New Mortgage Industry System Needed

The current predominant mortgage industry system includes the US Government coming to the rescue of our banking system and the secondary mortgage market. Fannie Mae and Freddie Mac, as well as FHA dominate the secondary market. 

There is $12 Trillion in mortgage debt in the US. Fannie Mae and Freddie Mac own $5.3 Trillion of that. Yet their losses to date, have cost the taxpayer $111 Billion. We have bailed them only so far. There is more to come. This system is broken. Does it really make sense to put debt behind debt behind debt. Essentially that is what our mortgage backed securities market is doing. The derivatives or leftovers at the top of the upside down pyramid don't pay. Somebody got caught with their pants down and the taxpayer has to step in and provide cover.

What is wrong with this picture? Even Barney Frank who is Chairman of the House Finance Committee, and is nowhere near the top of my list for Congressman of the Month or Year or Decade, has called for the dismantelling of these behemoths' that are proving to be dinasaurs.

The fact is that what we need to do is develop a system that will provide stability over time.

• Do rates really need to jump around from minute to minute on mortgages?
• A better question might be does the trading of the securities 2 doors down (bonds and derivatives) from the mortgage note really need to affect the rate of the note?
• These notes are usually long term notes of 15 years or more unless the loan is special purpose or adjustable and short term.
• Don't lose the concept that we are actually borrowing from ourselves
• Shouldn't we adhere more to our own long term goals?
• Its time to employ an advocate for the people that will keep rates within reason and consistent.
• Separate the needs of the consumer that simply wants to purchase a home for the long term to live in from the borrower who is flipping for profit.
• We can advocate fair pricing for these homes by applying a reasonable ceiling or markup of value so a consumer isn't over paying for his home.
• The fees being charged while buying a home or refinancing a home have gone up because of the debt that Fannie and Freddie are paying back to the taxpayers. Its the same taxpayer paying these fees to pay themselves back. 

Are we getting the drift yet. The system is broken. We need to get this back into Private hands so that we have the control back.

New Generation Lending has the plan. We use common sense. In our status quo system the term "common sense" has been thrown out with the the baby's bathwater. I mentioned in a previous blog that I don't believe Sub prime loans were the culprit in our mortgage disaster. New Generation will offer a Sub prime loan program as well as stated income programs. But these loan programs must be offered with common sense underwriting criteria. New Generation Lending has proprietary underwriting guidelines ready to put to market. We are ready to revolutionize the mortgage industry.

If you'd like to hear more or discuss New Generation Lending in detail, please don't hesitate to connect.

Let's get it right.