Special offer

How to SAVE the housing industry..........

By
Mortgage and Lending with Waterstone Mortgage Corporation

A friend of mine in Maryland was sent the following by a fellow employee of his yesterday. They both work for Mason Dixon Funding, a mortgage company. Brad Cohen sent this as a letter to the editor of the Washington Post newspaper. It hasn't been printed yet but he (Brad) told me that I was more than welcome to share it on this blog with you! I think it makes a lot of valid points that the Government needs to address, as do the banks and investors and servicers of mortgages. Please comment on this and let me know your thoughts - I will be sharing them with Brad!

 

Henry Paulson responds to President George W. ...

 

Sent to the editor at Washington Post yesterday. Ken harney

Good Morning Ken,

My name is Brad Cohen, and I have been a loan officer at Mason Dixon Funding Inc since July 1997. I was recognized as #94 in the country, for loan originators, last year by Mortgage Originator magazine. I have looked forward to your column every weekend as you give your readers the truth about what is happening in the world of Real Estate and Mortgages. I would love one day to speak with you in person or on the phone, but I know you must be the 2nd busiest person in America, as the rapid changes in our industry have you working around the clock to stay on top of it. Henry Paulson, in my opinion, is the busiest, as he is constantly using smoke and mirrors to keep the truth away from the American people. J

As an American, I am embarrassed and disgusted with our leadership in this country and I know we must be mocked around the world as we cannot get our hands around this mortgage meltdown and real estate crisis. The problems are a result of greed on everyone's part. The banks have been downright nasty and unwilling to help struggling homeowners out, as they have made this problem not only limited to subprime, but now every person who owns a home a victim. Last summer, when the Fed repeatedly said this was going to be contained to subprime, was when I knew Bernanke and crew were so far behind the 8 ball as subprime represented such a small portion of the loans in our industry. I knew the negative amortizing loans done by WAMU, Indy Mac, Countrywide, World Savings (purchased and now owned by Wachovia), and Chevy Chase bank were the most toxic loans ever created. Where are these banks now? Chevy Chase's days are numbered in my opinion. These loans, typically given to good borrowers, had low start rates and they had pre pay penalties for anywhere from 1-3 years that forced a borrower to stick with it as the deferred interest mounted. There was a fantastic article on Sept, 11, 2006 in Business Week about "How Toxic is your Mortgage" and I knew somebody else agreed with me that the phantom profits for these banks would come to an abrupt end.

I am regularly featured on Channel 9's Mind Over Money and the callers I hear from constantly tell me that their banks won't help them modify their loans because they owe more than the houses are worth. The pain I hear in these callers voices is quite troubling as the banks making these decisions are again, greedy and looking for the most return on their money. If they had started modifying loans last year when this started, we would be in a much better place now. If a bank modified someone's loan and dropped the rate, and not reduce the principal balance even with the negative equity, they would receive monthly payments and would not have the potential of a house going to foreclosure, losing the monthly payment revenue, and now the bank is left paying the utility bills, taxes and maintaining the property all while they have instantly dropped the price of the house usually hundreds of thousands of dollars to move it off their balance sheet. If they dropped the rate, and the payments dropped $400 per month, they would miss out on $4800 per year. Why not go down that path rather than write off $100K or more in a short sale or a foreclosure? The numbers make total sense. Keep the homeowner in the house and the values will stop freefalling. I cannot tell you how many people I speak to that actually think that the foreclosures have not affected the values where they live. They say that the comps are low because "they went to foreclosure", when the reality is the comps are all made up of foreclosures and short sales, that is the new value PERIOD!! Also, when people are foreclosed on, they do not usually leave peacefully, as I have seen massive acts of destruction as walls are kicked in, appliances removed, paint spilled on walls and carpet, and people leaving their last thoughts as the banks have taken their homes from them, even the ones that tried desperately to work out a plan and stay.

When Fannie and Freddie tightened guidelines last year, I told our rep that they have just guaranteed that housing will plummet due to the tighter restrictions. If you qualified to buy your house with an IO payment, and now you need to qualify using the Principle and Interest payment, nobody will qualify anymore as they stretched themselves in 2004-2006 to just be able to buy in what was a crazy market. The fact that you need a 740 credit score to get the best rate and if you have lower than 680, will cost you dearly, does not promote home ownership, but curtails it significantly as the average person has a 695 score. Another absurd guideline is the 4 financed property rule. You cannot buy a house if you already have 4 financed properties. Basically, they are guaranteeing investors that they cannot scoop up the inventory and fix them up and resell them which, by the way, creates jobs. The 25% down payment is a bit excessive but not totally, as having skin in the game makes you more responsible and less willing to walk away. The rates though on these have jumped to almost more than 1% over owner occupied where they were only .25% to .50% higher previously. Now is not the time to tighten too much as you need to create a stimulus to buy.

I have been saying for the last year, to drop everyone's rates to 3%-4% and reward all homeowners, not just the ones who had late payments as you are rewarding poor performance. We do not need to teach people that being irresponsible will be rewarded in lower payments and reductions in principle. I do not agree in reducing anyone's balance, but if you drop the rates and extend the terms, you would put a floor under the housing market. I cannot believe that Paulson, Pelosi, Reed, Cox, Dodson, Frank and President Bush have not done more to help our country. They are so far removed from Main Street and they try to act like they care. When you come up with stupid programs like FHA Secure which has supposedly helped only 4000 homeowners since it began in 2007, and hope for homeowners again with lower than dismal performance, you are not doing what you can to help. When the foreclosures went to 81,000 in September, and then 85,000 in October, a light should be going off to say "Hey Washington, It Isn't Working!" Why are these supposed leaders not consulting with Mortgage Experts? Real Estate Experts like Barry Habib, Donald Trump, Robert Toll, and Barbara Corcoran. To have the $700 Billion deal try and get rushed through in one weekend with people at the helm with NO REAL ESTATE backgrounds was astonishing. The plan was flawed when Paulson yelled fire in a crowded room and the markets plunged from that point on. Every time Paulson speaks, the market sells off as he has no credibility and certainly no charisma to give the American people hope. We all need hope and faith and our leaders have let us down yet again, and not one time have I heard anyone say "I am Sorry." It blows my mind that not one person has taken responsibility for this, and they all point the finger at each other. Republicans, Democrats and everyone in between are responsible, and should act like people of character, and take ownership and show leadership to this problem and move on.

As a country, we cannot wait for Obama to get in office and start getting us out of this as everyday, the ship is sinking further. We need action now, and Paulson should listen to Sheila Bair, as she knows about banking and she knows the current plans are not working and will not work. We are basically throwing a cup of water on a burning building. I wonder if they will get it when we cross the 100K mark for foreclosures in November. When it was announced that the foreclosures by Fannie and Freddie would cease until after the holidays, I said whoopee, let's give another 40 days of unresolved solutions. We need to create a stimulus for housing again and give homeowners a real tax credit( and not a loan over 15 years) of $10,000-$25,000 depending on sales price as people who own homes spend money furnishing them and making them theirs. The spending stimulus will save this economy from the greatest depression we will ever see. I appreciate your time and look to you as the voice of reason and hope.

Sincerely,

Brad Cohen

Comments (1)

Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

He has said it all Sue. Modification is the only thing that will help our industry and save people's homes.

Nov 25, 2008 08:30 AM