As if shedding nearly 40,000 jobs over the last eight months weren’t quite bad enough, in some ways the mortgage industry’s troubles have really just begun. The next blow, it seems, promises to come at the hands of the nation’s politicians.
Chief among them is New York Democrat Charles Schumer.
He’s been beating his mortgage villain drum since late March, when he fired this shot into the beleaguered industry.
"The sub-prime market is the Wild West of mortgage loans and it’s time we bring a sheriff into town," Schumer said then.
"The first step is making sure that borrowers are protected from these usurious lenders. It’s long past time that we ensure that working people are protected from loans that promise them the world and instead give them a mountain of debt and leave them homeless."
Not surprisingly, that sheriff is Schumer himself, and he’s come out guns a-blazin’.
In fact, just yesterday he yanked our old friends at Countrywide Financial Corp. out of the saloon and into the streets for a fight.
Countrywide, said the sheriff, should immediately halt the aggressive marketing practices that put many borrowers into loans they could not afford.
Angelo Mozilo’s company, he said, appears to have been driven by "greed that motivated widespread, irresponsible lending that contributed to what could have been the largest home foreclosure crisis in our country."
"In fact," he went on, "Countrywide’s lending business model prioritizes fees and commissions over the financial viability of the loans."
No doubt adding fuel to the Senator’s fire was this story by Gretchen Morgenson of the New York Times. It’s a devastating look inside the workings of the problem lender and it’s not for the squeamish.
The story paints the lender with the skuzzy brush, and to the many people that read it, it probably only conjured up one thought: "There ought to be a law."
That, of course, is where the sheriff and his growing posse of expediency-motivated politicians comes in. They are practically falling all over themselves these days to make it look like they are the ones on the side on justice, which means that new laws probably aren’t that far behind.
So while their businesses continue to collapse all around them (146 lenders have now gone under since December), the worst may still be in the cards.
The sheriff is in town and he’s out for blood.
Meanwhile, the once booming housing market that all of those bad loans were responsible for continues to fall like a rock.
The bottom in housing is nowhere in sight.
By the Way: One of the nation’s biggest housing pushers has finally come clean. Only months after stepping down from his post as the mouthpiece of the National Association of Realtor (NAR), David Lereah seems to have changed his tune.
In a recent interview, Mr. Lereah has now acknowledged that he got it wrong after all, saying he did not fully realize how loose lending standards had become and how quickly they would tighten up again this summer.
But even then, he just couldn’t resist this waffle in his own defense:
"The bears were bears way too early, and the bulls were bulls too late," he said. "You need to know when you are straying from fundamentals. It’s hard, when you are in the middle of the storm, to know."
His book "Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade–And How to Profit From Them" is still available on Amazon.com.
According to Amazon, customers who bought Lereah’s book also bought "Your Yugo Will Run Forever and How to Set the Land-Speed Record with It."
It can be had for as little as 35 cents. The reviews, however, are somewhat less than fabulous.
Nice job, David.
Wishing you happiness, health and wealth,
Steve Christ, Editor
