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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Investments Lending Servicing

Monday Morning Cup of Coffee: The best moment at the MBA servicing conference

And a really tone-deaf commentary on Wall Street

February 22, 2016

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.

What do the results from Saturday's voting — the Democratic caucus in Nevada and the Republican primary in South Carolina — mean for the mortgage finance industry? In Nevada, Hillary Clinton beat Bernie Sanders with 53% of the vote and in South Carolina Donald Trump walked away with 32% in the crowded Republican field, although that field got less crowded when Jeb Bush bowed out Saturday night.

Looking at the popularity of Sanders and Trump among younger voters, The Wall Street Journal ran an opinion piece Friday night, The Young and the Economically Clueless, that questioned why Sanders and Trump were so attractive to Millennials.

The commentary, by Daniel Arbess, a member of the Council on Foreign Relations, posited that support for these candidates was misguided, since both represent a stifling of the free market. 

These young voters seem not to realize that the economic policies they find so resonant are the least likely to promote the growth and the social mobility they desire. They deserve to be lead from the discredited backwater of equalizing outcomes, forward with policies that instead help eliminate barriers frustrating their access to opportunities.

That charge sticks for Sanders, who would certainly like to upend the financial system applecart, but is less clear when it comes to Trump, a billionaire who has profited from this very system. The article made solid points about the languishing labor market and weak economic recovery, but seemed truly tone deaf when describing the populist sentiment against Wall Street excesses:

Both Democrats and some Republicans keep blaming it all on “Wall Street” (Bernie Sanders’s all-purpose boogeyman) for “getting away with murder” (Donald Trump on hedge funds). Don’t they realize that the financial markets are the lubricant of the entire economy—that Wall Street’s capacity to provide liquidity and to broker capital is the lifeblood of American companies? History will probably judge the misguided post-crisis regulations like Dodd-Frank and retribution against Wall Street to have sown the seeds of the next financial crisis. For now, the vilification of Wall Street in the presidential campaign is irresponsible.

I don't know what history will judge, but this is not a sound rebuttal to the great anger that many people — and especially young people — feel about "Wall Street." No one is mad because the financial markets provide liquidity or broker capital. They're mad because Wall Street tanked the housing market for millions of Americans who make a middle class income, and laughed all the way to the bank. In fact, the article just underscores how out of touch the financial establishment truly is: If there had been any "retribution" against the people involved (and not just fines against companies) some of that anger would have abated by now. As it is, this kind of comment indicates the depth of Wall Street delusion.    

Investors who buy up distressed homes and then sell them under contracts in deed were scrutinized in a New York Times article published Saturday that calls into question the consequences to homeowners. More than 3 million people have these kinds of loans, according to the article, and they offer a way to get low-credit homeowners into houses. However, they can end up being a revolving door, as many homeowners are unable to make their mortgage payments and pay for the sometimes substantial repairs under the contracted timeframe and end up losing the house. From the story:

Now, complaints are piling up in cities across the country, according to dozens of court records reviewed by The New York Times, as well as interviews with housing lawyers and home buyers in Ohio, Michigan and Minnesota.

In Akron, some investment firms aim at residents “who do not have the financial ability to comply, nor the savvy to realize that they are being taken advantage of,” said Duane Groeger, the city’s housing administrator, whose office oversees code violations.

One company called out in the article, Harbour Portfolio Advisors of Dallas, often buys these homes for less than $10,000, then sells them for about four times that amount. And where are they getting a lot of their inventory? Fannie Mae.

Harbour, which raised more than $60 million from wealthy investors, was the single largest buyer of foreclosed homes from Fannie Mae’s bulk sale program from 2010 to 2014, which the mortgage giant used to unload more than 20,000 homes that were hard to sell. 

A Fannie Mae statement in the article noted that the company's mission was to minimize losses to taxpayers by selling the homes, but it seems like a mixed message at best.  

Today is the last day we'll be accepting nominations for our Rising Stars program. This award program, now in its third year, recognizes outstanding leaders in every part of our industry who are under 40. In keeping with the standards we set when we launched the program, our Rising Stars are not people who merely show potential, but those who can point to real accomplishments that have propelled their companies and the industry as a whole into new levels of growth and profit. Click here to start the nomination process.

The MBA's annual mortgage servicing conference wrapped up on Friday, capping a week of interesting panels and parties — I mean networking events — that included everything from Universal Studio's Harry Potter world to Cuban-themed nightclubs.

One of the most memorable parts of the whole conference came during the opening session, when MBA Vice-chairman J. David Motley introduced the association's program — MBA Opens Doors — that helps families with sick children pay their mortgages. Motley played a clip of several families who have been helped by the program, which was moving by itself, but the epilogue revealed that one of the girls featured in the video, who had been in recovery at the time, had since passed. The MBA foundation had allowed her parents to take time off work to care for her in the hospital and during her treatment without worrying about how they would pay their mortgage. 

When Motley asked the audience of servicers to stand and pledge their support to the foundation, the audience responded readily. David Pogue, host of NOVA's ScienceNow program and the keynote speaker for the first session, was visibly moved and pledged his support as well. It was a powerful reminder of all the good that our industry can do, and is doing. 

The FDIC closed no banks this week.

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