Blame for All but the Borrower Pays

Posted by kevin on August 30, 2011 under Foreclosure Blog | Comments are off for this article

Lenders are licensed in New Jersey.  That means that doing business- mortgage business- is not a right but a privilege.  Yes, you can make money as a lender or mortgage broker.  But you have an obligation to the public, an obligation to the State.

People, even it appears sometimes judges, forget this simple fact when they are confronted with with continuing mortgage crisis.  They pay lip service to the idea that there is enough blame to go around; but when it is time to pony up, only the borrower is left to face the music.

A recent edition of Consumer Bankruptcy News refers to a study done by Prof. Eric Higgins of Kansas State University.  In that article, Higgins says that it is not fair to point at the banks as being the bad guys who caused the housing market fiasco.  While admitting that the banks share some of the blame, Higgins stated that there is also blame to be had by the people who knew they were borrowing too much.  There’s blame to be had for investors who did not do their due diligence (how dare they believe an S& P triple A rating), and there’s blame for the regulators who were asleep at the switch.

Well, kudos to the  professor who points a finger at all parties involved.  However, how does the prof believe the problem can be solved?  Simple- speed up the foreclosures.  That’s right.  Everyone is to blame but once again,  only the homeowner has to pay the price.  And its a pretty big price at that.  They get to lose their homes.  But that will stimulate the housing market.

Higgins says that mortgage mods  do not work.  He is right.  The ridiculous modifications offered by the servicer on their own or under HAMP failed pitifully.  But they had to fail because  if you just add arrearages to the amount due and drop the interest rate a bit, you have a modification that costs more than the original mortgage which the homeowner could not afford in the first place.

I would like to read an article that not only acknowledges blame for all parties, but also advocates that all parties have to bear the pain to put the housing market back on its feet.  That means that bankers pay fines and go to jail if they engaged in fraud or predatory lending.   That means that regulators who do not regulate get fired.  That means investors get to sue Wall St firms for fraud.  And that means that bankers and homeowner share in the loss of equity on the home caused by a situation that the banker, in part, caused.  Then, I would say that lenders are somewhat worthy of the license bestowed upon them by New Jersey.