Mortgage Lenders Can't Escape Morgenson's Wrath

If you’d asked Gretchen Morgenson a year ago the root cause of the mortgage crackup, she’d have told you (I believe) it was lax underwriting by those unscrupulous, money-grubbing, (and then still-solvent) subprime lenders. Countrywide Financial (CFC) was her poster child; she ripped it regularly. Last August, for instance, in one of her more breathless Countrywide takedowns, she moaned that “Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers.”

A profit-at-all-costs culture willing to stop at nothing in pursuit of profits--even if it meant loading down customers with debt well beyond there ability to service! Yes! That was the problem!

What a difference a year makes. Now Morgenson seem to believe that mortgage credit providers aren’t lending aggressively enough. In particular, she’s bemoaning the fact that credit providers seem to be reducing their customers’ home equity lines of credit, on account of falling home prices.

I detect an inconsistency.

Now, Gretchen, which is it? The old you damned the industry for lending too aggressively against the value of borrowers’ homes. The new you damns the industry for not lending aggressively enough against the value of borrowers’ homes.

You can’t have it both ways. If these flip-flops keep up, people might get the impression that you just don’t like the companies, no matter what they do.

Tom Brown is head of BankStocks.com.

Comments

[QUIXOTIC:]

Its amazing how barely literate people at the NYT become stars "overnight". Who crowned these bozos. Take another favorite punching bag of mine; say Tom Friedman, a megalomaniac who can't string together three sentences without saying "I". The bright spot is the journalistic quality is reflected in a NYT stock that is collapsing. The audience of the NYT is not much better; watch their commericals; JUST CALL

2008 Apr 15 09:04 AM

[Baron:]

There HAS to be catharsis in this industry, there HAS to be some pain. Part of the Catharsis HAS to be greedy people like Mozilo and many like him who only care about their own pocket regardless of the long term effect.

2008 Apr 15 01:52 PM

[mbborak:]

I do not think Ms. Morgenson is incorrect in blaming the lenders for both irresponsibly lax standards and aggressively cutting off home equity loans. After all, these two situations are occurring in two very different environments, and both demonstrate the inability of these companies to temper their greed during good times and fear during bad times with sound underwriting and responsibility to their customers. Even though many borrowers share the blame for taking on too much debt, it is the lenders who have the resources and expertise to make the determination as to whether or not they are offering a loan that has a reasonable chance of avoiding eventual default.

2008 Apr 15 05:53 PM

[HonestAppra...:]

Isn't it time to stop placing all the blame on the lender? Yes, I realize the lax underwriting offered fuel for this fire but, NOT all these borrowers are "victims". What happened to the 100K you took out of your home just prior to walking away from your payments? And, don't blame me either! Ninety-nine percent of these foreclosures were not due to over valuations. The revamping of FNMA procedures is just a band-aid being applied to the wrong limb. We have survived the down markets in prior years. This too, shall pass.

2008 Apr 15 09:55 PM

[Smalltownba...:]

mborak should recognize that we "still" live in a free society and are responsible for our own actions. The lenders are responsible for their underwriting standards. They are not responsible for the foolish borrowing decisions made those who, in a capitalist society, want to demonizes profits and transfer their personal responsibilities to an underwriter who can only evaluate a snapshot of their situation. Do you invest based on a broker's advise or based on that plus a personal investigation of the investment? There is no difference between that and getting a mortgage. You make the call.

2008 Apr 16 08:17 AM

[john haskell:]

Being yelled at by Gretchen Morgensen is increasingly like being yelled at by one of the vagrants down at Union Square. Who cares.

2008 Apr 16 08:49 AM

["Magazine-C...:]

"Its amazing how barely literate people at the NYT become stars "overnight". Who crowned these bozos"

...

uh....the Pulitzer Prize folks did.....

...

2008 Apr 16 09:06 AM

[jimsep:]

Say what you want about Gretchen Morgenson, she has a much bettor record in warning investors about what was coming than almost all the analysts and portfolio managers on Wall Street. Including Tom Brown.

2008 Apr 16 10:26 AM

[j'adoube:]

Just to amplify that last poster's comments:

There's no inconsistency in Morgenson's comments. a) Lenders made foolish loans to people who could not afford to pay them back, and b) Now, they're overcompensating by cutting off healthy borrowers. Doesn't take a genius to figure that out.

Tom Bozo Brown actually cheerled New Century Financial and its ilk all the way down. And took a major bath along the way.

He looked so lovely shaking those pom-poms that I suggest he'd be more suited to join the Dallas Cowgirls than be caught anywhere near large agglomerations of capital.

It's funny that Tom Brown is so intent on blaming Morgenson for inconsistency. One of the key marks of a great trader is the ability to change his mind as the facts and situation change. But all Brown did during this crisis is keep hitting the Buy Button like some kind of monkey on meth. He doesn't have the mental agility to navigate this crisis. He's not a hedge fund trader. He should go back to pure research.

2008 Apr 16 01:09 PM

[Paula Rush:]

The author of this article is a MORON. First, the banks, CAUSED the artificial boom that homeowners believed was a legitimate real estate appreciation that they bought into by borrowing against a stable asset - their home. What homeowners didn't know was a PONZI scheme was underway with the monkey underwriting and lending to anyone who was breathing, thereby sending hordes of buyers into the market with five times the amount of money they would have really qualified for, CREATING the real estate bubble. The second part of the PONZI scheme was the FOOLS on WALL Street financed the entire debacle no questions asked. As long as the money kept flowing the scheme continued. When the dance stopped, everyone was left holding the bag - Except the CEO's and various execs on Wall Street who walked away with millions and billions of everyone elses money. Not one of these parties cared - they were earning massive amounts of money- by PLAYING WITH THE MONEY OF OTHERS. THen the BANKS decide that now that the crash has occured, the PONZI scheme has destroyed everyone, they no longer want to honor the agreements they signed to lend money. The home equity lines of credit they ALREADY gave people, are being yanked without warning. So, this is just another abuse of the power the banks have over the rest of us. The BANKS are taking a massive amount of money from the FED, 500 billion dollars, and can't honor the commitments they've made. The only thing they are doing is FORECLOSING to fix the liquidity problems they created for themselves. The author of this article from BANK STOCKS.com says it all. YOU ARE ONE OF THE PEOPLE WHO MADE MONEY ON EVERYONE ELSES MONEY. I HOPE YOU SLEEP WELL AT NIGHT THINKING ABOUNT THE MILLIONS OF FAMILIES, CHILDREN, DOGS AND CATS BEING TOSSED OUT ON THE STREET THANKS TO THE BANKING INDUSTRY AND THE MASSIVE ABUSE THEY PERPETRATED ON THE AMERICAN PUBLIC.

2008 Apr 17 09:39 AM