An article in Mortgage Servicing News entitled Housing Finance System Future is Wide Open written by Brian Collins quotes Treasury Secretary Timothy Geithner “as blaming the GSEs’ large investment portfolios for the substantial losses on the inherited commitments of two, saying FNMA and FHLMC failed to charge appropriate guarantee fees on low quality loans.” I would argue that once again the real issue has been missed.
Encouraging the collection of more fees to shore up “guarantees” is not going to fix the problem or prevent what has happened over the last couple of years from happening again. The real issue is not that appropriate guarantee fees were not charged. While this may have stemmed some of the bloodletting, it does not fix the real problem. Quality loan production tiering from loan origination through purchase is the real issue. Charging more fees just drives up the cost to produce mortgages, which ultimately has taxpayers eating it coming and going. Haven’t we already eaten our portion of this dog’s breakfast?
The REAL Solutionis to not buy the loans in the first place if quality production cannot be demonstrated prior to purchase. No more exceptions or backroom deals based on volume submission allowed. The days are numbered for direct seller/servicers who deliver Notes for purchase knowing the mortgage produced wasn’t done in accordance with good lending practices. The winds of change are a blowing… slowly, but surely. The new FNMA Loan Quality Initiative set to go into effect June 1st is the first step in the right direction, but there is so much more that can be done.
Have I mentioned standardization?
April 22nd, 2010 at 10:22 am
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