It's a headline that certainly caught the eye of those of us who live and breathe the mortgage lending industry, but the language may be infuriating for a loan officer to read: referring to mortgage lenders as "small-time bankers" who are "peddling to the poor."
Last week, Bloomberg took on part of the mortgage industry with a piece that was originally called: "Small-Time Bankers Make Millions Peddling Mortgages to the Poor," but that's not the headline anymore. Don't worry. We'll come back to that.
Prashant Gopal’s Bloomberg report focuses on Federal Housing Administration lending and an apparent growing concern about rising defaults in the FHA's mortgage insurance program.
From the Bloomberg article:
Dana Wade, acting FHA commissioner until the Senate’s confirmation this week of a permanent leader, says concern is growing within the agency, which is studying the riskiness of its portfolio. If too many loans sour, she says, the FHA could end up financially weakened and unable to extend help during the next downturn. “Borrowers are stretching more,” she says. “We’re concerned about it from a borrower perspective and a taxpayer perspective.”
Gopal’s piece is covering the growth of nonbank lenders using FHA-backing and the elevated risk to Ginnie Mae bonds. And he focuses on Angelo Christian of American Financial Network near Houston, Texas. Though he mentions many of the best mortgage lenders for first-time buyers.
As we stated before, the original headline was: "Small-Time Bankers Make Millions Peddling Mortgages to the Poor." But now it's changed. You can still see original headline if you look at the URL, here it is [spaces added for mobile readability]:
https://www.bloomberg.com/news/features/2018-05-24/small-time-bankers -make-millions -peddling-mortgages-to-the-poor
The new headline is not much more sympathetic to Mr. Christian’s efforts to build his personal wealth: “Getting Rich on Government-Backed Mortgages.”
[We suspect the headline was modified after publishing, though the URL was not updated after the change.]
And the language throughout reiterates that message.
Here are some examples of the strong language used in the article:
"This kind of lending echoes the subprime mortgage boom that preceded the credit crisis of 2008."
… and …
"Using a line of credit from a major bank, they would offer mortgages essentially to anyone with a pulse."
Nonetheless, Gopal is correct to point out the growing risk in the FHA portfolio. He offers a snapshot of the kind of person Christian is trying to get approved for a mortgage.
“Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. “If he can help me, he can help anyone,” Taylor says. “My credit history was just horrible.””
The whole purpose of the FHA is to extend homeownership to those who would otherwise be unable to access this level of credit — to help build communities through the building of personal assets. But, does the reporter have a point? Are we facing an FHA-lending crisis? Or is this yet another example of the enduring bias against mortgages in the media? Please answer on the message boards below.
Here is one such reaction on Twitter, from Logan Mohtashami, Loan Manager AMC Lending Group & Housing Data Analyst:
— Logan Mohtashami (@LoganMohtashami) May 29, 2018