Mortgage Brokers, Home Loan Lenders Squabble Over Market Blame
The heads of trade groups representing mortgage brokers and lenders traded barbs Tuesday over who’s to blame for the housing market’s woes.
According to today’s Chicago Tribune, the head of the mortgage banking industry’s trade group claimed that mortgage brokers profited from a home loan boom but didn’t do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or subprime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is “mad as hell” at “a few unethical actors” that have sullied his profession’s reputation.
In reaction, the president of the National Association of Mortgage Brokers e-mailed a statement that said:
“It is truly unfortunate [Robbins] has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders and underwriters for the subprime situation we find ourselves in today.”
Harry Dinham, president of the mortgage broker group, added the fact that congressional hearings have shown that “most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the deal but afraid or ashamed to admit it,” he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out “scam artists.”
The industry’s woes are confined to a small segment of the market, he said. About 5 percent of homeowners have subprime adjustable-rate loans that feature a low “teaser rate” which can move sharply higher later.
He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among subprime, or bad credit mortgage borrowers, will amount to 0.25 percent of U.S. homeowners.
Yet RealtyTrac Inc., an industry research firm, said last week that home mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling, too.
The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors.
Earlier this month, Sen. Charles Schumer (D-N.Y.) and two other U.S. senators introduced a bill that would mandate tougher federal standards for home loan lender institutions.
No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
SOURCE: Chicago Tribune