Dumping the secondary mortgage market market

[Community Development Banking List]

Original message from: 2sparks@cox.net

Hello,

I feel ridding ourselves of the opaque, complex, secondary mortgage market, which is a major player in the mortgage mess, is being over looked.

The relative sudden dependence on the MBS system that has mushroomed into prominence since its inception, not that long ago, should be a clear signal to at least start a discussion on weather it was a good idea at all in the first place. I for one think it was not.

There are cheaper ways to finance homes. Why let a breeding ground for greed go unchallenged, or for that matter think that we can successfully manage greed with regulations? What is needed is a simple transparent way of raising money where mortgages are held and not securitorized. Is anyone interested in hearing more?

Matthew Sparks

[Community Development Banking List]

Original message from: richardrc01@gmail.com

If you get rid of the secondary market you are going to limit the resources
available for first time home buyers and also your low income purchasers.
Small financial institutions will not be able to create as many mortgages
based on federal restriction and low dept ratios. I feel that we just need
to regulate the mortgage markets better and insure that the borrowers can
actually afford to make the purchases. If we lower the dept ratios for
borrowers back to 12% it should eliminate some of the mistakes made in the
past. The secondary market is needed especially in small markets with
limited resources.

Rich Chartrand.

On Tue, Dec 15, 2009 at 12:16 PM, Matthew Sparks <2sparks@cox.net> wrote:

Hello,

I feel ridding ourselves of the opaque, complex, secondary mortgage
market, which is a major player in the mortgage mess, is being over looked.

The relative sudden dependence on the MBS system that has mushroomed
into prominence since its inception, not that long ago, should be a clear
signal to at least start a discussion on weather it was a good idea at all
in the first place. I for one think it was not.

There are cheaper ways to finance homes. Why let a breeding ground for
greed go unchallenged, or for that matter think that we can successfully
manage greed with regulations? What is needed is a simple transparent way of
raising money where mortgages are held and not securitorized. Is anyone
interested in hearing more?

Matthew Sparks



CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: carl.malone@harrisbank.com

While I agree that there is a need for a secondary market, we should consider trying to find ways to simplify access to affordable mortgage products to qualified borrowers. Dropping the DTR to 12 percent is both impractical and improbable. You could drop it to zero and still have defaults. The key, to me, is curing whatever issues to prospective borrower has before he gets in to the pipeline.
--------------------------
Sent from my BlackBerry Wireless Handheld

________________________________
From: bounce-4779857-4990520@list.cornell.edu <bounce-4779857-4990520@list.cornell.edu>
To: Matthew Sparks <2sparks@cox.net>
Cc: communitydevelopmentbanking-l@cornell.edu <communitydevelopmentbanking-l@cornell.edu>
Sent: Wed Dec 16 13:23:47 2009
Subject: Re: Dumping the secondary mortgage market market

If you get rid of the secondary market you are going to limit the resources available for first time home buyers and also your low income purchasers. Small financial institutions will not be able to create as many mortgages based on federal restriction and low dept ratios. I feel that we just need to regulate the mortgage markets better and insure that the borrowers can actually afford to make the purchases. If we lower the dept ratios for borrowers back to 12% it should eliminate some of the mistakes made in the past. The secondary market is needed especially in small markets with limited resources.

Rich Chartrand.

On Tue, Dec 15, 2009 at 12:16 PM, Matthew Sparks <2sparks@cox.net<mailto:2sparks@cox.net>> wrote:
Hello,

I feel ridding ourselves of the opaque, complex, secondary mortgage market, which is a major player in the mortgage mess, is being over looked.

The relative sudden dependence on the MBS system that has mushroomed into prominence since its inception, not that long ago, should be a clear signal to at least start a discussion on weather it was a good idea at all in the first place. I for one think it was not.

There are cheaper ways to finance homes. Why let a breeding ground for greed go unchallenged, or for that matter think that we can successfully manage greed with regulations? What is needed is a simple transparent way of raising money where mortgages are held and not securitorized. Is anyone interested in hearing more?

Matthew Sparks




CDB list instructions http://www.runonthebank.net/cdblist.htm


CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: results@curtisconcepts.com

Unless you supplant with an equally capable facility, access to home ownership will become more exclusive.
Sent from my Verizon Wireless BlackBerry

-----Original Message-----
From: Rich <richardrc01@gmail.com>
Date: Wed, 16 Dec 2009 09:23:47
To: Matthew Sparks<2sparks@cox.net>
Cc: <communitydevelopmentbanking-l@cornell.edu>
Subject: Re: Dumping the secondary mortgage market market

If you get rid of the secondary market you are going to limit the resources
available for first time home buyers and also your low income purchasers.
Small financial institutions will not be able to create as many mortgages
based on federal restriction and low dept ratios. I feel that we just need
to regulate the mortgage markets better and insure that the borrowers can
actually afford to make the purchases. If we lower the dept ratios for
borrowers back to 12% it should eliminate some of the mistakes made in the
past. The secondary market is needed especially in small markets with
limited resources.

Rich Chartrand.

On Tue, Dec 15, 2009 at 12:16 PM, Matthew Sparks <2sparks@cox.net> wrote:

Hello,

I feel ridding ourselves of the opaque, complex, secondary mortgage
market, which is a major player in the mortgage mess, is being over looked.

The relative sudden dependence on the MBS system that has mushroomed
into prominence since its inception, not that long ago, should be a clear
signal to at least start a discussion on weather it was a good idea at all
in the first place. I for one think it was not.

There are cheaper ways to finance homes. Why let a breeding ground for
greed go unchallenged, or for that matter think that we can successfully
manage greed with regulations? What is needed is a simple transparent way of
raising money where mortgages are held and not securitorized. Is anyone
interested in hearing more?

Matthew Sparks



CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: dliles@ncinitiative.org

Any time you allow financial institutions to create and trade their own
currency (Mortgage Backed Securities), greed is at play. And we know
what happens when greed is involved. Why else would they create this
type of investment? The SEC shares as much blame for this current
economic mess as banks do. Better regulation and tighter controls are
keys to avoiding future meltdowns. I realize this won't solve the
problems, because you can't legislate morals, but it would help. As for
holding mortgages, banks can't afford to originate and then shelve its
mortgage loans. Not only is it financially imprudent to do this as a
bank, but it would also greatly hinder their ability to fund new
mortgages. The secondary market has to remain in play. One of the things
I'd like to see is an increased capacity for FNMA and other government
agencies. If the government can fund TARP money, you would think we
could find some way to make new money available for OUALIFIED mortgage
borrowers.



Don

________________________________

From: bounce-4779857-8990890@list.cornell.edu
[mailto:bounce-4779857-8990890@list.cornell.edu] On Behalf Of Rich
Sent: Wednesday, December 16, 2009 1:46 PM
To: Matthew Sparks
Cc: communitydevelopmentbanking-l@cornell.edu
Subject: Re: Dumping the secondary mortgage market market



CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: richardrc01@gmail.com

Although increasing fannie and freddies responsibility in the market is not
going to happen in the near future especially since they will be broke up in
the near future. The secondary market is making it possible for everyone to
be able to get a mortgage. Limiting the DTR will do a couple of things it
will insure that before the mortgage is underwritten the borrower can meet
the financial obligations toward the deed, and the institution does not put
the borrower in a fail situation. It will also make financial institutions
only loan to qualified home buyers. Sure there is always going to be
defaults in the market but it could be limited. Tarp isn't going to be here
for ever and we can't rely on government to solve all the problems. We need
to get back to common since approaches to lending and the greedy
institutions need to just go away.

On Wed, Dec 16, 2009 at 10:29 AM, Malone, Carl
<carl.malone@harrisbank.com>wrote:

While I agree that there is a need for a secondary market, we should
consider trying to find ways to simplify access to affordable mortgage
products to qualified borrowers. Dropping the DTR to 12 percent is both
impractical and improbable. You could drop it to zero and still have
defaults. The key, to me, is curing whatever issues to prospective borrower
has before he gets in to the pipeline.
--------------------------
Sent from my BlackBerry Wireless Handheld

------------------------------
*From*: bounce-4779857-4990520@list.cornell.edu <
bounce-4779857-4990520@list.cornell.edu>
*To*: Matthew Sparks <2sparks@cox.net>
*Cc*: communitydevelopmentbanking-l@cornell.edu <
communitydevelopmentbanking-l@cornell.edu>
*Sent*: Wed Dec 16 13:23:47 2009
*Subject*: Re: Dumping the secondary mortgage market market

If you get rid of the secondary market you are going to limit the
resources available for first time home buyers and also your low income
purchasers. Small financial institutions will not be able to create as many
mortgages based on federal restriction and low dept ratios. I feel that we
just need to regulate the mortgage markets better and insure that the
borrowers can actually afford to make the purchases. If we lower the dept
ratios for borrowers back to 12% it should eliminate some of the mistakes
made in the past. The secondary market is needed especially in small markets
with limited resources.

Rich Chartrand.

On Tue, Dec 15, 2009 at 12:16 PM, Matthew Sparks <2sparks@cox.net> wrote:

> Hello,
>
> I feel ridding ourselves of the opaque, complex, secondary mortgage
> market, which is a major player in the mortgage mess, is being over looked.
>
> The relative sudden dependence on the MBS system that has mushroomed
> into prominence since its inception, not that long ago, should be a clear
> signal to at least start a discussion on weather it was a good idea at all
> in the first place. I for one think it was not.
>
> There are cheaper ways to finance homes. Why let a breeding ground for
> greed go unchallenged, or for that matter think that we can successfully
> manage greed with regulations? What is needed is a simple transparent way of
> raising money where mortgages are held and not securitorized. Is anyone
> interested in hearing more?
>
> Matthew Sparks
>
>
>
> CDB list instructions http://www.runonthebank.net/cdblist.htm
>

CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: wtierney@numarkcu.org

Not really. You misspelled securitized which is actually not a word.
Aside from that, your assertion that "greed" is the primary motivating
factor for these instruments is somewhat misguided. I assume you are
talking about the greed of those handful of people who actually are paid
for placing these mortgages into the market. There may be some truth to
this argument if you are talking about the people on Wall Street who are
paid handsomely for placing these securities. But don't throw the baby
out with the bathwater just because a few companies and executives found
a way to make a lot of money. MBS and the secondary market have proven
to be a very useful tool in moving capital from capital rich areas to
capital poor areas at very reasonable rates. Missing this vehicle for
moving money capital poor areas might not be able to raise capital for
housing at all or would probably need to pay much higher rates to local
investors. The secondary market has also provided, until recently, very
liquid investments for financial institutions. Assuming we can safeguard
the liquidity of the investments they appear to add a strong social
benefit to our housing fabric.

________________________________

From: bounce-4779668-8116703@list.cornell.edu
[mailto:bounce-4779668-8116703@list.cornell.edu] On Behalf Of Matthew
Sparks
Sent: Tuesday, December 15, 2009 3:17 PM
To: communitydevelopmentbanking-l@cornell.edu
Subject: Dumping the secondary mortgage market market


Hello,

I feel ridding ourselves of the opaque, complex, secondary mortgage
market, which is a major player in the mortgage mess, is being over
looked.

The relative sudden dependence on the MBS system that has mushroomed
into prominence since its inception, not that long ago, should be a
clear signal to at least start a discussion on weather it was a good
idea at all in the first place. I for one think it was not.

There are cheaper ways to finance homes. Why let a breeding ground
for greed go unchallenged, or for that matter think that we can
successfully manage greed with regulations? What is needed is a simple
transparent way of raising money where mortgages are held and not
securitorized. Is anyone interested in hearing more?

Matthew Sparks




CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: dwoodmanlp@yahoo.com

The secondary mortgage market is a very good tool for expanding available lending capital and reducing the cost of borrowing.*sound underwriting however became a casualty of easy moeny.*Loan originators need to have*some skin in the game.*
*
*
Dan Woodman

--- On Wed, 12/16/09, Rich <richardrc01@gmail.com> wrote:


From: Rich <richardrc01@gmail.com>
Subject: Re: Dumping the secondary mortgage market market
To: "Malone, Carl" <carl.malone@harrisbank.com>
Cc: "2sparks@cox.net" <2sparks@cox.net>, "communitydevelopmentbanking-l@cornell.edu" <communitydevelopmentbanking-l@cornell.edu>
Date: Wednesday, December 16, 2009, 3:17 PM


Although increasing fannie and freddies responsibility in the market is not going to happen in the near future especially since they will be broke up in the near future. The secondary market is making it possible for everyone to be able to get a mortgage. Limiting the DTR will do a couple of things it will insure that before the mortgage is underwritten the borrower can meet the financial obligations toward the deed, and the institution does not put the borrower in a fail situation. It will also make financial institutions only loan to qualified home buyers. Sure there is always going to be defaults in the market but it could be limited. Tarp isn't going to be here for ever and we can't rely on government to solve all the problems. We need to get back to common since approaches to lending and the greedy institutions need to just go away.


On Wed, Dec 16, 2009 at 10:29 AM, Malone, Carl <carl.malone@harrisbank.com> wrote:


While I agree that there is a need for a secondary market, we should consider trying to find ways to simplify access to affordable mortgage products to qualified borrowers. Dropping the DTR to 12 percent is both impractical and improbable. You could drop it to zero and still have defaults. The key, to me, is curing whatever issues to prospective borrower has before he gets in to the pipeline.
--------------------------
Sent from my BlackBerry Wireless Handheld




From: bounce-4779857-4990520@list.cornell.edu <bounce-4779857-4990520@list.cornell.edu>
To: Matthew Sparks <2sparks@cox.net>
Cc: communitydevelopmentbanking-l@cornell.edu <communitydevelopmentbanking-l@cornell.edu>
Sent: Wed Dec 16 13:23:47 2009
Subject: Re: Dumping the secondary mortgage market market





If you get rid of the secondary market you are going to limit the resources available for first time home buyers and also your low income purchasers. Small financial institutions will not be able to create as many mortgages based on federal restriction and low dept ratios. I feel that we just need to regulate the mortgage markets better and insure that the borrowers can actually afford to make the purchases. If we lower the dept ratios for borrowers back to 12% it should eliminate some of the mistakes made in the past. The secondary market is needed especially in small markets with limited resources.
*
Rich Chartrand.


On Tue, Dec 15, 2009 at 12:16 PM, Matthew Sparks <2sparks@cox.net> wrote:



Hello,
*
*** I feel*ridding ourselves of the opaque, complex, secondary mortgage market, which is a major player in*the mortgage mess, is being over looked.
*
*** The relative sudden dependence on the MBS system that has mushroomed into prominence since its inception, not that long ago, should be a clear signal to at least start a discussion on weather it was a good idea at all in the first place. I for one think it was not.
*
*** There are cheaper ways to finance homes. Why let a breeding ground for greed go unchallenged, or for that matter think that we can*successfully manage greed with regulations? What is needed is a simple transparent way of raising money where mortgages are held and not securitorized. Is anyone interested in hearing more?
*
Matthew Sparks
*
*

CDB list instructions http://www.runonthebank.net/cdblist.htm

CDB list instructions http://www.runonthebank.net/cdblist.htm

CDB list instructions http://www.runonthebank.net/cdblist.htm

[Community Development Banking List]

Original message from: ejdodson@comcast.net

A flurry of messages have come through that deserve comment. Having been in
the trenches, so to speak, at Fannie Mae when the mortgage-backed security
market first developed and expanded, I know how much effort went into the
assessment and management of the various types of risk everyone realized was
associated with this innovation.

When many on this list already understand very well, however, is that
neither the savings institutions nor the commercial banks were in a position
to hold large numbers of fixed rate mortgage loans in portfolio during the
1980s when interest rates were extremely volatile. And, even though the rate
environment stabilized from the early 1990s, the yields on such assets were
insufficient to warrant devoting (and reserving capital) to portfolio who
loans. This was the case even during those periods when the pricing for ARM
loans moved consumer demand in the direction of ARMs. Moreover, it should be
remembered that the GSEs and FHA would not purchase or securitize ARMs made
to first-time homebuyers or under special programs targeted to low- to
moderate-income homebuyers.

It is no secret that FHA had (and may continue to have) serious difficulties
with fraud prevention and poor servicer performance. Fannie and Freddie were
not immune to fraud problems, and this challenge certainly became more
intense as loan volumes skyrocketed. The response was to introduce automated
underwriting systems and rely more heavily on data gathering and analysis to
prevent fraudulent collusion on the part of those whose financial incentives
was to make every deal work.

I have expressed the view previously that Fannie, Freddie, FHA and the FHLBs
(which hardly anyone mentions, even though they became significant investors
in MBS from about the mid-1990s on) added fuel to the speculation-driven and
overheated property markets by annually raising maximum loan limits to
accommodate the rising median price of residential property. This was deemed
necessary to keep up loan volumes and guarantee fees for the simple reason
that household savings was in constant decline. Only by the lowering of down
payment requirements and otherwise reducing the borrowers' cash contribution
to the transaction was it possible for people to qualify for higher and
higher loan amounts. And, what few analysts observed was the fact that
appraisal reports were showing rapidly rising land-to-total value ratios,
which meant we were financing more and more land value and less and less
housing value.

The proliferation of the private placement MBS market, with originations
poorly or fraudulently underwritten, with the bond rating agencies without
the wherewithal or commitment to scrutinizing the underlying collateral, and
with Wall Street hawking these securities to investors looking for greater
than realistic rates of return -- all this and the above conditions in the
conventional and FHA arena combined for the perfect storm.

Interesting, the policy solution being followed by the Federal Reserve is to
keep the discount rate for banks so low that the banks can tap into this
source of funds and, so long as they match durations well, make enormous
profits even on relatively high risk business lines. What the Fed chairman
understands is that in the property markets, any window of affordability
created by lowering interest rates will get capitalized into high property
prices. The policy gamble is that property prices will recover enough so
that homeowners (i.e., those who have managed to stay employed and keep
their credit score high during this recession) will eventually be able to
finance out of whatever subprime debt they took on, or even refinance out of
an ARM into a FRM. Sound good. The problem is that once the engine of
property price inflation starts up again it will take on momentum that
eventually cannot be sustained.

What the regulators ought to do instead, in my opinion, is to prohibit any
financial institution that accepts government-insured deposits from making
loans for the purchase or refinancing of land value (except in those
instances where a mortgagor is able to prove they were victimized by fraud
or predatory lending practices).

If the private mortgage insurers all collapse as a result of the current
crisis, homebuyers may have to go back in any event to the days when they
had to come up with a 20 percent cash down payment. It is one of the great
ironies of the property market that the very availability of PMI -- by
increasing the pool of potential homebuyers to include those with minimum
savings -- helped to drive up property prices. With greater demand
forecasted, builders competing with one another to acquire developable land,
and investors who saw huge short-term returns increasingly realized put more
and more money into land speculation.

There is more to the story, of course, but these are the ingredients I saw
and experienced during my 30 odd years as a mortgage lender and then at
Fannie Mae.

Ed Dodson

[Community Development Banking List]

Original message from: CRosenthal@cdcu.coop

The notion that secondary markets, per se, are a bad thing is obviously flawed. As has been abundantly argued on the list, the capacity of a primary lender to originate and hold loans, especially long-term, fixed loans, is limited.

It is certainly the case for the mostly small, low-income credit unions that my Federation represents and serves. Mortgage lending is, we believe, crucial to their ability to survive. It is very hard to forge a successful business model making large numbers of very small loans to low-income consumer at affordable rates. But many, if not most, of our community development credit unions (CDCUs) have been constrained in originating mortgages. One reason among several is the fact that low-volume originators have had limited ability to access the major secondary markets -- especially if they made non-conforming loans to meet the needs and characteristics of their low- and moderate-income members.

For this reason, the National Federation of CDCUs created our CDCU Mortgage Center, LLC, to purchase loans from our credit unions and free them up to expand their lending in their communities. In the world of secondary markets, we are definitely a very small, nice player, with a portfolio in the millions, not tens of billions. But to the degree that we can establish a pipeline, we believe we can play a significant role in expanding lending in the communities our credit unions serve.

In effect, we are serving as an aggregator or "pre-secondary market" for low-income credit unions. In 2010, we plan to execute our first resales of mortgages in our portfolio to CRA and social investors, who are looking to receive a near-market return on their investments. You can find us at www.cdcu.coop.


Clifford Rosenthal
President/CEO
National Federation of
*Community Development Credit Unions
116 John Street, 33rd Floor
New York, NY 10038
212-809-1850 ext. 216
fax: 212-809-3274
www.cdcu.coop
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