This morning I happened across an MSN news article written by Michael Brush, entitled “Who’s to blame for the mortgage mess?” The full text of the article can be found here.
First, I must say that it’s about time some of the news folks started getting on the blame bandwagon. I’ve been waiting for this with bated breath. Michael gets started with a “who-cares” attitude about what the current state of affairs means to our economic viability, and moves immediately into the classic democrat’s response of trying to find blame pointing fingers at it. Or, as I call it, admiring the problem instead of solving it.
Michael needs to get it straight. The Fed has never, ever in the course of its 220-year history existed for any other purpose than to fight inflation. It’s most useful and used tool for this purpose is the Funds interest rate; the Fed raises or lowers the rate banks pay for overnight loans to each other to control the flow of cash into and out of our national economy. This is ALL the Fed does. Even as now-chairman Ben Bernanke said just two months ago in the September meeting minutes, they will do what is necessary to avert a recession but the Fed will not take action to bail out mortgage lenders, investors, or even the holders of mortgage notes. So to get back to setting Mr. Brush straight, his # 1 culprit, Alan Greenspan, beautifully upheld the Feds long-term principles by lowering the target Funds rate to as low as 1% in 2003. Had he and the Board not acted swiftly and decisively as they did with their reduction cycle following the events of 9/11, Mr Brush wouldn’t have to write about what was going on in the housing market right now; there wouldn’t be one.
Last, I can’t help but feel personally attacked by number six on his list of culprits: mortgage brokers. Unfortunately, I also have to admit that I tend to agree with some of his analysis. Getting licensed as a loan officer in Oregon is relatively easy; 20 hours of online study, followed by a proctored 100-question exam. I finished my online study tests in under 9 hours, and sat there refreshing the page for another 11 hours while watching movies and browsing the Internet. I then blasted through my exam in the first try, and viola! I was Oregon’s newest Loan Officer.
The complaint I have about the LO testing in Oregon is not that it’s too easy. My beef is that it’s largely irrelevant and fails to teach new Officers how to structure mortgages for their clients. I finished up my exam and online training in a flash, but what I learned had nothing to do with what I might recommend to a client some day. I learned all kinds of compliance and legal mumbo, but there wasn’t even a section on the different types of mortgage products available! I got all that knowledge from my years of experience as a property investor and through my own number-crunching ability. So I don’t think it’s fair to hold naïve mortgage originators (and most of them are naïve as opposed to out-and-out fraudulent) responsible for the sins of those who are in positions to oversee testing.
That said, most of the mortgage brokers I know are either doing a great job for their clients or they’re in prison. If they’re doing a great job, I don’t see how they made it onto Mr. Brush’s Axis of Evil list. If they’re in prison, their sins have already found them out and they shouldn’t have done something they knew was completely wrong when they did it. there just isn’t enough room in this industry to do stupid things without knowing you’re doing something stupid.
Okay, there. I’m done with my rant. Mr. Brush, please write when you get work.
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