1. The most pressing problems in the housing and mortgage finance market remain unaddressed. GSE reform appears to be a distraction from the much harder work of fixing what is really broken in our housing market. While the GSEs are now wards of the state, they were not the central part of the housing crisis. The bulk of the abuses and damage to the economy came out of the non Fannie/Freddie market. The plan gives lip service to some of the broader problems, such as mortgage servicing. There is no acknowledgment of, much the less an effort to deal with, hemorrhaging wounds such as the questionable role of MERS, the widespread failure to convey mortgage notes and liens as stipulated in pooling & servicing agreements, and foreclosure abuses.
We now have virtually no private securitization market because the investors wised up and aren’t about to buy private mortgage paper unless the mortgage industry cleans up its act. But instead of discussing that problem and focusing regulations and clearer civil and criminal penalties as the solution, Treasury wants to subsidize credit instead. If the large segments of the sausage industry were found to be in the business of making poison sausages, this Administration’s response would be to have stress tests to show how much poison the sausages could contain without posing a public menace along with government-funded insurance in case anyone got really sick. So why aren’t we cleaning up the sausage factories instead?
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