Mortgage Industry In Search of Leadership
Are there any leaders in the mortgage industry?
Despite being several months into what equates to the de-construction and re-building of the mortgage industry...there seems to be a distinct lack of leadership.
The "subprime meltdown" brought the US economy to the brink of all out Armageddon. Because several market participants chose to turn a collective blind eye on the convergence of the events leading up to this financial tsunami...I think we can all agree that there is no shortage of blame to go around. Like the residents of New Orleans who were victims of hurricane Katrina, we should now be asking...Where are the leaders?
The conspicuous absence of leadership from within the mortgage industry evokes concern for our future. I have yet to see a singular entity or individual step up on behalf of the mortgage industry and offer any constructive ideas or recommendations that bring the “mortgage community” together in a shared effort to fix the problem. I have yet to witness one source step up to help the industry avoid further tightening of lending guidelines, more regulations, and increased licensing requirements. All of which have the effect of constricting, rather than expanding, home ownership in America. Where are the leaders?
What actions have our industry leaders taken to re-establish integrity and regain the confidence of consumers? What solutions (besides tighter lending guidelines) have been proposed from within our industry to self-police and ensure the quality of mortgage backed assets? Why hasn’t our industry stepped up and acknowledged its role in creating the problem and pledged to do better in the future? In the same way that a consumer (who is fully informed rather than being misinformed or even deceived) will logically make a decision in line with their own self interest....so too will investors.
The most constructive, albeit quiet, non-legislative efforts to effect change to our industry is being made by the American Securitization Forum (ASF) and Project: RESTART.
According to a survey of members of the ASF, the top suggestion for improvement to the residential mortgage backed security process was greater transparency of the underlying asset quality. Project: RESTART is an initiative to improve the securitization process by developing commonly accepted standards for transparency, disclosure and diligence so that underlying credit quality can be rigorously analyzed by market participants. Given a greater understanding of MBS quality, we should expect that a more responsible process of underwriting, buying, and selling of the underlying asset, mortgage loans, would lead to higher quality debt securities (MBS).
But, what about consumers? The ASF is focused on securitization risk (i.e. protecting Wall Street) but has the playing field really been leveled for borrowers? Conspicuously absent from the processes under discussion is a means of protecting the CONSUMER. In fact, it almost seems that everyone's interests are represented EXCEPT the consumer.
Without a calming voice and a common message which communicates and assures consumers that the mortgage industry has changed, we will continue to fight the battle of being commoditized, marginalized and disrespected. We all know that in any business venture or industry, problems will arise. What distinguishes failed firms from the prospering companies is how they respond to and handle those problems.
How do you think the mortgage industry has handled THIS problem?