How many times do brokers need to say, they never developed a single-loan program, wrote guidelines for those same programs, or underwrote and approved any consumer’s mortgage?
TheNicheReport.com) On July 21, 2010, Congress sent the final version of the Dodd-Frank Act to the President for signature. Surrounded by then Senator Chris Dodd and House Financial Services Committee Chairman Barney Frank, the President signed the bill into law. A key component of the law was the creation of the Consumer Financial Protection Bureau, better known as the “CFPB.” Although the CFPB became operational exactly one year later, it lacked the authority to regulate non-banks, due to not having a Senate-confirmed Director.
On December 8, 2011, the Senate attempted to take up the nomination of former Ohio Attorney General Richard Cordray, as President Obama’s choice as the first CFPB Director. However, by a vote of 53-45 a procedural motion to begin debate on Cordray’s nomination was defeated. That same day President Obama held a news conference where he lashed out at Republicans and MORTGAGE BROKERS. During his remarks the President once again singled out mortgage brokers and payday lenders as the root cause of the financial crisis. From the podium in The White House Press Room, Mr. Obama, referring to the importance of the CFPB’s authority over non-banks, stated,
“A key component of that was making sure that we have a consumer watchdog in place who can police what mortgage brokers and payday lenders and other non-bank financial entities are able to do when it comes to consumers.”
Apparently, the President never heard of the SAFE Act, RESPA, TILA, ECOA, the LO Comp Rule, Appraiser Independence (HVCC), state laws and a host of other rules and regulations governing mortgage brokers. If he had, he would have known mortgage brokers are the most highly regulated segment of the financial services industry. During the Q&A part of that same news conference, the President again blamed brokers for consumers losing their homes.
“So let's just take a very specific example: All the families out there who have now lost their home, after having paid their mortgage over and over again, because they were told that they could afford this home; they didn’t understand all the documentation that was involved -- this was peddled deliberately to them, even though a mortgage broker might have known that there was no way that they could keep up with these payments -- and now they're out on the street because nobody was making sure that there's fair play and fair dealing in the mortgage industry on it. Now, why wouldn’t we want to have somebody just to make sure that people are being treated fairly? Especially when not only is that family affected, but our whole economy is affected.”
How many times do brokers need to say, they never developed a single-loan program, wrote guidelines for those same programs, or underwrote and approved any consumer’s mortgage? With respect to the documentation “they didn’t understand” and was “peddled deliberately to them,” those would be your forms, Mr. President.
In addition, Georgetown and Harvard studies support broker claims that they weren’t responsible for the financial crisis. The Georgetown subprime loan study specifically states, by using a mortgage broker, consumers will save an average of 1.13 percent on their APR versus a bank-originated mortgage. The Harvard study goes even further by saying that mortgage brokers were not responsible for the financial crisis.
On January 4th
, Mr. Obama made a recess appointment and named Richard Cordray Director of the CFPB. On that same day Mr. Obama twice singled out mortgage brokers as the predators. However, during a stop at the Cleveland, Ohio home of William and Endia Eason, the truth caught up with the President. While sitting at the kitchen table in the Eason home with the couple, Director Cordray and Deonna Kirkpatrick, Communications Director of an Ohio non-profit agency, Mr. Obama told a gaggle of press a horrific story endured by these home owners, who almost lost their home in a foreclosure.
According to the President, the couple’s “trouble began in 2001,” after their home was cited for a housing code violation by the City of Cleveland. A mortgage broker came knocking at their door and told the Easons they needed a loan to get the work done. He further quoted the broker as having said, “The Easons would go to jail,” unless they made the changes. After telling them it was too late to back out of the loan process, the broker talked the couple into borrowing $80,000 to repair their steps, garage and roof.
The President continued the story by saying, after having lived in their home for 30 years, they suddenly found themselves owing almost $80,000. When they failed to meet their payment obligations, the lender started the foreclosure process. In desperation the Easons contacted a non-profit that specializes in helping victims of predatory lending. The President went on to say, with the help of the non-profit they were able to convince the mortgage company to write off part of the mortgage loan and back away from the foreclosure. Lastly, he stated, the mortgage broker made $4,000 from the deal and walked away. If in fact the Easons were victims of predatory lending, those responsible should be punished. The Easons and the non-profit never mentioned the name of the broker or brokerage.
After looking into the matter, here’s what we found. A mortgage broker was NOT involved in any predatory act against the Easons. Within minutes of the story breaking, one of our members emailed me the public record of the Eason’s property lines, dating back to 1974. That record confirmed a broker was not involved in any 2001 mortgage transaction. In fact, the only time a broker was involved was in 2004, when the Easons received an FHA reverse mortgage
. The Eason’s lien record showed 55 results, including IRS tax liens. One of those liens was recorded in January 1995, followed by the property being deeded over to another individual. That same individual deeded the property back to Mr. Eason two months later. Absent the broker who originated the reverse mortgage
, it appears the liens shown on the record were made by banks and finance companies. One would think the President’s staff would have vetted the Easons, before exposing the President.
As a 30-year veteran of the mortgage industry, I’m tired of getting blamed for the actions of others. Some say it’s a misconception about who a mortgage broker is and the White House didn’t do it deliberately. Even if that’s true, the misconception has caused mortgage brokers to be targeted for most of the onerous rules, regulations and legislation we have today. As an example, we have HVCC and LO Comp. NAIHP has met with The White House regarding this serious matter and is working with them on a “clarification.” Additionally, we have a scheduled meeting with the new CFPB Director set for January 26th. Interestingly enough, The White House has asked to join that meeting. Lastly, NAIHP is about to launch an all-out media campaign to correct the misconception that brokers caused the financial/housing crisis. If you’re interested in joining our media campaign, please contact email@example.com
Marc is the President of the National Association of Independent Housing Professionals. Previously, he served as the 2008-2009 President of the National Association of Mortgage Brokers. He also held the positions of NAMB’s President-elect, Vice President, Director, Chairman and Founder of the Consumer Protection Committee, and was awarded NAMB’s highest honor, Broker of the Year.