mortgage

Wrong-headed regulators

Thursday, July 16
Written 1 p.m. EDT

GET THE DETAILS: I have an article up today -- "Want to refinance? Know the details" -- in which I describe the Home Affordable Refinance program as confusing. Normally, I strive to believe that people act in good faith, but they make mistakes. But I'm cynical about the refinance plan. I think at least one stakeholder wants it to fail. But I don't know which stakeholder to blame.

There's a passage of the story in which I describe the plan to allow refinances of loans with between 105 percent and 125 percent loan to value. "Lenders could process and close those loans now if they wanted to, but they don't want to. They'll wait until Fannie and Freddie are buying those loans," I wrote. But I have an unconfirmed report, from a mortgage broker, that one lender plans to start taking applications Monday.

FLAT RATES:  Mortgage rates didn't change much this week, at least in Bankrate's weekly survey. Freddie Mac reports that the 30-year fixed fell 6 basis points last week.

AVERAGE: There are hearings today in the House and in the Senate about financial regulatory reform. I'm glad I'm not watching them on TV because I'd be hoarse from screaming at idiots. Y'know, the world would be better off if it were run by smart, lazy people like me instead of hard-working people of merely average intelligence. I'm that guy who didn't do a lick of academic work in high school, yet made mostly A's and a few B's; meanwhile, the people who studied all night just to make B's and C's are now in charge of everything.

The problem is that when industrious people get hold of a bad idea, they make sure it's implemented.

Today Elizabeth Duke, a Federal Reserve governor, testified before a subcommittee of the House Financial Services Committee and asked that the Fed be allowed to keep its consumer-protection powers instead of having those responsibilities moved to a new Consumer Financial Protection Agency.

I know what you're thinking: The Fed has consumer protection powers?

Yeah, it does. In her prepared remarks, Duke says the Fed needs to do a better job for consumers. Then, in the next paragraph, she says, "We have demonstrated, particularly in recent years with which I am most familiar, our strong ability to effectively execute our congressionally assigned consumer protection responsibilities."

Maybe she's auditioning to be Bernie Madoff's publicist.

Also today, an official with the Treasury Department submitted written testimony to the Senate Banking Committee about the Obama administration's failing Home Affordable Modification program. Herbert Allison, assistant secretary for financial stability, brags that the administration's foreclosure-prevention efforts are at a scale that "has never been previously attempted."

Well, I could attempt to bench press a million pounds, but I would fail, and I wouldn't expect the Senate to give me a pat on the head for trying.

What bugs me most about Allison's testimony is that he never mentions principal reduction, unless I missed something in his turgid prose. Instead, he seems to think it's a great idea to "help" underwater borrowers by extending their loan terms to 40 years.

Meanwhile, an executive who represents mortgage investors told the Senate committee that more homeowners should get principal reduction, according to a report by Bloomberg.com's Jody Shenn.

Curtis Glovier, speaking on behalf of the Mortgage Investors Coalition, told the Senate that more borrowers should get to take advantage of the Hope for Homeowners program, in which borrowers have some debt forgiven when they refinance into government-insured mortgages.

Under Hope for Homeowners, holders of home equity loans and home equity lines of credit would be paid off with pennies on the dollar. Glovier told the Senate that TARP money should be paid to those second lienholders so they'll let the refis go through.

Hey, finally -- someone who speaks sense.

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David McMillin

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