Smalltownbanker

Fast and Easy Fannie

Fast & Easy was simply Countrywide's version of a product that Fannie Mae made available to every one of it's customers in the nation through it's "easy doc" program. The answer is yes it was a true no-doc loan. They made it available to everyone but not all companies offered it. Many in fact did not so give those lenders credit for seeing that the risk was not deferred by the 1.5% discount point add on it was priced on based of standard prime rates.

Mortgage Brokers, RIP

In case you do not realize it, the vast majority of local Community Banks are also mortgage brokers. These Community Banks and other mortgage brokers are an integral part of the industry in the United States. If you really want to see the mortgage/housing industry collapse just eliminate the mortgage broker.

In 2003 when rates reached the point where they are now I worked directly for one of the top three lenders in the nation. Even with the brokers out there this industry giant was taking 120+ days to process and close an application to refinance one of their own loans. It would take years for the national lenders and banks to hire enough loan officers, processors, underwiters and closers to handle the volume that would be dumped on them if brokers went away, assuming that they would even want to. Keep in mind they will benefit tremendously from the constricted availability of mortgage loans.

Large banks and lenders like Bank of America, Wachovia, Citigroup, WaMU, Wells Fargo & Countrywide stink at customer service. Brokers exist because they are more capable of delivering the level of service the consumer wants and most of them care about that consumer, much more than the megabank does. Large wholesale lenders have the tools that will allow them to virtually eliminate fraud in the application process. They do not use them because up to this point the default rates have not justified the cost. That is changing and wholesale lenders are implementing more of these controls every day.

The "Mortgage Crisis" was not caused by brokers. The lax practices of the large wholesale lenders attracted a fringe element to the industry through the broker channel of loan origination because it was the easiest point of entry. Anytime there is a weakness that can be exploited for ill gotten gain it will happen, regardless of the industry. If wholesale lenders impose strict rule sets for their brokers, verify application data electronically using available technology and follow the rules, the industry can return to a normal, efficient and healthy opperating environment in a matter of months without stifling the entreprenuerial spirit that makes this a great industry to work in.

If wholesale lenders adopt sound underwriting and verification practices the bad mortgage brokers will go away very quickly without a single law being passed.

Out of the Credit Mess in 1-2-3: Blame, Blame, Blame

Brokers like your friend are to blame. Individuals who signed notes they could not afford are to blame. The mortgage giants who set the underwriting guidelines are to blame. Loan officers who knowingly ignored fraud and or participated in it are to blame. Law enforcement and Regulators who ignored mortgage fraud as a crime are to blame. Congress is not to blame but they will be to blame for destroying the industry with their actions after the fact. Fannie Mae and Freddie Mac are to blame. Wall Street is to blame for hiding the true risk of what they were selling. Loan officers who sold the wrong products to the wrong borrower are to blame. Realtors and Builders who hold way too much influence over the lending process are to blame. Appraisers who overstated value are to blame. Alan Greenspan and the Federal Reserve is to blame for holding rates so low for so long.

I am to blame also because I knew what was happening and did not lobby anyone to reign it in or establish controls. We are all to blame for the irrational exuberance which culminated in disaster. Everyone who is running for President is to blame as well because they all had a louder voice than I do and a podium from which to speak.