Editor Is Traveling
Posted on July 14th, 2008 by the Editor
Mortgage Law Blog’s Editor is traveling and will not post this week.
Fed and SEC Enter MOU
Posted on July 8th, 2008 by the Editor
Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve, and Christopher Cox, Chairman of the Securities and Exchange Commission have announced that the two agencies have entered into a Memorandum of Understanding designed to “deepen their information sharing and cooperation.”
The Board’s press release indicates that the MOU will enable the agencies to cooperate in a number of important areas of common interest, including anti-money laundering, bank brokerage activities under GLBA, clearance and settlement in the banking and securities industries, and the regulation of transfer agents. Under its terms, the MOU covers bank holding companies and “Consolidated Supervised Entities” that own securities firms. The MOU is designed to formalize the long-standing cooperative arrangements between the two agencies, and recent cooperation on matters including banking and investment banking capital and liquidity following the Board’s emergency opening of credit facilities to primary dealers.
In response, Chairman of the Senate Committee on Banking, Housing and Urban Affairs released the following statement:
It is my hope that the MOU will result in improved supervision of investment banks and bank holding companies, and strengthen our financial markets for investors and our nation’s economy. It is important to note that the MOU does not grant any new authority to either agency, nor does it affect the ability of the Congress and the Senate Banking Committee to oversee regulated institutions and markets. I am pleased that the MOU seeks to achieve its important objectives while leaving consideration of any broader reforms to our financial regulatory landscape to Congress– issues that the Senate Banking Committee will begin to examine in greater detail over the coming weeks and months.
For a full copy of the Board’s press release, please click here.
For a copy of the SEC’s press release, click here.
For a copy of the MOU, click here.
For a copy of Chairman Dodd’s press release, click here.
Paulson & Bernanke to Testify on Regulatory Restructuring
Posted on July 4th, 2008 by the Editor
Barney Frank (D-MA), Chairman of the House Committee on Financial Services, has announced that the Committee will hold hearings beginning July 10, 2008 on potential policy implications of the transformation of domestic and international financial markets.
The hearings will focus on potential systemic risk associated with substantial growth in the share of assets held outside the commercial banking system, the complex arrangements that link firms subject to different regulatory standards and increasing amounts of leverage.
Mr. Frank announced that the Committee will probe the “adequacy of current oversight and regulatory tools, and the extent to which existing structures are adequate to respond to future problems.” Mr. Frank stated that the hearings will initially explore:
- The current state of the financial regulatory system, both in the United States and abroad, and ways to measure and limit risk without stifling innovations and improve market liquidity and breadth.
- The implications of providing investment banks and others access to the discount window.
- In light of the collapse of Bear Stearns, proposals to improve the regulatory structure to better assess and mitigate systemic risk to avoid a similar or more serious crisis in the future.
- The need for enhanced capital and reserve requirements for financial firms.
- The adequacy of current powers of the Federal Reserve and other regulatory agencies to protect the financial system and the taxpayers.
Henry Paulson (Secretary of the U.S. Treasury) and Ben Bernanke (Chairman of the Board of Governors of the Federal Reserve) will be among the first to testify.
For a copy of the press release announcing the hearing, please click here.
Meet MBA Future Leader - Lou Pizante
Posted on July 2nd, 2008 by the Editor
Mortgage Law Blog recently had a chance to catch up with the CEO of Mavent, Inc., a 2007 Future Leader of the Mortgage Bankers Association.
That dialog appears below.
Background
Tell us about Mavent, Inc.
Mavent provides automated consumer protection regulatory audits and compliance-related consulting services. Mavent is best known for its automated compliance engine, which analyzes electronic loan data to determine whether a loan complies with over 300 federal and state consumer protection laws related to mortgage lending. Mavent’s compliance rules are maintained by its in-house attorneys in coordination with-and subject to ultimate approval by-its network of nationally recognized law firms. Mavent has performed over 25 million compliance reviews. Our clients include five of the ten largest lenders and seven of the top ten investors.
Describe your role at Mavent.
I’m Mavent’s Chief Executive Officer. As such, I’m responsible for providing direction and leadership toward the achievement of the organization’s culture, mission and strategy. Our culture centers on an almost evangelistic determination to protect our clients’ business, provide service excellence and foster breakthrough thinking. Our mission is to harmonize our clients’ consumer protection and business goals by providing a high-ROI means for ensuring all loans our clients fund or purchase comply with applicable law. Our strategic direction is guided by our understanding of the relationships of technology to law, law to business and business to the customer.
Describe your background, and how you got into the industry.
I hold a dual degree in law and business from New York University. Following law and business school, I worked on Wall Street for Goldman Sachs, Nomura and Greenwich Capital, mostly in real estate structured products. At Greenwich I worked for Paul Nidenberg, who became a mentor and close friend. Paul is now Mavent’s CFO. It was through Paul that I was introduced to Mavent. I was fascinated by what Mavent was attempting to accomplish—namely, to make it technologically possible and economically preferable to review every loan in a pipeline or pool for compliance with applicable law prior to funding or purchase. I joined Mavent working in sales and was promoted to CEO in 2006.
Describe the various departments of Mavent and a few of the persons in key roles.
I am fortunate to lead some of the most intelligent and driven individuals with which I’ve ever worked.
Our Legal Team is lead by Angela Cheek, SVP, Senior Legal Counsel. Her attorneys work together with a group of nationally-recognized consumer credit law firms to monitor, interpret and implement regulatory changes within the system. I consider one point of differentiation from our competitors is our obsession with accuracy. Each rule in the Mavent system is formally documented in plain English and formally signed off on by a Mavent attorney and an outside attorney. Mavent attorneys are also responsible for authoring, implementing and quality checking rules, with appropriate check and balances of course. Our approach to rule development ensures that all reviews are well-reasoned and firing accurately within the system. Employing such highly skilled individuals along the rules maintenance value chain involves significant costs. But, it is the cost of quality.
Lauren Ingersoll, another of our attorneys, heads our Client Training & Support Department. I said that Mavent has an almost evangelic focus on our clients. Compliance professionals must safeguard their institutions without impeding production. No automated compliance engine, no matter how sophisticated, can alone support an efficient mortgage enterprise. Ultimately, automating compliance requires the interaction of skilled professional to ensure that regulatory interpretations and loan review results are properly understood. For this reason, we believe that quality and value are largely determined by the team supporting the client.
Scott McNulla leads our Professional Services team which handles our client and partner integrations. Most of our loan reviews are performed in real-time via an interface with our client loan origination or other production systems. This enables us to better tailor the compliance review based on a client’s license or charter, regulatory elections, unique regulatory interpretations and internal compliance policies. Scott also oversees our Data Services team which maintains our proprietary nationwide broker and lender licensing database, as well as tracks the more than 90 indices required for our compliance reviews.
Ryder Smith provides leadership to Mavent’s technology operations team, which is responsible for keeping Mavent’s production environments up and running, as well as for ensuring Mavent personnel have the technology tools required to properly service our clients. Joe Chang is responsible for all aspects of Mavent’s product development, including strategy, requirements gathering, release planning and product roadmap management. Jason Connolly, who heads our sales and marketing function, has primary responsibility over prospective client and strategic partner development and service.
Describe the three things that your company does best.
We’re fixated on client satisfaction. We’re very focused on arranging all the elements of our service — functionality, delivery, support — so that they collectively generate an exceptional client experience.
By functionality I’m referring to our approach to product development. Our clients define for us what is important. This means we have to stay on top of our clients needs. You have to understand changes in the marketplace and regulatory landscape. You need to track new legislation and how examiners are interpreting regulations. You need to understand how the business is evolving and how product menus are changing. And, given all this, you need to keep asking what enhancements to our service would be useful to our clients.
By delivery, I mean how the compliance engine is deployed. Mavent reviews are performed in real time via an interactive integration with the lender’s LOS. Mavent reviews are automatically triggered by client-defined status changes to the loan file (e.g. submission to underwriting, drawing documents, funding, etc.). If no exceptions are found, the end-user never needs to know the review has been processed. If exceptions are found, stops can be put in place to prevent funding non-compliant loans until the user takes corrective action.
We’ve performed more than 25 million compliance reviews for some of the industry’s largest lenders and investors. Our professional services team is unrivaled in its experience implementing compliance engines across every institution type and business channel imaginable. The key is to deliver this knowledge and experience to our clients so that, based on their unique needs, we’re able to deliver a high-quality, value-driven service. No two institutions have deployed Mavent in the same way, and most of our clients have multiple deployments tailored to each business channel. The single commonality is that all Mavent deployments support, complement, and leverage our clients’ internal compliance resources without unnecessarily burdening production. We want our clients to take comfort in the millions of loans we’ve reviewed, but at the same time, feel that the service we provide is unique, and not mass produced.
The final element to our service is support. Our client support team excels at listening to our clients. They alert our clients to coming regulatory changes, describe how the engine addresses various compliance requirements and explain loan review results. They cull data that enables our clients to identify issues and measure the kinds of performance that creates, or impairs, value. As excellent as our automated compliance engines are, we recognize that it is our client support team that ultimately creates value since they are the ones who determine the kinds of experiences Mavent generates for its clients.
Our competitors compete mainly on price. We understand that many lenders will buy on price alone. Not all lenders are able to appreciate our approach or value. As far as we’re concerned, the most successful institutions over the long run are those that are most capable of measuring value. Anyone can build an automated compliance engine that is right most of the time, but few companies can excel at really creating value for their clients. We meet our clients’ needs faster and better than our competitors, and we attribute this to why we are so dominant among the industry leaders.
Describe the types of companies that are best fits for Mavent.
Mavent’s automated compliance engines and other services were developed to service the needs of large, sophisticated lenders operating on a multi-jurisdictional basis with a full range of mortgage products across multiple production channels.
However, over the past year we have enhanced our products to provide cost-effective service to medium and small-sized lenders. We are seeking to “democratize” compliance by providing these lenders access to the same high quality automated compliance reviews previously available only to the industry’s largest players. The benefits are two-fold. First, because the investors that use Mavent have considerable share of the loan purchase market, small- and mid-sized lenders can now leverage Mavent to reduce costly loan repurchases and realize better secondary market executions. Second, Mavent enables small- and mid-sized lenders to reduce their regulatory risk exposure. This is critical to ensuring the continued strength of the mortgage industry and real estate capital markets, expanding homeownership, and generally protecting all stakeholders from the irresponsible actions of bad actors.
If readers wanted to learn more about Mavent, what would be the best way?
The best way to learn more about Mavent is to first check out our website at www.mavent.com. We also encourage you to give us a call at 949.474.4700.
Bird’s Eye View of the Industry.
What effect have the changing market conditions had on your work over the last three years?
Consumer protection regulation is undergoing an unprecedented transformation, marked by an accelerating pace and growing complexity in the law. Consider that during the savings-and-loan crisis HOEPA was not yet enacted, nor were there any high cost laws. Available technology was much less sophisticated and the mortgage industry, relative to other industries, was behind the adoption curve. The past three years, however, have brought a growing patchwork of federal, state and local legislation and regulation subject to varying and—frequently—inconsistent interpretations among regulatory agencies, courts and investors. This notwithstanding, record volumes and profits bred a sort of risk management arrogance.
But over the past year, the pressure on mortgage institutions, lawmakers and regulators to protect borrowers’ interests has grown as a result of media coverage, election year campaigning, and homeowner concerns about home values and financing options. Attorneys general and the plaintiffs’ bar are leading a rigorous and intense inquiry into the industry’s poor performance over the past several years in complying with consumer protection laws.
The risk management arrogance simply won’t fly anymore. There is now a zero-tolerance attitude towards regulatory and other risks. Mavent enables its clients to review all loans pre-funding or pre-purchase for compliance with these laws in a matter of seconds and at a very low cost. For our clients, this reduces the costs of borrower, refunds, fines, penalties, civil actions, investor put backs and other commercial contract disputes.
What changes do you anticipate going forward?
All we’ve really seen thus far is fallout from credit losses. We have yet to see the fallout from related consumer protection violations. This will come significantly in the form of civil litigation and regulatory enforcement actions.
Bear in mind that both credit underwriting and consumer protection regulation consider whether the terms of a financing are such that a borrower can be reasonably expected to meet its obligations. Consumer protection regulation, however, goes further in that it also takes into account a transaction’s fairness and appropriateness. Given that credit decisions are profit motivated, it’s naïve to assume that the industry as a whole, did a better in job protecting borrowers than it did in protecting itself.
There is plenty of evidence supporting that it did not. For instance, in September 2006 the FDIC’s Office of Inspector General (OIG) issued a report regarding member bank compliance with 8 federal consumer protection laws during the 2005 audit cycle. 83% of the institutions examined were cited for significant compliance violations. 43% of those institutions were repeat offenders. 85% of those repeat offenders were highly rated by the FDIC for their in-place compliance processes.
Why, then, has the consumer protection issue not become more pronounced?
During the past several years, the industry’s rate of non-compliance went largely unnoticed because all interested parties were largely satisfied. Borrowers had access to cheap financing, lenders sold loans profitably into the secondary market, issuers were profiting off mortgage-laced structured financial products, and securities investors were earning ample yield on ostensibly investment grade securities. Regulators, meanwhile, lacked the resources or clout to sufficiently supervise mortgage institutions, as the FDIC study illustrates. Consequently, the industry and the public were lulled into a false sense of security.
But, not surprisingly, defaults change everything. It is the current credit crisis, and consequent record foreclosure rates, that is now revealing a multi-year stretch of systemic consumer protection violations.
This is apparent from the significant rise in mortgage-related litigation. Navigant Consulting, Inc., a consulting firm, recently released a report that showed the number of mortgage-related cases filed in federal courts have surged in the first quarter of 2008, dramatically outpacing 2007 filings. The total filings are close to surpassing the savings-and-loan crisis litigation of the early 1990s. According to the Navigant Consulting report, the number of mortgage-related cases exploded in the first quarter of 2008, increasing 85 percent over the next busiest quarter. A staggering 170 cases were filed during the quarter. Borrower class actions were the largest category of cases filed.
Similar to the crisis that led up to Sarbanes-Oxley, this is going to be a painful process marred by more executive firings, possible criminal charges and loss of franchise value for some of the financial services industry’s most consumer-oriented brands.
What are the biggest concerns your customers have?
Our clients are most concerned with protecting their brands, which ultimately means protecting their clients. Most of our clients are large, diversified institutions with consumer-oriented brands. The intangible costs of consumer protection violations—by this I mean the “headline risk”—is of major concern.
The biggest near-term concern our clients and prospective clients have is how to manage compliance risk while budgets are shrinking. The industry is in survival mode and is concerned foremost with cutting costs. Consequently, compliance resources are being scaled back, just as compliance risk is growing.
The mortgage industry is predicated on smartly bearing risk. But, a financial cost/benefit analysis lacks appropriateness when it comes to complying with consumer protection laws. Unlike credit or collateral decisions, compliance is rooted in laws designed to ensure social equity. This makes a purely economic approach to tolerating compliance risk unacceptable and profoundly corrosive of the industry.
This notwithstanding, it is debatable whether the costs of non-compliance are properly understood. Like many of the mortgage “quant” models that have turned out wrong, expected losses from regulatory violations are based on skewed data and rickety assumptions. There is no historical precedent for the past three years. Never before has the industry transacted so widely across the credit spectrum and with such explosive growth in its product menu. There have never been more federal and state laws to trip over. We are in what statisticians call a “fat tail” – a term that describes extreme events that occur more frequently than theory predicts.
Clearly smart decisions have to be made about how to maximize dollars spent, and even then it is impossible to bullet-proof an institution. But, public records—and our own experience—reveal that a large number of institutions are taking on a reckless amount of risk. One of the things we do for our clients is perform assessments of their compliance risk management practices (or those of their counterparties), as well as assist them in formulating cost/benefit analysis.
Future Leader’s Program.
You were named a Future Leader in 2007 by the National MBA. Describe that experience.
Exhilarating. Exhausting. I guess it was exhilar-austing.
What benefits did the experience bring?
The experience afforded me the occasion to meet and work with some of the industry’s brightest and most experienced individuals, gain an appreciation for the scenic and culturally rich island of Puerto Rico, and represent our industry in contributing to the growth and sustainability of the Puerto Rican community.
What were the downsides?
The downside is that the class divided into teams. Consequently, I did not have the opportunity to work closely with many of the outstanding individuals in the program.
Looking back, anything you would change?
I probably wouldn’t have had that last mojito the night before our first all-day session. But, field work is important.
To whom would you recommend the program?
Those interested in building a long-term career in this industry should become involved with the Mortgage Bankers Association. Those with a particular taste for suffering should become Future Leaders.
Anyone to whom you would not recommend the program?
The program involves an enormous amount of effort and requires individuals to work well in teams. I would not recommend it to those without the time, dedication or interpersonal skills.
HUD Posts Interstate Land Sales Act Settlement
Posted on June 30th, 2008 by the Editor
The Department of Housing and Urban Development has posted a new settlement agreement entered into between HUD and a developer for alleged violations of the Interstate Land Sales Act.
As of this writing, HUD had not issued a press release regarding the settlement. HUD also appears to have inadvertently posted the agreement under RESPA instead of the ILSA.
This ILSA settlement is the first posted for 2008. It follows one settlement per year posted for 2005-2007.
For a copy of the settlement, please click here.
OCC Summarizes Legal Developments of 2007
Posted on June 26th, 2008 by the Editor
The Office of the Comptroller of the Currency has issued 2007 Significant Legal, Licensing, and Community Development Precedents for National Banks.
The summary highlights certain developments in the areas of general banking and securities activities, enforcement actions, investments, preemption and regulations.
Readers will recall that 2007 included a monumental victory for the OCC in the area of preemption in the Supreme Court case of Watters v. Wachovia, ___ U.S. ___, 127 S.Ct. 1559 (2007).
For a full copy of the summary, please click here.
FHA Issues Guidance on Non Approved Brokers
Posted on June 25th, 2008 by the Editor
The Department of Housing and Urban Development’s Federal Housing Administration has issued Mortgagee Letter 2008-17, Non FHA-Approved Mortgage Brokers - Forward Mortgages.
The Mortgagee Letter states in part:
This Mortgagee Letter reminds lenders of existing FHA policy regarding the use of non FHA-approved mortgage brokers when originating FHA-insured forward mortgages. FHA loan origination services must be performed by a FHA-approved lender or FHA-approved mortgage broker (loan correspondent). A FHA-approved loan correspondent may be compensated for the actual loan origination services it performs either directly by the consumer or indirectly by the FHA-approved lender without being in violation of either the Real Estate Settlement Procedures Act (RESPA) statute and regulations or FHA regulations.
While FHA regulations permit a borrower to engage a broker who is not FHA-approved to assist him/her in obtaining mortgage financing (24 CFR 203.27(e)), the loan origination services may not be performed by that broker and the FHA approved mortgagee shall not compensate the broker for such services. FHA requires that these services be performed by either an FHA-approved lender or loan correspondent [footnote omitted]. RESPA prohibits the payment of duplicative fees. The payment to the unapproved broker for duplicated services amounts to an unearned fee in violation of section 8(b) of RESPA. Further, this payment may also act as a disguised referral fee for steering the borrower to the FHA-approved lender or loan correspondent, which is in violation of section 8(a) of RESPA.
For a full copy of the Mortgagee Letter, please click here.
Frank Says FHA’s Position on Caps Illogical
Posted on June 23rd, 2008 by the Editor
Chairman of the House Committee on Financial Services, Barney Frank (D-MA), has sent a letter to the Commissioner of the Federal Housing Administration at the Department of Housing and Urban Development.
Following the greeting, the Chairman’s letter states:
I am writing in the hopes that you can reconcile for me two recent statements by you that are very much in conflict with each other. In your recent speech, you stressed that you wish to run the FHA according to sound business principles. But you have also announced that you do not wish to be able to guarantee mortgages – including those that are indisputably credit worthy – for homes over $550,000 in value. The statement that I read that was attributed to you is that since these homes above that number do not represent a very large percentage of your business, there is no need for you to insure them.
I find it hard to think of an argument that could be more at variance with your professed dedication to sound business principles. Can you cite me other examples of enterprises run along business principles that repudiate the desire of some customers to deal with them simply because those customers are at too high an economic level? If servicing people at the level above $550,000 detracted from your ability to service others, I would share your objection to your being allowed to do the higher end, although it would hardly be based on business principles. That is, a business – which is again the way you say you want to run the FHA – would presumably be willing to sacrifice lower end customers for higher end ones if there were a greater profit in servicing the higher end customers, and a choice had to be made.
But in this case, not only does no choice have to made, according to the Congressional Budget Office, servicing people at the higher end provides increased revenue that you can then use to enhance your ability to operate.
So I repeat my request that you explain to me what sound business principle leads you to proclaim that you do not wish to be able to service people who are seeking mortgages above $550,000, despite the fact that you could do this in a way that enhances your overall mission, and in fact is profitable in this regard.
It seems that the Chairman and the FHA Commissioner may be talking past each other. It will be fascinating to see the reply.
For a full copy of the letter and the Committee’s summary, please click here.
Stay tuned . . .
HUD Suspends Flipping Rule to Move Foreclosures
Posted on June 20th, 2008 by the Editor
The Department of Housing and Urban Development has announced suspension of its 90-day waiting period for FHA insurance in some cases.
HUD’s press release states:
In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.
For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.
“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”
FHA’s new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties. Many foreclosed properties remain vacant for months, inviting vandalism and reducing values of surrounding homes. To address that sizeable inventory, lenders have hired companies that specialize in the marketing and disposition of foreclosed homes. It’s reasonable and appropriate that these firms have the ability to sell the properties to borrowers using FHA financing.
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition is intended to prevent property “flipping,” a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. FHA’s new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.
To read the full text of this new temporary policy, visit FHA’s website.
Mortgage Law Blog notes, however, HUD’s press release did not include a link to the new policy, and a search of HUD’s primary website at the time of writing did not reveal the information. Nevertheless, a copy of the policy can be found here.
MLB also points out, the rule suspension is for a limited category of transactions, and only for one year.
For a full copy of the press release, click here.
HUD Defends Policies - We Did Not Create the Subprime Crisis
Posted on June 18th, 2008 by the Editor
A Washington Post article (registration required) has suggested that the Department of Housing and Urban Development’s affordable housing policies for Fannie Mae and Freddie Mac contributed to the collapse of the subprime market.
HUD issued the following press release in response:
The Washington Post, citing former HUD officials and academics, claimed HUD’s affordable housing goal requirements of Fannie Mae and Freddie Mac helped to fuel the collapse of the subprime mortgage market. This is a gross misrepresentation of much larger forces that were at work in the mortgage market. We believe it’s time for a reality check:
Congress requires that HUD set affordable housing goals for these government-sponsored enterprises. The largest jump in HUD’s required goals occurred in 2000. If, at any time, Fannie and Freddie believed the goal levels that HUD establishes are unattainable given current market conditions, they need only notify HUD. Until last summer, they did not.
After 2004, Fannie and Freddie struggled to reach out to the affordable marketplace but by then, subprime lenders had seized the market by offering borrowers mortgages with little or no underwriting requirements. As a result, the markets were less receptive to Fannie and Freddie’s loan products, preferring mortgages that in many cases proved irresponsible.
It’s also important to note that despite the downturn of the subprime market, 92 percent of all mortgages are being paid on time. Many of these previously underserved homeowners will remain homeowners today precisely because of these affordable housing goals, a point lost in the pages of the Washington Post.
On a related point, this Administration has long supported legislation to create a stronger, world-class regulator of Fannie and Freddie, and urges Congress to complete its work on this important bipartisan bill.
In conclusion, both Congress and HUD have long believed it is good policy to encourage Fannie and Freddie, as part of their public mission, to focus on underserved borrowers who were often shut out of homeownership. It’s disingenuous in the extreme to think that HUD’s policies in this area somehow aided and abetted the current subprime market situation. Markets are motivated by profit, period. When lenders and brokers opt to promote risky loan products based on poor underwriting, they do so at their own risk. If Freddie Mac and Fannie Mae are holding securities backed by these loans, it is because they were attracted to their yields and not because of a public policy designed to promote affordable homeownership.
For a copy of the Washington Post article, please click here.
For a copy of HUD’s press release, please click here.