July 21 marks the 1-year anniversary of the Dodd-Frank Act. This octopus of financial legislation continues to entangle both consumers and lenders and if left as written will continue to harm the housing industry.
As a residential lender, I am now forced to comply with many burdensome new regulations and even income restrictions.
The current battle is being waged over the qualified residential mortgage exemption.
This act has too much vagueness and will lead to banks raising interest rates, offering fewer loan choices and making fewer loans. The fees associated with a residential mortgage continue to rise as competition shrinks.
I commend the Mortgage Bankers Association for going on the offensive with the QRM issue.
The powerful National Association of Realtors needs to have a stronger voice other than their commercial "We support responsible housing finance reform." Really? Is best they can do? Maybe when some propeller-head in Washington, D.C. figures out that a 6% commission on a house sale is excessive they will join the fight. Appeasement is not the answer.
The problems we face today began when the government began to dictate how and to whom mortgages are to be written and then gave these mortgages an implied guarantee through Fannie Mae and Freddie Mac. What did they expect would happen? These quasi public-private agencies served a very important role in the secondary mortgage market. However, given their neither fish nor fowl status and their congressional oversight they became ripe for abuse.
Consumers need to remember that Wall Street is basically the American equivalent of the African savannah. The weak are picked off by the strong and those who succeed are compensated well. I do not think any private entity should have restrictions placed on their income. It's un-American. Begrudging or taxing someone else’s financial success isn't going to make you wealthier. The consumer outrage is not over the millions in bonus dollars a successful banker receives, but over the fact the firm passing it out lined up for a taxpayer-funded bailout.
The large Wall Street firms and lenders provide a very important role in our housing industry. The door became unhinged because the bets that these banks were making on residential mortgages were backed by the U.S. Elected officials, in their unrealistic quest to increase homeownership, had their finger on the roulette wheel and were gambling with our marker. Many risky loans probably would have never been written if the banks were playing with their own money.
It is my opinion, that neither Rep. Frank nor Sen. Dodd should have been permitted to author any financial legislation. Both were responsible for encouraging and permitting Fannie Mae and Freddie Mac to extend mortgage loans to those with poor credit and little down payments and ignored the repeated calls prior to the housing melt-down to reign in these programs. Watch the YouTube video of Rep Frank addressing the U.S. House of Representatives in 2005.
As the crisis unfolded evidence surfaced that both had questionable ties to those writing these risky loans. Rep. Frank intervened on behalf of a friend to secure him employment at Fannie Mae and there was the notorious case of the Countrywide VIP loan program where Sen. Dodd and other elected officials received preferential loans from the now defunct lender. Today it has cost the American taxpayer billions of dollars with no end in sight.
There are many solutions available to cure this housing crisis. It is time to unshackle our financial institutions and let the free market take over. Some critics claim that the free market got us into this mess, I disagree. It was the socialistic goals of a few attempting to tilt the free markets. Sen. Dodd and Rep. Frank, et al, constantly call for accountability from lenders and banks, but who is holding them accountable for their role in the housing crisis?
Richard Booth is a certified mortgage banker with America’s First Funding Group LLC, a residential and commercial lender in Neptune, N.J.