan Officer licensing --after January 08, One could not work under a broker without being licensed in any capacity. Not even a phone operator could be employed by a branch manager like me. We had to give up our assistants who couldn't get licensed. This process did kick out a few bad seeds, convicted felons, etc. We celebrated licensing for setting professional standards.

The latest insult is the broad daylight hijacking of the broker's responsibility to liaise with appraisers. Since brokers and appraisers are all crooks who have inflated home values, banks are taking back this right into the underwriting process. What this neatly accomplishes is that the borrower will be at the mercy of said bank (and so will brokers) to establish values upon which they may deign to lend. Lenders will hold right to these borrower paid appraisals forcing borrowers to accept their offers! Oddly, Realtors are able to communicate with appraisers (the last person they wish to speak with) according to the new Home Valuation Code of Conduct which is supposed to take effect May 1, 2009 Briefly:

All members of the broker’s loan production staff...shall be forbidden from: (1) selecting, retaining, recommending, or influencing the selection of any appraiser for a particular appraisal assignment or for inclusion on a list or panel of appraisers approved to perform appraisals for the lender; (2) any communications with an appraiser, including ordering or managing an appraisal assignment; and (3) ... communication with any appraiser.

An impending sense of doom has perpetuated our waking and sleeping hours these last two years. Every time the Fed or Greenspan or Bernanke opened their mouths our lenders would fall over or rates would zoom up in exact disproportion to the consumers expectations for 'lower Fed rates' (while we tried to educate the public on these realities in vain). The likes of Lending caused a race to online banking which has created havoc on borrower's credit due to the excessive abuse of credit pulling by such institutions.

Meanwhile, credit protection laws were being breached by loopholes within the agency bureaus, sanctioned by the Federal Trade Commission, allowing the Credit Bureaus (repositories) to resell actual credit reports on 'trigger lists' we brokers had issued to unknown list buyers.

Disastrous effects there: Credit Repair agencies sprang up. Loan Modification firms sprang up. Our spam exploded with these shysters.

I have a friend in the business who wrote this book if you care for an expose on bad bank habits. Carolyn Warren worked for several sub prime banks before writing this NY Times Best Seller.

So--why am I and my two loan officers still plugging away? We actually believe in this business. We are skilled at helping home buyers and investors establish clear priorities, see opportunities, and we deliver a superior product and service. We are committed to it. I for one feel things can only get better. Eventually smart borrowers realize that their bank is lazy and self interested when they see how well we advocate for them.

Thank you, Susan and Bill for shedding some light on this issue.

Rick Santelli, of Chicago is involved in the capital markets, and speaks out daily from his platform at CNBC. Bill Cara ventures to say there is not a banker in America who isn't familiar with Rick Santelli. Here, he's discussing moral hazards...

Lending Tree Mortage Link:

No comments:

Post a Comment