Today’s news reports that the Feds filed criminal conspiracy charges against one of our nation’s 10 largest home builders reaching a deal that allows it to clear its record by paying up to $50 million dollars to compensate borrowers who were defrauded by its former mortgage arm, Beazer Homes.
As English essayist, Alexander Pope (1688-1744) so aptly put it “No one should be ashamed to admit they are wrong, which is but saying, in other words, that they are wiser today than they were yesterday.” So it makes sense that Ian McCarthy, Beazer’s CEO would make a statement for the media saying, “We deeply regret these matters and have used what we learned to strengthen our control and compliance culture.” Now, the proof “is in the pudding” as great grandmother used to say. Over and over in mortgage we have seen bad players, having been caught, move shop, change names and re-open with the same unethical practices.
Does paying a drop in the bucket fine really change their modus operandi? Love of money gets Lenders into the mess; having money gets them out; then wanting more money makes the appeal to do what ever it takes to get there faster even more tempting. It is and always will be about money. Check it out in the poem I wrote in 1986:
Money
I am a newly minted coin.
Bright and Shiny.
Sought After.
Treasured.
I am a well worn coin.
Spent.
Tossed for Decisions.
Changing Lives in Passing
I am Truth’s Competition.
So what else can the Feds do but fine the guilty and move on? How about a complete freeze on their ability to lend in the United States? You know, kind of like if you loose your drives license due to reckless behavior. You are not allowed to drive a vehicle – not legally, anyway. Maybe that is the concept here.
If the Feds put a freeze on a company’s executives’ and loan originators’ lending ability but the company and/or its originators begin lending again under another company name or in another state they could possibly go to jail.
Breaking a law like that might just be illegal enough to qualify for jail time; whereas defrauding American homeowners one loan at a time, apparently is not.
No one should be ashamed to admit they are wrong, which is but saying, in other words, that they are wiser today than they were yesterday. Alexander Pope
Part I
ReplyDeleteThe following was caused by Barney Frank and Christopher Dodd
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September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES NY Times (verified)
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
Part II
ReplyDelete''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
WHERE IS THE OUTCRY, THE APOLOGIES AND ACCEPTANCE OF THE BLAME. OUR FAMILIES WILL PAY FOR THE ILLEGALS AND THE MORTGAGE FIASCO FOR GENERATIONS.
WE NEED A THIRD PART AND A CODE OF ETHICS!!