03/31/2008

Who was minding the mortgage store?

Hello:

With today's unveiling of the new regulatory plan by Treasury Secretary Paulson (which is recommended to come into effect only after the current mortgage problems are resolved) and the simultaneous resignation by the Housing and Urban Development (HUD) Secretary Jackson makes one wonder who was regulating mortgages? Do we sense something unusual?

Remembering that the Federal Housing Administration (FHA) is primarily a mortgage insurer, then in terms of mortgage regulators, there exists:

1) The Office of Federal Housing Enterprise Oversight (OFHEO), which, according to the Washington Post is "an agency based in the Department of Housing and Urban Development, has a staff of 183 and a budget of nearly $40 million. It oversees two of the nation's largest and most complex financial institutions, which together guarantee payment on about $3.1 trillion of mortgage-backed securities.

Chartered by the government to provide a steady flow of funds for home mortgages, Fannie and Freddie borrow money from investors to buy mortgages from lenders and package mortgages as securities for sale to investors. Although the government disavows any responsibility for the companies' debts, some government analysts and investors say taxpayers could be called upon to bail them out in a crisis."
So, it appears we have an executive branch agency only overseeing other government agencies that buy and repackage mortgages.
2) The American Association of Residential Mortgage Regulators, a non-profit organization, whose purpose is to, according to their website, "promote the exchange of information between and among the executives and employees of the various states who are charged with the responsibility, pursuant to the laws of the individual states, for the administration and regulation of residential mortgage lending, servicing and brokering".
So it appears there is an association that merely promotes conversations amongst state mortgage regulators.
Let's take a look at the state mortgage regulators of California, one of the most populous states in the union, shall we?
According to the California Department of Corporations website, mortgage underwriters are governed by the California Residential Mortgage Lending Act (CRMLA) which "requires that any person engaged in the business of making or servicing residential mortgage loans within California do so only under the authority of a license under the CRMLA. The following entities are exempt from the licensing requirements:

• Banks, trust companies, insurance companies, and industrial loan companies;
• Federally chartered savings and loan associations, federal savings banks, and federal credit unions;..."

So, it appears that some major mortgage lenders are exempt from regulation in California.

So who was minding the mortgage store???? Anyone? Bueller? Anyone?

If mortgage regulation was indeed as hole ridden as it appears, no wonder our economy is in such trouble now. Perhaps we will see improved regulation emerge from this mortgage mess.

As we near the tax filing deadline of April 15th, please remember that your donors may be frustrated by taxes, too. Could it be that if they donated just a bit more to your organization, that they would drop into a lower tax bracket? Perhaps they would like to consult with their tax professional in preparation for next year's tax filing.

 

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager