The Fair Mortgage Collaborative ?

The Fair Mortgage Collaborative, a consortium of lenders, brokers and mortgage technology providers, made its debut in June with financial backing from the Ford Foundation, among other groups. Its purpose, the organizers say, is to make only those loans in a borrower’s best interest and to identify and certify the lenders that adhere to certain strict standards. The group . . . must ensure that the lenders are suitable for borrowers.

–A Mortgage Watchdog Group Is Born

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Really? You call this a Watchdog — another Self-Regulating (SRO) Entity?

This looks more like a group of concerned foxes volunteering to watch the hen house.

I guess the threat of losing certification (top) will really keep these firms focused on doing the right thing: Responsibly making loans to qualified borrowers. After all, the threat of going belly up (350 mortgage companies and counting) was far too intangible — what they really needed was something more concrete.

Like a gold shield.

Pardon my cynicism, but why should anyone believe that a “consortium of lenders, brokers and mortgage technology providers” are going to be anything more than a trade group?

I seem to recall a similar consortium of lenders, brokers and mortgage technology providers being one of the main causes of the credit bubble and the housing boom and bust.

The timeline goes something like this: Greenspan cut rates to 1%, ignored non-bank lenders whose banking model was “lend-to-anyone-then-sell-the-mortgages-to-securitizers.” Boom, bust, economic collapse, bailouts, 2008 Election, new administration, blahblahblah.

Fast forward to recent months. The White House proposes a new Consumer Protection Organization that is designed to protect the public from, well, a “consortium of lenders, brokers and mortgage technology providers.”

I like that idea. Do away with biased industry owned arbitration, enforce usury rules, make sure terms are properly disclosed, and transparent, written in plain English. And include biting penalties for transgressions.

I have two big dogs, and they both have powerful jaws. Woe to the burglar who finds himself under 300 pounds of canine fury. These are real watchdogs, they have sharp teeth.

But an industry based consortium? Puh-leeze. I don’t see much in the way of enforcement.

This smells an awful lot like an attempt to head off oversight to me.

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Sources:
Fair Mortgage Collaborative
http://fairmortgage.org/default.asp

A Mortgage Watchdog Group Is Born
BOB TEDESCHI
NYT, August 2, 2009
http://www.nytimes.com/2009/08/02/realestate/02mort.html

Consumer Financial Protection Agency: an overview
The proposed agency’s powers and oversight would go beyond mortgages and real estate. Here’s a rundown of what the agency could do, who’s for and against it, and how it might affect you.
Kenneth R. Harney
L.A. Times, August 2, 2009
http://www.latimes.com/classified/realestate/news/la-fi-harney2-2009aug02,0,7083818.story

Consumer Groups Back Obama Regulation Changes
Consumer Affairs, June 18, 2009
http://www.consumeraffairs.com/news04/2009/06/reg_react.html