Mortgage Professional America forum is the place for positive industry interaction and welcomes your professional and informed opinion.

ACLU sues FHFA over eminent domain plan

Notify me of new replies via email
Mortgage Professional America | 06 Dec 2013, 11:37 AM Agree 0
What do you think? Is the ACLU out of line, or is FHFA overstepping its bounds? Give us your two cents in the comments below.
  • Laurie | | 06 Dec 2013, 11:59 AM Agree 0
    I would like to see someone like the ACLU spend their resourses on something that will actually help low income families. If they want to sue for discrimination, how about sue over the exclusive use of credit scores to price mortgages. Responsible, bill paying lower income people typically carry a lot less credit, thus casueing a naturally lower credit score due to less crdit history or credit lines available. As a result of them having lower scores, combined with buying lower priced properties, (thus getting smaller mortgages), they are penalized with much higher interest rates. They may have NEVER had a late rent or mortgage payment in their lives, but simply becasue they don't have a 740+ fico score, they are penalized with paying more for 30 years. Please tell me how that is far or equal?
  • Tom D | | 06 Dec 2013, 12:06 PM Agree 0
    Lets see. A government organization being influenced by big banks. Gee, why would anyone ever think that could happen?! Follow the money. Not sure who I distrust more in this scenario - the banks or the government. Pretty much of a toss up in my opinion.
  • John Deleva | | 06 Dec 2013, 12:18 PM Agree 0
    On the one hand the ACLU along with many other forces for housing equality and access to include Congress pushed for loose lending in the form of CREA, weak underwriting guidelines pre-mortgage crisis and a host of other such initiatives to fulfill the goal of higher home ownership percentages. On the other hand the same forces are at work to force the servicers to write down principle balances or face another government action...damned if you do, damned if you don't. Can this be real????? Yes it is in the new norm and world order the liberals prescribed and are now executing. The moderates had better wake up and straighten out the left and the right before this country is damaged beyond repair.
  • Michael G. Burroughs | | 06 Dec 2013, 12:22 PM Agree 0
    Eminent domain was created for a purpose. To reach in a bag of tricks by a city and pull this out is simply wrong. For one govenment enitity to work against another government enitity is not only wrong it is a waste of precious resources.
    Focus on helping people not legal manuevers to be countered by more legal manuevers. Cities should do their jobs and eminent domain to buy houses is a trick. Stop the tricks.
  • Bob G | | 06 Dec 2013, 12:40 PM Agree 0
    Light use of credit is such a small contributor to the scoring process that your statement is a total reach. Short credit history is more of an impact. I have clients with only a few trade lines whose scores are will above the minimums required in todays market. They are equally divided between low-mod and mainstream borrowers. Younger borrowers with short term credit histories have lower scores. THe scoring system doesn't factor social or income factors into scores. Late payments and higher percentage of use of available credit, both stalwarts of low-mod income borrowers, is why there scores are low. They are an inherently higher risk and there credit HISTORY shows that. SO get off the soap box with your misguided ranting. If low mod borrowers pay there bills on time and borrower responsibly, they have the same scores as my higher income clients. That has been the case for as long as FICO scores existed.
  • Howard Platte | | 06 Dec 2013, 01:10 PM Agree 0
    To a certain extent I agree with Laurie. The use of credit scores in our industry has been the least mentioned topic of all the evils contributing to the housing meltdown. Since the initiation of automated underwriting and the use of credit scoring, the industry has effectively "dumbed down" the underwriting process to the point that underwriters no longer have the authority (nor the skillset) to make credit decisions. They simply check to see if borrower's hit the hurdles of the program's criteria or not. This lack of ability and fundamental knowledge of making an actual credit decision is what will continue to result in credit worthy borrowers being declined or rated to pay higher rates while other borrowers who should be declined get preferred rates, because they seemingly hit all the guidelines and are approved when they should possibly be declined or counteroffered. As an example, as long as the borrower has a 740 FICO rarely does an underwriter ask a borrower to explain why it is that they have $60,000 in potentially destructive credit card debt as long as they have 2-3 months PITI in reserves. Hardly comforting knowing that a borrower carrying this much volatile debt has only about a months worth of household income in reserve at closing. Most Underwriters have long ago been stripped of making real credit decisions and even if it were given back to them, few if any would actually know how to make a decision. Just look around and see how many direct lenders are even willing to do manual underwrites. It is a tiny fraction. FICO and AUS modeling has made it cheaper in the short run to get a mortgage to closing but the actual quality of the mortgage is inherently lower because a skilled underwriter is no longer evaluating true credit attributes. Instead, these so-called underwriters are checking boxes, yes or no. I don't doubt that generally it is more efficient than the old school methods for originating the mortgage, but the end result is too many potentially good mortgages are declined and too many bad mortgages are approved because of the system. The ones in between would have been approved under either system. Until the GSE's and FHA get back to truly granting some immunity from buybacks for making good faith credit decisions, nothing will change. As to whether the latest generation of automated credit underwriting decisions will prove to be prudent and worth the benefits of the upfront efficiency, I guess we will have to wait until the next meltdown because we wont be able to blame it on any of the old reasons!
  • David S | | 06 Dec 2013, 04:20 PM Agree 0
    Reading between the lines, by supporting this eminent domain proposal, perhaps the ACLU is tangentially working to make sure Fannie and Freddie survive and stay in the game. This may be upsetting to FHFA because it seems clear that FHFA would like to see these two GSEs gone, leaving Wall Street Banking interests in charge of underwriting, capital allocation, and the resulting 'private label' securitization process that would follow.

    FNMA and FHLMC may be imperfect but in my opinion, are essential to the availability and maintenance of model uniform underwriting rules, and ensure equal access to fairly priced products and essential funding capital allocation in serving an exceedingly large, diverse, and important middle segment of our residential real estate market.

    Thus FHFAs direction to the GSEs to steer clear of these markets (even though the GSEs products are specifically excluded in the proposed legislation - from eminent domain seizure possibility) - is an indication of FHFA's determined vision of ensuring the potential private label (Wall Street) world to come?
  • GENE ANDERSON | | 06 Dec 2013, 05:43 PM Agree 0
    FHFA's MISSION: Ensure that the housing GSEs
    government-sponsored enterprise (GSE) is a financial services corporation created by the United States Congress.

    Ensure that the housing GSEs operate in a safe and sound manner.
    The City of Richmond desires to PURCHASE underwater mortgages (including foreclosures) and refinance them at lower rates. The lender is made whole. The city stated that "if" the lender would not sell them the mortgages that to remove the blight from their community, they would use eminent domain but the plan would be aimed at mortgages packaged into private-label securities not sold on FHFA–regulated markets.
    FHFA should stay out of this until they have a dog in the fight. Remember their ONLY mission is "Ensure that the housing GSE s operate in a safe and sound manner".
    The suggested use of eminent domain in communities EXCUDES "housing GSE's".
    This is a fight between the PRIVATE Wall Street Bankers and cities but it seems that FHFA will absorb the cost of the fight for Wall Street.
    When regulators, wall street and greedy people truly grow up resolution will happen BUT no one should benefit financially due to a foreclosure Take the profits out and there will be a meeting of the minds
  • Robert Hockett | | 06 Dec 2013, 10:26 PM Agree 0
    It makes perfect sense for the ACLU to involve itself in this matter. It has a longstanding interest in racial justice, and the financial industry's first reverse-redlining communities of color for predatory lending, then redlining communities working to dig out of the mess caused by that predatory lending, and finally inducing a federal agency - FHFA - into doing the same thing is as profound an assault upon communities of color as this nation has experienced in recent decades.
  • gheinecke | | 07 Dec 2013, 09:04 AM Agree 0
    Don't worry they will find a way to blame it on the brokers
    I said it a long time ago that the credit scores would be the downtrend of the industry. When we underwrote bad mortgages we lost our job . That is why we made mortgages that made sense without credit scores.
  • Randyz | | 08 Dec 2013, 07:57 AM Agree 0
    When dealing with Fannie Freddie I do not see where it is really needed. HOWEVER it is a way around portfolio mortgages where Big Banks that bought up companies like CW refuse to work with people because their mortgage was not Fannie or Freddie. They have a conflict of interest because they can take away the property and make so much more money!
Post a reply