It's Barack Obama's turn to take a whack at the mortgage lending industry piñata. Writing under his own byline in the Financial Times, he starts off with a nice indictment:
The implosion of the subprime lending industry is more than a temporary blip in our economic progress. It is a cancer that, given today's integrated financial markets, threatens to spread with devastating impact to housing and to our economy as a whole, unless we act to contain it.
It is also a parable about how an excess of lobbying and influence can defeat common sense rules of the road, placing both consumers and our nationb
Millions of dollars of campaign contributions from the mortgage lending industry, declares Obama, explain the federal government's failure to properly regulate the mortgage lending industry. To fix the situation, he suggests creating a fund to help borrowers refinance or avoid foreclosure by fining "lenders that acted irresponsibly or committed fraud."
Everybody deserves a chance for the dream of home ownership, "but that is not going to happen until we stop the unlicensed, unregulated, fly-by-night mortgage brokers who are hoodwinking low-income borrowers into taking on loans they cannot afford."
This is all fine up to a point. But if we're talking cancer, fly-by-night brokers are hardly the primary source of metastasizing cells. Obama devotes no space to considering how Wall Street's hunger for risky loans created the incentives for bad mortgage lending behavior. If you're looking for a tumor to cut out, that's the place to start.
Or if, like me, you are one of the many Americans who writes a monthly check to the largest mortgage lender in the U.S., you could examine your most recent "home loan statement" from Countrywide.
Countrywide wants me to save "up to 10 percent or more" on my monthly mortgage payment. Awesome!
Best of all, this can be done with...
- NO need to show bank statements or verify other assets
- NO paycheck stubs or proof of income required
- NO new appraisal (in most cases)
- $0 out-of-pocket closing cost options available.
Oh, wait a minute, there's some fine print.
Refinancing may increase the total number of monthly payments and the total amount paid when compared to your current situation. ARM rates subject to increase after the fixed rate period. Borrowers who choose to pay closing costs upfront may qualify for a lower rate.
Countrywide hardly qualifies as a "fly-by-night" broker. But here they are, right now, in the middle of a mortgage lending sector meltdown brought on, in part, by the irresponsible encouragement of a tsunami of ill-advised loans, eagerly inviting homeowners to refinance their mortgages with new loans that, if you read the minuscule print, just don't seem like a very smart idea. Hey, did you know you can save 10 percent on your monthly payments by agreeing to a new loan that may increase your overall debt, expose you to an uncertain future of upwardly-resetting monthly payments, and consign you to a higher interest rate if you grab for that alluring "$0 out-of-pocket closing cost" option?
It's easy to attack "unlicensed, unregulated, fly-by-night mortgage brokers." But if Obama really wants to get down and dirty on this issue, he could just wave a Countrywide mortgage bill at his audience and declare that, if elected, he will demand that the font size on the fine print be jacked up so we don't have to squint to realize we're being conned.
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