September 11, 2003: ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, and the less we will see in terms of affordable housing.'' (NY Times)
It was only eight years ago that these ill spoken words from Barney Frank, Melvin Watt (Democrat NC) and other Democrats assured the country that Fannie Mae and Freddie Mac were financially sound. To preface the following comments, this is not about politics other than to show how easy one man with power can ruin our housing and banking sectors as well as the entire socio-economic spectrum.
Since those eventful words were spoken Frank and company have systematically set out to destroy the mortgage lending industry that has functioned for over 50 years without issues until the 2004-2006 debacles. Frank first stood on his podium screaming for lenders to make loans to those who could not afford them and now has switched sides to protect those who created the housing crisis.
Frank and his good friends Chris Dodd, Chuck Schumer and Andrew Cuomo have pulled the wool over every American’s eyes with their cliché claims to ‘protect the consumers’. Here’s a sample of their cost saving fixes over the last two years:
1. Cuomo created the new appraisal system The Housing Valuation Code of Conduct (HVCC). Appraisal prices are now double what they were just two years ago and appraisers earn less as new management companies formed by the banks make the rules.
2. Frank and Dodd’s new Financial Reform bill will transfer mortgage costs from the lenders directly to borrowers by changing the way loan officers get paid. Borrowers will no longer see zero point options and if they do they will pay a steep rate.
3. The Dodd Frank Bill has already increased costs to simply have a checking account and credit card rates have soared in one short year. This as I said was all done in the name of ‘consumer protection’.
In a nutshell, all Americans but specifically homebuyers, sellers, realtors and mortgage professionals are about to become victims to a monumental ‘hoax’ compliments of Barney Frank and friends. They have singlehandedly destroyed the independent (non-bank) mortgage industry and are not done yet. They successfully blamed everyone but those responsible and are about to wipe out an entire industry while preserving future roles for those who actually caused the financial collapse in housing and our economy.
Looking back to at the steps taken by Frank and his cohorts to secure this hoax, we begin in early 2007 it was evident that the housing market was about to come crashing down. This core group of Democrats began an exercise in scamming the American people by first deflecting any blame for the housing crisis by accusing a small group of scapegoats and ignoring those truly at the root of the collapse.
Barney Frank was front and center blaming the local loan officers, mortgage brokers, and any non-bank lenders i.e., the pawns for this travesty. To his claims I have always asked Mr. Frank:
“Who created these toxic programs? Whose brilliant idea was it to not verify a borrower’s ability to repay a loan? Mr. Frank never would answer these questions and instead pushed forward with his plans.
The first order on Frank’s agenda was to put the mortgage brokers out of business. Frank and company were successful in stereo-typing these folks as Goldman Sachs and the rest of Wall St. were applauding the bailout and taking their bonuses. Goldman even became a bank overnight so as to receive the benefits of the bailout monies. Not a word by Frank or his friends.
Next, Frank recognized that he may not be able to get rid of all the competition through his blame game, so he and Dodd designed legislation that would kill off any remaining brokers and non-bank lenders with over the top requirements. Limiting compensation and changing the net worth requirements are new rules that he knew would drive them out leaving the biggest players to control the business.
Enter Andrew Cuomo who jumped into the fray and immediately blamed the appraisers and the loan officers as well for fraudulent appraisals. His idea was so good that appraisals which once cost $275 now cost as much as $475 and appraisers get paid less all in the name of consumer protection.
Next step was obvious as Frank and Dodd began touting ‘regulatory Reform’. The believers were all drinking the cool aid and the call for reform was being accepted hook line and sinker.
The foxes were in the henhouse and the goal was simple, destroy the independent mortgage market leaving a few select players left to control the housing, banking and mortgage markets. On April 1, 2011 the bill they put together under the guise of protecting consumers will go into play.
This will not be an April fool’s joke that can be undone. This man singlehandedly crushed a once thriving mortgage industry all in the words that Barney Frank devotees love to hear: “In the name of consumer protection.”!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.