The mortgage industry is evolving on a daily basis.  New reforms have been signed into law and the rule-making process is underway, yet no clarity has been provided on exactly how these reforms will implemented. The futures of the GSEs are up in the air,  confusion continually surrounds new originator compensation practices, and good luck figuring out what loans qualify for exemption status in new risk retention regs.    Making matters worse, depressing headlines are contributing to a negative feedback loop that will only further erode home values and breed more pessimism.

Nick Timiraos called attention to comments made by FHA Commissioner David Stevens at the MBA conference yesterday that illustrate the challenges we face ahead....


FHA’s Stevens: Mortgage Industry Faces ‘Trust Deficit’

By Nick Timiraos
ATLANTA—A top Obama administration housing official called on the mortgage industry to address a “trust deficit” that is widening as a result of banks’ difficulty in properly processing foreclosures at the industry’s annual convention on Tuesday.

The furor over banks’ inability to properly file foreclosure paperwork serve as the latest reminder that the nation and the industry are paying a high price for almost a decade of abuses and irresponsible behavior, said David Stevens, the commissioner of the Federal Housing Administration, at the Mortgage Bankers Association’s annual meeting.

Mr. Stevens, whose mortgage-banking career included stints at Freddie Mac and Wells Fargo & Co., called on the industry to do more to participate in taxpayer-supported efforts to modify loans and refinance at-risk borrowers. “We aren’t holding ourselves accountable,” he said. “There’s clearly a trust deficit that occurs.”

On Monday, the Obama administration reported that the number of homeowners who received permanent modifications under its Home Affordable Modification Program had fallen below 28,000 in September, the lowest level since November 2009, when the program was being launched.

Policy makers have kept mortgage markets functioning by backing nearly nine in 10 new loans today, including preserving access to low down-payment mortgages through the FHA and by pledging to put unlimited amounts of capital into failed mortgage-giants Fannie Mae and Freddie Mac. Officials have also taken unprecedented steps to drive down mortgage rates, which have hovered near 60-year lows for the past month.

The former banker said the industry risked losing some part of a generation of home-buyers—young workers and families that comprise the “echo boom” generation—by “scaring them” with headlines about predatory loans during the boom and improper foreclosures during the bust.

“They’re the future of homeownership. They’re the ones…who have just watched this shock and awe and may be concerned, may be resistant about entering a market, particularly if they don’t trust all the participants,” he said.

Mr. Stevens chided the industry for putting profit margins ahead of customer service and due process by relying on loan-servicing staffs that are stretched thin. The FHA launched this spring performance reviews of its five largest mortgage servicers, which handle day-to-day loan management on behalf of mortgage owners.

Several sessions at the four-day conference focused on the challenges of dealing with a bevy of new federal regulations. But on Tuesday, Mr. Stevens was set to reject some concerns that the recent financial-regulatory overhaul and the creation of a consumer-protection agency would stifle innovation or restrict lending.

“I quite frankly am surprised that we push back so hard,” he said, given that the industry’s past poor practices had led to the need for transparency and accountability that new regulations are designed to provide.

Addressing the convention’s opening session on Monday, MBA Chief Executive John Courson decried the “feeding frenzy” that had resulted from banks’ decisions to halt foreclosures after flawed processes surfaced last month.

“We’ve seen facts that are inaccurate,” he said, “and information that’s coming out that’s unrelated to the issue at hand.”


Negativity and uncertainty are abundant and guess whose fault it is?


At least that's the perspective of the outside world. It doesn't matter what role you perform in the process, if you work in the mortgage industry, you are lumped into the crowd, considered a low life. I am no different.  My own extended family balked upon hearing that I was still working in the mortgage business, it was like I had leprosy. They didn't stop to ask what I did or where I worked, it didn't matter that the transient salesman who entered the mortgage business during the subprime boom had long since moved on, a stigma still surrounds the housing finance system, mortgage professionals are still viewed with great disdain by Main Street. 

Unfortunately perception is reality. As long as the economy is weak, fingers will be pointed and we will carry the brunt of the blame. It is what it is and complaining about it does nothing but lead outsiders to say things like "we aren't holding ourselves accountable" ...which adds to the negative feedback loop and only further delays the timing of recovery in the housing market.

We can accept the physical and psychological challenges that lie ahead or we can continue to let the world think we're a bunch of low life scum. I don't know about you but I refuse to accept that stigma.  We're gonna have to restore integrity to this industry one borrower at a time.

Now that doesn't mean we shouldn't stand up for what we believe in,  we just can't approach this debate from a self-promotional point of view. It's not about making our lives more comfortable in the eyes of tax payers and global investors, it's about providing transparency to investors and promoting sustainable homeownership. Our personal priorities mean little in the context of the BIG PICTURE, if you can't deal with that I recommend you move on to another profession because the road to recovery will not be short and we'll be the root of all evil until then....

It is what it is.