“As a result of the liberals in our government (and elsewhere) inappropriately scapegoating Wall Street, banks, and mortgage lenders for the 2008 financial crisis, the measures we have adopted don’t really address the core risks (of another crisis)…

…Especially as it relates to mortgage lending. Isn’t this unbelievable given mortgage lending was at the core of the U.S. financial crisis? It’s been seven years, and yet we couldn’t even come up with a government-designated qualified mortgage, with a prudent down payment (and other key underwriting terms) or resolve Fannie Mae and Freddie Mac! You may not want to hear it or believe it, but FHA has largely replaced the private subprime mortgage lenders. And what about the FDIC? They were inadequately capitalized pre-crisis and effectively became temporarily insolvent during the crisis (for the second time in my adult life) and remain undercapitalized, relative to their insurance risks, even today. Fannie Mae, Freddie Mac, FHA, and the FDIC all either went insolvent, or would have without federal government backing, during the crisis. And as a result of the ill-conceived Dodd Frank, we now have the Consumer Financial Protection Bureau, which acts like a Soviet government bureau; refusing to publish rules and regulations that can be followed. Instead they prefer to enforce their politicized-views, arbitrarily on the industry. From what I have seen from the CFPB, their rules are mostly “form-over-substance”, increasing costs by thousands of dollars to individual mortgage borrowers (hidden in today’s low rate mortgages), with little real benefit. During the crisis, the mortgage industry was  nationalized (the government guarantees 90%+ of U.S. mortgages) and an oligopoly of a dozen or so primarily Too Big to Fail Banks package home mortgage loans according to these government standards. Beyond thousands of pages of new rules and regulations for banks and mortgage lenders (and beyond some good and substantive new bank capital and liquidity rules for banks, insurers, and money market funds), what’s really changed? Not much related to mortgage lending. Nothing substantive regarding the government’s national statistical rating agencies. Their flawed opinions are still too integral to our bond markets and to bank and insurance company investment policies and capital requirements. The Too Big to Fail Banks are bigger than ever. And absolutely nothing has been done with respect to our central bank, The Federal Reserve. I, and economic and monetary experts including Nobel Laureate’s, believe The Fed’s distortive monetary policies are directly responsibly for many of our assets bubbles and busts (certainly our recent housing bubble/bust), and much of our financial instability. Quite unbelievably, The Fed has even more power today, both actual and perceived (in the markets). In many respects, unfortunately, it seems like “we have learned nothing” and are therefore are doomed to repeat the mistakes of our past. I have done my best on this blog, to study everything about the crisis I could and use my knowledge and experience to communicate not a narrative, but the facts and the truth. I believe this blog will largely stand the test of time/history.”, Mike Perry, former Chairman and CEO, IndyMac Bank

“It’s difficult to get a man to understand something, if his salary depends on his not understanding it.”, Upton Sinclair

2014 and 2015 Select Blog Postings from Nottoobigtofail.org…”We’ve learned nothing..”:

October 30, 2015 – Statement 998: “I didn’t know that FHA “invented” red-lining, did you? Look, pre-crisis, as a result of government-mandated CRA requirements and pressure from consumer-advocacy groups, most banks and mortgage lenders fully-embraced lending to minorities (in predominately minority communities), because they could lay off the credit risk to FHA, VA, Fannie, Freddie, and/or the private securitization market…

July 6, 2015 – Statement 810: ““Fannie and Freddie made a profit until they didn’t,” Mr. Hensarling said. “We are becoming a backstopped, bailed-out, bankrupt society.” Hensarling argues, all those loan guarantees make taxpayers vulnerable, just as the federal flood insurance program and the Pension Benefit Guaranty Corporation have weighed down the government’s balance sheet…

June 30, 2015 – Statement 804: “Industry regulations and requirements are having an adverse effect on new 1-4 family mortgage loan originations, which are at a 12 year low. Commercial banks are also exiting the 1-4 family mortgage origination market as almost 80% of the compliance costs for small banks derive from residential lending.”, Kroll Bond Rating Agency, June 2015

June 18, 2015 – Statement 782: “Pre-crisis, as a result of vibrant competition, mortgage bankers made a profit of just 0.156% ($312 on a $200,000 mortgage), as a result of substantially reduced competition (from failures and dramatically increased regulation), post-crisis mortgage bankers made a profit of 0.615% ($1,230 on a $200,000 mortgage). That’s a whopping 294% increase in profits post-crisis…

June 3, 2015 – Statement 750: “A profit of $1,500 per mortgage, plus $7,195 in costs!!! American homeowners are paying (directly in fees or indirectly in a higher rate) $8,695 on average to obtain a mortgage to buy a home or refinance. That’s outrageous!!! Especially when almost all of these mortgages are government insured or guaranteed. Packaging loans for the government shouldn’t cost this much…

May 12, 2015 – Statement 726: “The Federal Housing Finance Agency just released the results of the annual stress tests for Fannie Mae and Freddie Mac. Under the severely adverse economic scenario, the companies would need $157.3 billion in capital…

April 27, 2015 – Statement 711: “This recent mortgage newsletter excerpt on appraisers and related regulations is nuts. It’s all form-over-substance. Nothing has really changed re. the methodology of home appraisals, despite the fact that they didn’t detect or prevent the housing bubble/bust. U.S. homes are still being valued using “market comparables,” which tend to confirm the direction of prices rather than challenge or refute them…

April 20, 2015 – Statement 704: “So how is Navy Federal pulling in hordes of young first-timers? By offering loans that address their needs — zero-down payments, no private mortgage insurance premiums, plus the standard low-down payment menus of the Federal Housing Administration (3.5% minimum) and the Department of Veterans Affairs (zero minimum) loans.”, Kenneth R. Harney, The Los Angeles Times

April 20, 2015 – Statement 703: “The decision is a reminder of how little has changed in mortgage finance and at Fannie and Freddie despite their central role in the financial meltdown. The housing lobby—the Realtors and home builders and “affordable” housing advocates—want the government to continue to favor housing over other parts of the economy. Taxpayers bear the risk.”, The Wall Street Journal Editorial Board, April 20, 2015

April 16, 2015 – Statement 698: “The FHFA’s latest decision to lower fees for some (riskier) borrowers is “just starting to look like part of a larger trend, that’s my real concern. What’s next?” said Mark Calabria, director of financial regulation studies at the libertarian Cato Institute. “There was not some single moment or event that got us into the last mess, but the accumulation of lots of errors.””, The Wall Street Journal, April 16, 2015

April 9, 2015 – Statement 677: “Customers can utilize a Community Second Mortgage or a Down Payment Assistance Program with ditech. MyCommunityMortgage and Fannie Mae Conforming allow a 105% CLTV when using Community Seconds and Down Payment Assistance Programs (DPAs). The Community Second option combines a first mortgage that Fannie Mae purchases with a subordinate mortgage…

April 8, 2015 – Statement 676: “It is telling that Congress adopted the (Dodd-Frank) act in July 2010, six months BEFORE the FCIC’s report was issued, a clear demonstration that the Democratic Congress knew well in advance exactly what this well-controlled commission would say.”, Peter J. Wallison, “Hidden in Plain Sight, Chapter 3: The Financial Crisis Inquiry Commission and Other Explanations for the Crisis”

March 25, 2015 – Statement 664: “NewDayUSA is aggressively advertising a VA (government insured) mortgage program that it says allows veterans to borrow up to 100% of their home’s current value (pulling all of their home equity out to pay off other debts or for any reason)! How can the government offer this risky and irresponsible mortgage program? This VA program is only viable if housing prices always rise…

March 9, 2015 – Statement 650: “FHA assumed 4.2% annual, nationwide home price appreciation (HPA) in its reverse mortgage (HECM) lending model since the products inception in 1989, for more than 20 years, EVERY SINGLE YEAR, all the way through the financial crisis and much of the housing bust!!! And yet today, even with the benefit of hindsight and despite the massive HECM losses (billions of dollars) FHA incurred because of this assumption, they continue to assume 4% annual…

March 1, 2015 – Statement 632: “Yes, let’s once again advise American’s (who already have a mortgage) to take out a second mortgage on their rising home equity, and use those funds to speculate on a rental at the beach (probably with a third mortgage)!!! Have we learned nothing from the 2008 crisis?”, Mike Perry, former Chairman and CEO, IndyMac Bank

February 20, 2015 – Statement 622: “This has happened because the mortgage industry has effectively been nationalized (80+% of mortgages flow through a handful of Too Big to Fail Banks, 90% or so of mortgages are insured or guaranteed by the government, and the totalitarian Consumer Financial Protection Bureau arbitrarily fines and scares the heck out of lenders)…

February 11, 2015 – Statement 610: “Today, just five banks, all Too Big to Fail, control 83.2% of the U.S. mortgage market and about 90% of U.S. mortgages are insured or guaranteed by the federal government: FHA, VA, Fannie Mae, and Freddie Mac. That’s not a free and fair marketplace, it’s a mortgage lending oligopoly tacked on to a government mortgage insurance business…

February 9, 2015 – Statement 606: “Yes, let’s once again advise American’s (who already have a mortgage) to take out a second mortgage on their rising home equity, and use those funds to speculate in the stock market!!! Have we learned nothing from the 2008 crisis?”, Mike Perry, former Chairman and CEO, IndyMac Bank

February 3, 2015 – Statement 596: “Expecting Mel Watt and the federal government to responsibly manage government finance for Fannie and Freddie housing is the management equivalent of placing the honey badger as the bee-hive supervisor and expecting honey yields to increase…

February 2, 2015 – Statement 594: “Recently, the new President of our local Mortgage Bankers Association and I went to meet with our Congressman. As part of the presentation, I had printed off the 1,888 pages of the Consumer Financial Protection Bureau (CFPB) ‘Know Before You Owe’ rules for August 2015, and a sample loan application (90 pages for an FHA loan). We were both surprised to see his reaction…

January 30, 2015 – Statement 586: “Now, you would think some of these parties (especially the government and mortgage lenders) would have…learned the very painful lessons of the 2008 financial crisis and not repeat them, but they have not. Why? Because as Upton Sinclair said: ‘it’s difficult to get a man to understand something if his salary depends on his not understanding it.’”, Mike Perry, former Chairman and CEO, IndyMac Bank

January 29, 2015 – Statement 585: “But Watt (Melvin L. Watt, director of the Federal Housing Finance Agency), a former longtime House Democrat, said the agency had taken steps to make sure that a loan with a 3% down payment “is just as safe” as a loan with a 10% down payment.”, The Los Angeles Times

January 26, 2015 – Statement 580: “Low-down-payment mortgages have long been available. The Federal Housing Administration insures mortgages with down payments as low as 3.5%…The trend has picked up since mortgage-finance giants Fannie Mae and Freddie Mac , which buy most mortgages from lenders, recently lowered the minimum down payments they will accept…

October 29, 2014 – Statement 452: “We say hypocrisy because these rules from the banking regulators have been marketed since the 2010 Dodd-Frank law as a way to reduce risks by ensuring that everyone has “skin in the game.” The concept was that borrowers and the people who sell these mortgages to investors have to be on the hook for losses…

October 22, 2014 – Statement 443: “It’s certainly possible that this is only the beginning of government pressure to make (home) loans with lower lending standards,” Alex Pollock, fellow at the American Enterprise Institute

October 22, 2014 – Statement 442: “If an investor wants to put his own money at risk and lend to (mortgage) borrowers who are putting down just 3%, he’s welcome to call it “sensible and responsible.” And we agree with House Financial Services Chairman Jeb Hensarling that if private lenders and borrowers are operating without a federal backstop, they should be free to set the terms of their mortgage contracts without interference from Washington…

October 22, 2014 – Statement 441: “It will really be up to the investors. If they want better lending standards, it is up to them.”, former FDIC Chair Sheila Bair

October 21, 2014 – Statement 435: “(I am of a mixed mind), but a down payment of just 3% doesn’t leave borrowers with much of a cushion. If prices fall, it risks a repeat of what happened before the downturn…

October 16, 2014 – Statement 427: “…after an uproar from real-estate agents, lenders and civil rights groups, banking regulators dropped the 20% down payment requirement in a new proposal issued last year…

September 12, 2014 – Statement 361: “The FHFA hopes that increasing demand for low-income mortgages from Fannie and Freddie will spur lenders to make more of these loans. That is certainly the way things worked before the financial crisis, when lenders could be counted upon to quickly adapt their lending practices to satisfy the appetites of the mortgage giants…

June 30, 2014 – Statement 247: “If you’re self-employed, you’re hosed. If you just started a job, you’re hosed. If you get a bonus, you’re hosed. Just got a severance payment? Can’t count that. I don’t have to do a lot to be a lender. I just have to be normal. Banks have forgotten that (mortgage) loans are collateralized by the home itself.” William D. Dallas

May 19, 2014 – Statement 194: “The Obama administration and federal regulators are reversing course on some of the biggest postcrisis efforts to tighten mortgage-lending standards amid concern they could snuff out the fledgling housing rebound and dent the economic recovery…

May 14, 2014 – Statement 188: “Hey, I have an idea! Let’s have the government encourage expanding lending to riskier borrowers. That way we can sell more houses, real estate agents can make their commissions, and when things go south, we’ll blame the lenders! Didn’t we try all that about ten years ago?…

March 10, 2014 – Statement 149: “Aggressive (U.S. government) housing programs have not always helped the poor and middle class. The median net worth of American adults is now one of the lowest among developed nations—less than $45,000, according to the Credit Suisse Global Wealth Databook. That compares with approximately $220,000 in Australia, $142,000 in France and $54,000 in Greece.”, Michael Milken, WSJ, March 6, 2014

Posted on November 5, 2015, in Postings. Bookmark the permalink. Leave a comment.

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