Much has been written about who should bear the blame for the current real estate and mortgage crises. Some have levied blame at the borrowers while others have levied blame at unscrupulous mortgage brokers.
I for one have levied most of the blame on the big Wall Street Investment houses that bundled non conforming mortgages into something called "Collateralized Debt Obligations" (CDOs) and then put makeup on this pig by getting them rated investment grade by companies such as Moody's.
Some have expressed opinions that we shouldn't be worried about who's "fault" it is, that we should worry about what to do about the problem. Others have written that we shouldn't do anything about the problem and leave it to the so-called "free markets" to work out on it's own. Well, for one, I do think that we should be worried about who's fault it is so that we can take steps to assure ourselves that this mess can never be repeated. In this effort we need to be very aware that not all is as it appears.
That there are players with vested interests moving behind the scenes to take advantage of situation. Such is my opinion on HR 3915, a bill that will do nothing to address the real cause of this crises and will only serve the interests of large banks in their effort to raise the cost of production for mortgage brokers, thereby eliminating competition and in the long run increasing the costs of borrowing for everyone.
My suggestion is to convene a non-partisan panel of representatives similar to the 9/11 commission to objectively examine how this mess came to be in the first place and to make recommendations as to how we should proceed.
If I were on the panel my current opinion would be that laws should be passed to hold Wall Street accountable for their actions. I would particularly place emphasis on the ratings agencies and the conflicts of interest that riddle this industry.
I would also make sure that steps were taken to make sure that current laws such as RESPA are enforced and that fraudulent activities are prosecuted.
Another step I would take would be to establish a pool of money to purchase loans that are currently in default or in serious danger of going into default. We could then work with EACH of these borrowers to establish a work-out plan for these mortgages. The terms on these mortgages could be adjusted to a point where the borrower could perform. After a period of time (say 12 or 24 months) of on-time performance, the now "seasoned", performing loan could be sold on the open market, possibly at a profit!
In the event that a workout plan couldn't be agreed to, this entity could then foreclose on the properties and liquidate them in an organized and systematic fashion. Thereby avoiding flooding the market with distressed properties.
As mentioned above, Home Ownership is a cornerstone of our economy and far too important to sit back and hope that the free markets (if there really is such a thing) will protect. Reigning in Wall Street, keeping people in their homes and managing the disposal of foreclosed properties would help stabilize the housing and mortgage markets and benefit us all in the long run.
To read more of my thoughts on real estate and mortgage banking, as well as to find out more about ValueList Real Estate Services, Inc., please feel free to visit our web site at ValueListre.com