Mortgage Brokers Surprisingly Get Support From Banking Top Regulator, John M. Reich

Mortgage brokers heard rare support from the nation’s top banking regulator, John M. Reich at the National Association of Mortgage Brokers Legislative & Regulatory Conference in Washington, D.C..

Some of the nice things said by Mr. Reich about mortgage brokers were:

“First, I want to say I believe that mortgage brokers have made significant contributions to help fulfill the aspirations of people to own homes in America. The most recent studies show that, all combined, mortgage brokers accounted for 58 percent, or $1.7 trillion, of all home loans made in 2006.

The majority of these mortgages were made responsibly; they helped finance homes for minorities and first-time homebuyers, and those who wanted to refinance into a better interest rate when rates were falling. They also helped qualified borrowers with impaired credit buy homes and repair their credit ratings.”

He goes on to give a slap to all the bashers of mortgage brokers who have accused them of single-handedly causing the mortgage crisis by saying:

“How many of you in this room have underwritten loans believing that the borrower wouldn’t be able to make payments and would end up in foreclosure? How does it feel to be accused of this every day in newspapers, on TV, on the Internet, and by elected officials and candidates?”

He rounds out his comments by shedding some light on the other players in the mortgage meltdown other than mortgage brokers:

“But there is plenty of blame to go around. There were homeowners who used this opportunity to buy the largest and most expensive homes they could get and Realtors who encouraged them to do just that.

And let’s not forget that Wall Street deserves a share of the blame. Investors’ appetite for high-yielding subprime mortgage securities put a lot of pressure on the mortgage banking community to generate a high volume of loans without paying enough attention to quality. Before the 1990s, lenders held most loans on their balance sheets. But the increasing popularity of the securitization model allowed lenders to lower their underwriting standards because they could pass on the elevated risks to investors at prices that did not reflect those higher risk levels.”

He finishes by praising the National Association of Mortgage Brokers for their support of H.R. 3915:

“Of particular importance to you must be the licensing and registration requirements in the bill. It calls for the establishment of a national registry of all loan originators, whether they work for a depository institution, mortgage company or mortgage broker. In addition, it establishes strict standards governing the state licensing of non-federally supervised loan originators, including such requirements as criminal background checks, fingerprinting, continuing education requirements and testing. I know that NAMB strongly endorsed the House bill as soon as it was passed. Your association supported the bill even knowing that it would place a burden on small mortgage brokers. You recognized that the national registry of all originators would be effective protection for consumers against bad actors in the industry. It would prevent those originators who break the law from moving from state to state or company to company without being detected.

And I applaud you for this position.”

It’s nice to finally hear a voice of sanity about mortgage brokers coming from a high-ranking government official…it is all too rare.

Good Luck

Author: Rob K. Blake
Published February 11, 2008