So You Want to be a Mortgage Banker? Really?

rcwhalen's picture

So you want to be a rock'n'roll star

Then listen now to what I say

Just get an electric guitar

And take some time and learn how to play

And when your hair's combed right and your pants fit tight

It's gonna be all right


"So You Want to Be a Rock 'n' Roll Star"

The Byrds/Jim McGuinn & Chris Hillman (1967)

Last week confirmed many of the things about the financials and housing that we have been talking about since last summer.  Those of you who were on the conference call for JPMorgan Chase’s 2Q 2013 earnings results will recall that Chief Financial Officer Marianne Lake disclosed that the bank was expecting a substantial drop in mortgage volumes in the second half of the year.  In fact that is just what has happened.  And as Lake predicted, revenues are falling faster than costs, meaning that JPM is losing money on mortgage originations.   The other TBTF banks are in much the same situation.  

The entire industry is in the midst of a massive consolidation in mortgage finance, with banks cutting back staff and operational infrastructure in an effort to right size business to the volumes expected in 2014.  With mortgage applications at a two decade low and origination volumes running about half of last year’s levels, nobody is really sure just what expected volumes will be in 2014.  

For example, the total of 1-4 family loans securitized by all US banks fell almost 5% over the past year to a mere $610 billion.  Real estate loans secured by 1-4 family properties held in bank portfolios as of Q4 2013 fell to $2.4 trillion in the last quarter, the lowest level since Q4 2004.  FDIC reports that the amount of 1-4 family loans sold exceeded originations by almost $30 billion or 5% of the total sold into securitizations.

Meanwhile JPM and other banks are hiring armies of new compliance officers to watch the employees who remain after the next round of cost cutting occurs.  Reuters reported with respect to JPM:  

The company said it expected total headcount to fall by 5,000 to 260,000 in 2014. Around 6,000 full-time and contractor jobs in JPMorgan's home loans unit and 2,000 jobs in its branch and credit-card network will be cut. At the same time, the bank expects to add 3,000 new jobs in its control function, including areas like compliance.

Sadly those new compliance officers cannot make loans, but they can certainly prevent their colleagues from making loans or doing any other sort of business.  A lot of the pain you see at banks like JPM, Wells Fargo, Citigroup and Bank of America comes from the 2010 Dodd-Frank legislation.  Next time CNBC has former Rep. Barney Frank on for a chat, they ought to ask him how it feels to be responsible for cratering the markets for US housing and financials single handed. 

The banks as a group are running away from the mortgage sector, another reason why mortgage applications and volumes are falling.  Most banks, if they make mortgage loans at all, will only write business that can be sold to one of the GSEs – Fannie Mae, Freddie Mac or Ginnie Mae.  And even these loans are losing their allure because of the new regulations being spewed by the Consumer Finance Protection Bureau.  The most recent 10-K for JPM has the following disclosure:

The CFPB issued final regulations regarding mortgages, which became effective January 10, 2014, and which will prohibit mortgage servicers from beginning foreclosure proceedings until a mortgage loan is 120 days delinquent. During this period, the borrower may apply for a loan modification or other option and the servicer cannot begin foreclosure until the application has been addressed. 

What this means is that a home owner can default on their mortgage and basically live in the house for free for at least half a year before the bank can even contact the debtor.  In states like Massachusetts, the home of Democratic Senator Elizabeth Warren, there is an additional cooling off period set by state law that starts after the federal cooling off period is done.  

Bottom line is that a Massachusetts resident can default on their mortgage and live in the house for free for a year before the lender/servicer is allowed to contact them.  So now you know why banks don’t want to touch a borrower with less than a mid-700 FICO score. But it gets better.  Because of the pro-consumer legal regime in states like MA, home sales volumes are a fraction of pre-crisis levels.  Prices for non-performing loans in states like MA, CT, NY and NJ are typically among the lowest in the nation.

Let’s continue that same paragraph from JPM’s 10-K:

The CFPB issued another final regulation which became effective January 10, 2014, imposing an “ability to repay” requirement for residential mortgage loans. A creditor (or its assignee) will be liable to the borrower for damages if the creditor fails to make a “good faith and reasonable determination of a borrower’s reasonable ability to repay as of consummation.” Borrowers can sue the creditor or assignee for up to three years after closing, and can raise an ability to repay claim against the servicer as a set off at any point during the loan’s life if in foreclosure. A “Qualified Mortgage” as defined in the regulation is generally protected from such suits.

What is means is that not only can the borrower default on the mortgage loan and sit in the house for a year, undisturbed, but he can also sue you.  In states like CA, the borrower can get a shopping mall plaintiff lawyer, who can sue the lender/servicer/note holder for relatively minor errors.  The defendant must actually foot the bill for the litigation in the People’s Republic of California.  Assuming the case goes to trial, a settlement will cost as much as $50,000 or about 10x the maximum profit on the loan.

Q: How many times you think a lender/servicer/investor in mortgages will write a $50,000 settlement check before they stop making loans to below-prime borrowers?  

A: The commercial banks are already there.  This is one reason, mind you, that the market for below-prime lending is still not coming back.  

Think of the current regulatory regime for mortgage lending as a menage à trois among state and federal politicians, the Big Media and regulators, many of whom were in politics before they mounted the ramparts to “defend consumers.”  Just imagine Barney Frank, Liz Warren and CFPB chief Richard Cordray enjoying one another’s company in the political hot tub and you get the idea.  The trial lawyers are serving the drinks, BTW.

Cordray, lest we omit, before he went to Washington, was OH AG where he frequently bullied lenders into large cash settlements for supposed violations of consumer protection laws.  Now at CFPB Cordray is operating on a bigger stage, where he can extort settlements from all manner of lenders, loan servicers and anybody else who makes a living in the consumer finance sector.  The unitary model of the CFPB gives Cordray unilateral control over the agency with none of the political accountability of a commission structure. And he is directly allied with the Big Media, who breathlessly report his latest offensives against “abusive lenders.”

The most overt attack against the lending industry came several weeks ago when a New York State regulator halted the transfer of about $39 billion in unpaid balance (UPB) of mortgage loans rights to Ocwen Financial (OCN) from Wells Fargo (WFC).  Since last summer, federal regulators have quietly put in place a review process for loan transfers that requires both the seller and buyer of loans and mortgage servicing rights to gain approval. 

The action by New York State is yet the latest layer of regulatory oversight over loan transfers dating back to the various settlements for “foreclosure abuse.”  The credit rating agencies, who demand big dollars to assess the operations of bank and non-bank servicers, are also part of the shakedown game.  Never mind that the people who work for the rating agencies are completely clueless about how the loan servicing business works. They want a fee.

Here is a list of the various regulatory agencies and their areas of responsibilities when it comes to the sales of loans and/or mortgage servicing rights (MSRs):

CFPB:  Primary role consumer protection under Dodd-Frank as well as enforcement of compliance with the state AG foreclosure settlements.  Any consumer loan from autos to mortgages to credit cards and student loans falls under Cordray and the CFPB.  CFPB has also asserted authority over institutional loan and MSR sales.

FHFA:  The Federal Housing Finance Agency enforces the AG settlement broadly and also seeks to protect Fannie Mae, Freddie Mac and the Federal Home Loan banks from risk of loss.  In the settlement last year with Bank of America, FHFA announced that it would put in place an applications process for sales of loans and MSRs.

FHA/HUD:  The Federal Housing Administration enforces the AG settlement and reviews transfers of loans that are securitized by Ginnie Mae, including FHA, VA and USDA loans. Again, the agency has final say over any sales of loans or MSRs by the agencies under its purview.

Fed/OCC/FDIC:  The three major federal bank regulators oversee bank compliance with the AG settlement more generally, especially as it impacts bank financial soundness and reputational risk.  All three have made clear to the largest banks that they do not want to see any further settlements for violations of law or regulation, another reason why the CFPB and state regulators can extract any sort of concessions from the TBTF banks.  Note that the OCC has essentially become subordinate to FDIC, a remarkable turnabout that is due to the astute political skills of FDIC Chairman Martin Gruenberg.

NY & Other States:  The State of New York is a player in all of this because it did not agree to the original AG settlement and instead decided to take an independent course in enforcing consumer protection.  Most banks and non-banks are licensed as mortgage lenders in NY, giving the state direct jurisdiction.  Remember too that virtually all of the mortgage loans in question are owned by an RMBS trust that is governed by NY law, thus the State of New York also has direct jurisdiction via the Martin Act.  The other states are involved in overseeing the AG settlement and enforcing their own laws against mortgage abuses.

Part of the problem facing banks and non-banks is that we have the blind leading the blind when it comes to the understanding of regulators and the Big Media regarding the mortgage lending industry.  For example, the NYT and Financial Times, among others, repeatedly report that specialty mortgage servicers like OCN have been purchased “tens of billions of dollars of mortgage servicing rights from large global banks.”

No, in fact the total fair value of all MSRs held by US banks is less than $50 billion, according to the FDIC.  The non-bank servicers like OCN, Nationstar (NSM) and Walter (WAC) have purchased loans with a UPB in the hundreds of billions of dollars.  And remember that the total first lien loan holdings of all US banks and RMBS trusts totals into the many trillions of dollars, right?  So everybody just calm down.

Another frequent error made by the Big Media, which is picked up by regulators and our esteemed professionals in the ratings industry, is the idea that non-bank servicers don’t have to follow the same laws and regulations as commercial banks.  Again this is wrong.  

Not only do the non-bank servicers like OCN and WAC have to follow Dodd-Frank and the regulations from the CFPB, but they also inherit all of the legal undertakings from a bank when they acquire loans.  All non-bank servicers that acquire loans from any party subject to the AG settlement inherit the very same duties and responsibilities, period. 

One of my favorite errors that you see constantly in the Big Media and from regulators like the CFPB and the State of New York is the idea that it is good business to push a home owner into foreclosure.  Anybody with even the slightest idea about the world of distressed servicing knows that the law now requires that loan modification is the first order of business when a borrower gets into trouble.  But apparently the folks at the CFPB and the State of New York, where it can take a creditor up to three years to foreclose on a house, have not gotten the memo.  

If you actually know the world of distressed servicing, there are three golden rules when it comes to a non-performing loan.  First is keep the owner in the house.  Second is protect the asset and make sure that maintenance, taxes and insurance are current. And third is to preserve the cash flow of the loan via loan modification, if possible.  Keeping  the family in the house and protecting the asset and cash flow, even with a substantial modification, is always better for the note holder, whether that is Uncle Sam or a private investor.

Because of the phalanx of regulators how involved in reviewing loan transfers, the top four TBTF banks are having profound problems moving legacy assets off of their books. The case involving WFC and OCN is a case in point, but that situation does not even begin to describe some of the operational problems facing other TBTF lenders who cannot perfect the documentation of legacy loans up to current standards.  

If you cannot bring a loan made by, say, Countrywide or WaMu up to the full doc standards that are now the law of the land, then you cannot sell the loan – period. Neither the regulators nor the potential buyer of the asset will play if the loan file is not complete. Since the AG settlement as well as federal bank regulators are expecting that all distressed legacy loans be transferred to a special servicer, you can understand why this is a problem.  A big problem.  

Bank of America, for example, has taken legacy residential mortgage assets down from $953 billion in 2011 to just $516 billion at the end of 2013. BAC’s 10-K confirms that  “the decline in the Legacy Residential Mortgage Serviced Portfolio in 2013 was primarily due to MSR sales, loan sales and other servicing transfers, modifications, paydowns and payoffs.”

Keep in mind too that the TBTF banks really want to sell any loans that are either distressed or likely to be distressed in order to avoid future problems.  This is one reason why, despite the current noise from regulators, the non-bank servicers as a group led by the likes of WAC, NSM and OCN are going to have pretty attractive prospects going forward.  This opportunity is driven by Dodd-Frank as well as acts of idiocy like the Basel III capital rules, which penalize banks for making private loans but set sovereign exposures as having no risk.  More on this in a future note.

The key takeaway of all this is that the pain and suffering of commercial banks when it comes to residential mortgages is not nearly done.  Over the next several quarters, lower expenses for loan-loss provisions and a reduction in litigation reserves will be more than consumed by expenses related to downsizing mortgage operations for the top four banks. Look for increased regulatory scrutiny to slow the pace of loan sales and MSR transfers, hurting efforts by the top banks to shed problematic legacy exposures.  And most important, the regulatory attack on bank and non-bank lenders will continue to adversely impact the housing sector.  

Indeed, due to the good works of the likes of Richard Cordray and Elizabeth Warren, the housing prices could actually decline in many markets as 2014 unfolds.  In Northeastern judicial states such as CT, NY and MA, prices are already falling and inventories of unresolved home foreclosures remain very elevated.

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confidant's picture


Where was the consumer financial oversight review board prior to the housing bust? allowing all those under qualified buyers to purchase homes.

It seems to me now the average american consumers are being punished by the banking industry for past failed regulation, which can be blamed on the Bush administration.

And i would like to add that if this country is not building we're in some serious trouble! building promotes growth.

Loanman26's picture

The mortgage loan business is more regulated than ever, which is a good thing. However, we didnt need Dodd Frank to be implemented. We only needed no doc loans to be taken off of the product menu. The legislation was written by the banks for the banks. 

The amount of  shabby MBS rated and sold as AAA  is still the problem. Do you think we would still be printing as much QE if Bernanke just stiffed those MBS buyers? Ben took on all of the Fannie and Freddie MBS as US obligations. If the buyer was a foreign bank they have been reimbursed or in the process of being reimbursed for their silence.

The concept of buyer beware should have been followed. The criminal faction of the MBS sales should be in jail and the chairman Mr. Ben should have been at the top of the list, along with Hank Paulson, Barney Frank and the rest of the slime.

The loss sharing agreements that the Fed has with the TBTF, encourage the moral hazard. If TBTF knows they will be reimbursed by the Fed for 80-90% of the losses, why would they want to work with distressed owners. The distressed owners know they can stay in the property for sometimes as long as 3 years, why would they be in a hurry to resolve the issue. The whole system is a cluster fuck. 

I am not a big fan of Hank and his bazooka, his alerting his banking buddies and him choosing who survived and who failed. FUCK you Hank!!!

I work for a small mortgage banker and have been in the business 29 years. I conduct myself ethically and honestly which sets me apart from a vast majority of my peers.




earl swagger's picture

Well said.

-The victim of foreclosure is the homeowner who put equity in and pays on time.

- Buying a home for 300K , 100% LTV , then SISA, a BS Appraisal & home becomes the income stream.WTF did people think was going to happen with 4 layers of risk, 200K underwater with not a penny in. The Borrower owns that problem.

-Rating agency applying AAA rating to 4 layer of risk mtgs own that problem.

-Any market maker (that 24 yr old genius from Goldman) synthesizing that same product owns his fair share of that problem.

-FNMA buying CW's "Fast & Easy" product owns a huge part of the destruction of the Fmbs market.

-Anybody that believes Barney Frank has the answers with his swam song legislation is missing a problem.

-Those that think Elizabeth Warren and state AG is looking out for the consumer are part of the problem.

- TX Model works. Max LTV/CLTV Cash Out is 80LTV. Equity out once every 12 mos. Once a cash out always a cash out = 80 LTV. Protects the neighbors from the guy with the self inflicted underwater problem.

- TX demonstrates cash out delineation can stay with the title trail.

- What happens if one doesn't pay rent on time ? Eviction. The rent is due.

- States driving up the fixed cost to service loans with delaying FC are NOT doing constituents any favors unless one likes "proposed" recovery and rent inflation.

-Borrower beware is right. Discovery trail should take a borrower that commits fraud to felony fraud or deficiency judgement.

-Wind the clock back to the original sanctity of the Agency MBS 1984. before FICO and AUS. Agency = full doc & qualify. Limit equity out to real equity.

-Equity Out = Stays with title trail for price discovery and LLPA.

-Foreclose early in the event of breech terms Note & DOT. No entitlement to renegotiation. Self Fulfilling Prophecy with free PUT FC process. Only TBTF's can play. = High Margin / Low Volume equation long run.

-Plenty of blame to go around. First step is restoring integrity to the underlying MBS market & Asset.

-Improper FC litigation should be limited to foreclosure proceedings against a borrower paying on time.

usednabused's picture

So Mr Loanman, how many people did you make a loan to knowing they couldnt repay it? From what I am aware of, there were no banking institutions which did not resell their loans onto the secondary market. In which case, they really had no qualms with whether those loans were repayable or not. I do not doubt your honorability, just whether its a matter of your faith... whether in the borrower or the secondary market.


dizzyfingers's picture

..."home sales volumes are a fraction of pre-crisis levels"...  So those who paid off their mortgages are fools.

Great way to maintain an economy. Good luck banks, you've screwed yourselves as well as your potential present-and-future subsidisers. No one in the former-gigantic US middle class has a living-wage job thanks to you, so you're out of luck. Bankers, do not believe you deserve or will receive any sympathy or that we care what your problems are. You brought this on yourselves and you deserve whatever happens to you.

Bonapartist's picture

I'd rather have a paid-off house as an asser than a fistfull of Facebook or Twitter stock certificates- and all the gold in the world won't keep me sheltered from the elements.

Screwball's picture

Fuck the banks, and fuck Whalen.  He's a bigger bank shill than Dick Bove or the CNBC swine.

How bout an article on why MS & GS are still banks, and not thrown back out of the pool Whalen?  Cause you suck bankster dicks slimeball, that's why.

chunga's picture

<- Whalen belongs on CNBC

<- Whalen belongs on ZH


At least with the Phoenix Capital posts you know he's selling news letters.

I don't know what the fuck this Whalen banana is selling. All he seems to do is run flak for banker cronies. He is part of the "anti-consumer, flout the law, bailout regime".

Get lost Whalen. Cry for Countrywide, Ocwen, WF, somewhere else.

Oldwood's picture

It seems to me he is just stating fact. I did not get a sense from this article that he is defending anyone except pointing out what is happening and possibly what the outcome might be. For better or worse the banking industry has become even more burdened with "market protections" that will have their costs. If you are pleased with this, then feel free to say so. If you think that government can prevent fraud then you should be happy, but if you think that government prospers from fraud then you should be afraid. If you want our government to decide who gets what and when, then things are going your way. If you think the only free and prosperous society comes from an intelligent and informed public, then you probably share a sense of doom. We must accept that transparency and accountability ARE NOT in the interest of our government, and that knowledge should inform our opinion of their actions.

11b40's picture

You need to read it again, and maybe a few other RCW articles of late, to get the drift.

elwind45's picture

I read it as a transparent redaction at best and as big a fraud as the originial excuses of no doc or low income squatters? The BLAME is being lifted on the fraud and placed on your neighbor or his guy in Congress and not the banks? Chris could have been like "it was the insurance that collapsed than the banks and not the other way around and went on tweeter? Instead it was an Easterner dammit? Riiight!

chunga's picture

He seems to be suggesting that the “Too Big To Fail™” financial leviathans that now stride the earth are best left to their own devices, are most appropriately suited to regulate themselves, and furthermore, any regulatory intervention would only fetter the ingenuity of America’s best and brightest financial innovators.

Without doubt, we are not lacking for government agencies and departments; we have the DOJ, the SEC, OCC, CFTC, FINRA, OTS, etc., not to mention the legions of committees and panels in existence both past and present. An argument can easily be made that, in reality, they exist in a state of intense over-abundance.

The problem is: the majority of the group of people running these things have paths that travel through a constantly revolving door between government agencies and commercial banks.

I am sad to inform that we are not living in a black and white movie. This is not Bedford Falls and we are not dealing with Bailey Building and Loan Association, an institution vital to the well-being of the townspeople. In the real world, George Bailey no longer exists and Mr. Potter did indeed steal and keep Uncle Billy’s $8,000.
The stern looking bank regulator not only approved and encouraged this theft but also helped Mr. Potter convert that money in to trillions of dollars of unregulated derivatives; conspired to pay no taxes then proceeded to conceal that fact. To allow this charade to persist would be catastrophic.

Since the banking and financial industry has frequently touted their innovations as “products”, let’s look at them in the context of product liability. Allow me to name just a few of them: “Option ARMS”, “Collateralized Mortgage Obligations”, “Credit Default Derivatives”, “Mezzanine Tranches”, “Asset Backed Securities”, "Pay-Option Adjustable Rate Mortgages" “Cancelable Default Swaps”, “Negative Amortization Loan”, “MERS”, “Leveraged Default Swaps”. It is somewhat unsettling that, apparently, it is entirely appropriate to affix the term “synthetic” to virtually any of these products.

Moving on to product liability…the government has projected that homeownership will fall from roughly 60% to 40% in the coming years. As been their habit, this estimate is probably low and the staggering 20% drop will more than likely require revision (upward).

But we know approximately 1/3rd of the people have no mortgage; so when we multiply 2/3rds (the number of people with mortgages) by 1/5th (the number of people projected to lose their homes) we get 2/5ths or 40%. It’s fairly safe to say nearly half of these “products” will result in foreclosure.
The banks have repeatedly referred to their financial junk as “products”. They have used the term again and again; they were “innovating” new financial “products”.

So the banks amazing new “products” failed about half the time; an astonishing rate. Imagine any other product that failed half the time resulting in massive damages. Lawyers would be lined up for blocks suing on theories of product liability.

It would be as if a car company released and financed a car that blew up half the time…then said that all the people whose car blew up – half of them – used it incorrectly and should be forced to pay for the financing. The banks have created a defective albeit miraculously profitable array of products then managed to blame the people it injured.
The point I am trying to make here is that the very perpetrators of this unprecedented fraud stand alone as its sole and exclusive beneficiaries; toting neither consequence nor ramification.
This is in sharp contrast to the Savings and Loan debacle that shellacked so many…yet is pint-sized in comparison to the disaster staring us in our battered faces today. 
It is not possible to belabor this point enough, so let’s belabor it some more. No one is in jail. There reaches a point in time when those responsible for putting people in jail, yet repeatedly fail to do so in the face of enormous magnitudes of evidence, belong in jail themselves.

Many of these outfits are already bankrupt both morally and financially. Those that aren’t financially bankrupt would be if it weren’t for reckless tax-payer bailouts that were angrily objected to by the taxpayers themselves. To foolishly continue this dishonest course may very well bankrupt the entire country if not the world. To further suggest that should these zombie banks suffer their demise as a result of their own bad acts, it would spell undoubtful doom for *all* with no other option but to salt the earth and burn the churches.
This is ridiculous. The only ones that would be doomed would be them. The vacuum that would be created by their rightful rejection would be filled by honest institutions that are not financial predators. Unfortunately, it's probably too late for that.

usednabused's picture

Chunga, thanks for the great post. What the fuck is Whalen even employed for? Simply to lie to people. Anyone with a bit of functioning brain would see that you make sense and Whalen sucks shit.

elwind45's picture

The discount window is the tbtf jail. Getting money for free is not all its cracked up to be? Considering we take a bigger risk needing money to make money than making even the riskiest loans outright! Our risk of loss is compounded by the zeal the Fed maintains toward managing our assets and a public becoming less risk taking as the days and years progress. It was a godsend that the EM was ready for liquidity and we really pumped it in to keep gravy flowing! Now mom wants a bigger take than income off the topand we need something left for bonuses? Mom is going to close the discount window someday and lucky nobody remembers a time prior to it being always open. But we still have time to change sides of the rowboat before everybody else must try this feat lol

Comte d&#039;herblay's picture

Outstanding.  Many thx for this.

And there still is no wall, the one that was torn down by Gramm, Leach and Bliley, and # 42, William Fefferson Clinton. 


Imagery's picture

Consumer Protection Laws my arse. I line in TX and we have long ago undermined any such thing that ever existed.

Take a look at your tele, insurance, etc. The effing legislature bowed to insurance and big Corps to "mandate" such things as "appraisal clauses" in auto insurance policies; "arbitration clauses" in tele contracts and other. These are nothing more than forced usurpations of citizens' Constitutionally-protected rights!

They force one to buy services from auto insurers for example, then when one has a claim and the insurer says he believes the claim is $5 for $ 5,000 of damages as confirmed by the dealer repairing your vehicle, you sue. The insurer tells the judge / jury the can NOT hear the case and you find yourself at the table with 2 wolves and sheep voting what's for dinner!

Biggest fraud going. We should try them all for treason and roll the guillotines. I will NEVER AGAIN vote Rep though the other team is just as bad.

usednabused's picture

You didnt just vote for a REP or a DEM, you voted for a banker whether you realized it or not. And yes bankers look out for and help their bros, the ins industry and bi business in general. They do tend to fuck over the rest of the population tho, so don't give them any more votes

Oldwood's picture

When living in a world dominated by corruption, the only path to profit is through MOAR! Our entire political system has been bought and paid for by moneyed interests. This is the cost of allowing our government to pick the winners and losers. While we may feel, and actually BE, justified in our thirst for justice, we should be exceedingly careful at what cost we purchase that justice. We "demanded" protection from uninsured motorists, so now we must all through force of law, purchase this insurance. Are we now more protected or more "owned" by our protectors? When we hire a gun fighter to protect us, we shouldn't be surprised when we find out that someone else is paying them more. Our government is the dominant gun for hire, and our fears and demands for justice simply buy them more ammo to use against us. It was always called a "protection racket" until our society was consumed by the same. Now its just called government.

elwind45's picture

I would rather the slim pickens cowboy than the westworld cowboy. Running back to town for tollbooth dimes beats being chanced by Yul Briner any day

Oldwood's picture

The system is corrupt from top to bottom. The crooks are always out there selling us somethng for nothing. I have little sympathy for the borrowers either as most knew they were in over their head, or should have. The real point here is that the system was ALLOWED to do this because all systemic failures ultimately grow the government's power. If anyone thinks that a government run banking system is going to be less corrupt than what we already have is just not paying attention, and be not confused, for that is where we are headed. No accountability, no responsibility, only the deserving will "progress'.

elwind45's picture

Oh George looked most powerful when he was begging the Saudis Congress and anybody else listening for money during the White House telethon of '08. I gained excitement each day as he turned up to beg in a different room of the White House. Almost made the 750b TARP worth every penny and IT WAS Roflmao SAD

elwind45's picture

Or when McCain walked out with everybodies balls still up his arse. And Obama having to take over because George is running around room after room shouting I did it I saved myself

usednabused's picture

Fuck you OLDWOOD, your problem is that you're just too fucking old I guess. Were you looking for a home during those years? Was every pundit and banker telling you that prices were only going higher, and buy while you can afford to yet? I didn't think so, and yet you have the balls to stand up and say you have no sympathy for borrowers.. I used to respect your posts, not so much anymore. Be careful to tip your nose down when it rains so you don't drown.

Bonapartist's picture

You're right- no one and everyone  is to blame.

therearetoomanyidiots's picture

Despite the right or wrong of this article, what is for certain is that the governent and 'governing' of people is WAY overgrown.  

We are beyond done. 

swmnguy's picture

I wonder what the banksters' sob-story will be next month, or the next time they crash the market to cash in the blank check the government has given them.

When the finance crash of 2008-2009 was becoming obvious, when housing started to tank in 2006, almost overnight the banks went from saying, "You're a sucker if you don't cash in; they're not making any more real estate!  Prices and values will only go up!" to, "Those greedy unqualified borrowers swindled us!"  That one didn't catch on nearly as well as they hoped, so in late 2007 and the first half of 2008, I started hearing the finance-controlled media talking about the Community Reinvestment Act of 1978, and it's mid-90s update.  That was the new excuse; those dirty Liberals made us give outrageous mortgages to poor and non-white people, saddling them with twice as much debt as their crappy houses were worth.

Right at that time I worked on 3 meetings for different finance institutions; one TBTF mortgage lender you'd all recognize, another large bank that made loans but also played in the secondary mortgage derivatives market, and one that only did the derivatives.  The audiences were all internal; all executive employees.  The presenters were mostly each bank's executives, but also some outsiders.  There were guys from Blackrock, Neel Kashkari was at one; guys from GS and Citi.  That kind of meeting.

At each one, they spent as little time as they could talking about the housing finance crisis.  Each time, at least one banker in the audience asked somebody, either an exec or an outside presenter, to comment on the idea that it was all the CRA's fault.  One time the presenter laughed, and all times they didn't take the suggestion the least bit seriously.  They all said if there was a law to blame, it was the Commodities Modernization Act of 2000, which really laid out derivatives and explicitly prevented most regulatory supervision.  They all said it was greed and the lack of supervision that caused the problem. 

Of course, they all also thought that a great solution would be for the Federal Government to buy all their worthless derivatives, and for any new regulation to be more or less meaningless going forward.  So in hindsight, they got their way once again.

But hearing how the still-popular excuse of the banksters was laughed off in their own internal meetings, and now reading here that Dodd-Frank is the whole problem (rather than, maybe, the median house is about 50% overpriced compared to the median income?Hmmm?) I wonder what the excuses will be next tiime, and how hard the bankers will be laughing about them amongst themselves.

elwind45's picture

Is it tapper or taper anyhow its spelled blame going forward? By buying less treasuries overseas investors will take over. American exports will again be the engine that pulls the rest of world along and countries continue buying treasuries with the imbalance. As the dollar climbs gold is sold and the world witnesses the rise of the Asian consumer? With fracking America will turn back to wars for hard minerals and be alright about collateral damages unless it adversely effects the money markets of course. Our European allies will become friendlier toward Americans again!

usednabused's picture

Thanks for the insight SWMNGUY. That's quite an experience to host a meeting of bastards. I'm just wondering, while you were hosting these filthy cocksuckers, did you get a tingle up the spine? Or what was it like? I mean in the prescense of evil, surely the hair on your neck stands up?

A_MacLaren's picture

The Commodites Futures Modernization Act of 2000 (the one that gave legal standing to Credit Default Swaps, "No, its not gambling...") doesn't receive enough airtime.  Thank you for pointing out that there was truth being spoken, greed, lack of supervision, OTC Derivatives and other factors.  To this day, what do the banksters fight the hardest against?  Derviatives Regulation.

Repeal CFMA & reinstate Glass-Steagall.  Those 2 things will help.  They are not the cure all be all end all.  But they are a start.

Then larger more important issues can begin being addressed: The Federal Reserve, Fractional Reserve banking, the Fraudulent Faux Fiat Money System, ...

skipjack's picture

"Because of the pro-consumer legal regime in states like MA, home sales volumes are a fraction of pre-crisis levels."


This made me laugh. Really ??? And here I thought it was because people had no jobs, too much student loan debt, and so-called investors were running up the prices of said house with cash from China or the Fed.


Oh well, what would I know...

irishlink's picture

Can someone please send a MEMO on the three rules to all Irish Banks. They are breaking every one of these rules. They have young ""relationship manager ""with flawed economics degrees and zero history forcing people to sell property into a dead market that has surged in the past year on CASH buyers but will stall again on the decline in these buyers. The main banks are not lending . Restructuring these loans and giving the borrowers more time until the Economy gathers more steam would be the smarter move. Time is a great healer but this is lost on the banks who could not push credit fast enough onto the people 8 years ago at the top of the market and won't extend it now at the bottom. All the pushers are now retired on fat pensions bailed out by the taxpayers and the new " relationship managers" are cleaning up a mess they do not understand.

besnook's picture

sorry. double post.

malek's picture

This article seems purposefully written in a way to pull ZH readers legs.

total of 1-4 family loans securitized by all US banks fell almost 5% over the past year
Ok, all together now: one big "Ooooohhh" pity for the banks.

The CFPB issued final regulations regarding mortgages, which became effective January 10, 2014, and which will prohibit mortgage servicers from beginning foreclosure proceedings until a mortgage loan is 120 days delinquent...
Banks will like that one - it only codifies what they have been doing for years by stuffing the forclosure pipeline to not realize losses.

The CFPB issued another final regulation which became effective January 10, 2014, imposing an “ability to repay” requirement for residential mortgage loans...
A valid point, but SSDD - just another layer more on top of various existing twisted rulings, allegedly so "two wrongs make a right." Cali voters will love it.

From my point of view debt levels need to be reduced. When part of it happens slowly through less mortgage origination over many years, I have no issue with that.

besnook's picture

cry me a river. the laws against stealing are a result of people who steal. the laws are proof laws are not a real deterrent to criminals. laws only deter noncriminals. that means bankers will not be deterred. they don't want that business anyway. it is too much trouble for the money as you pointed out. if a person wants to buy a house now they will have jump through the gse hoops or put 20% down and both will pay at least an extra point to do either because only storefront mortgage brokers will process the paper and servicers will add a monthly fee for their "services".

Raging Debate's picture

Besnook - I can validate your point. My girlfriend is trying to buy a house for $120k. She is a nurse, makes good dough and has average credit, but did have a shortsale a year ago. The bank wants 25% down.

Comte d&#039;herblay's picture

No one should be allowed, by law, to buy a house WITHOUT 20% down, preferably 30%.

The stringency in credit is what most of us----- who have level heads, even without a law----would never think of buying our homes without a good third of the mortgage in cash as a down payment.

The real problem is lack of advancement opportunities at higher pay, and the lack of very well paying jobs with decent benefits. 

In other words, negative growth.  If you believe GDP numbers from the government, then you are doubly fooled. If you are not growing you are withering, so there is no such thing as neutral, stability, steady state or standing still. 

First law of economics in a capitalist, mostly country:  "Grow or Die". 

Which is why most countries governments must go socialist or communist: Not enough productive jobs. Therefore the government must redistribute in order to provide for the people who cannot find work, will not work, and never will.

The cure of providing millions of new jobs every year, is a pipedream in mature economies, especially with corrupt to bone governments. 

They must take theirs off the top and leave the dregs for the people they purport to govern.



kchrisc's picture

Just imagine the losses when people won't or can't pay?!


The Four Rs
Rejection: Quit paying, quit obeying , quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: Is there really any place for these sociopaths and criminals in a restored civil and Constitutional society?!
Restoration: Restore the Constitutional republic.

Yes_Questions's picture



I've been there when home loans were underwritten by people that review loan application documents, including the full form credit report.  Appraisals were scrutinized.

before "credit scores".


and I'm aghast they'd ever do that again.  let alone force lenders to be able to prove in court they actually verified by Best Practice the credit was good.


Yes, i've done the foreclosure thing too..


Its an ugly thing, divestiture.  UGLY..


The "Lender" better have it right, because its the only adult in the room when it comes to credit money creation.  The borrower, after all, is not responsible to the bond holder in the secondary market, and will sign off on anything to get the loan for what the borrower wants.


this may be bad for the money velocity as we've come to know it in recent years, but it worked just fine until sub-prime and selling the same loan to multiple buyers came along.  




Comte d&#039;herblay's picture

Don't understand the thumbs down but only in the context of what was written by Cog Dis yesterday:

People demand to be lied to. 

The truth is what is bringing you, the messenger, arrows aimed at your heart.

Atlantis Consigliore's picture

quick quick quick, lets get an offshore book going;  35x :1 leverage, and bang the opening bang the close,  

I just wanna front run mkt all day, and partyh every night,  Kis Kiss Kiss, bang bang  Gangbang you bagholders


Pike Bishop's picture

"Q: How many times you think a lender/servicer/investor in mortgages will write a $50,000 settlement check before they stop making loans to below-prime borrowers?"

Hopefully none.

"A: The commercial banks are already there.  This is one reason, mind you, that the market for below-prime lending is still not coming back."

Gosh, that has already proven itself to be one of the deadliest lending pasttimes to an entire Nation. Hate to see it go.

"Real estate loans secured by 1-4 family properties held in bank portfolios as of Q4 2013 fell to $2.4 trillion in the last quarter, the lowest level since Q4 2004."

Wasn't Real Estate lending in 2005-7, the worst Bubble in Earth's history since tulips?

"Next time CNBC has former Rep. Barney Frank on for a chat, they ought to ask him how it feels to be responsible for cratering the markets for US housing and financials single handed."

Frank is deep in neuron retardant, but how could he crater US housing and financials, which were never really uncratered. Bernanke's One-Man Mission to rescue the US Housing and TBTFs by way of Balance Sheet and monetary Policy was only wallpaper.

This is the same as Nixon's wage and price freeze. The second it came off, the earlier anticipated ruination arrived. No matter how seemingly sophisticated the artiface, once removed in six to sixteen months or years, reality sets in.

In this case, it's going to be a cratered US Housing market which will have to build itself organically.

And TBTF Banks as tattered ghosts of their former selves, before they stockpiled the dynamite and lit the fuse to create the crater.

Bonapartist's picture

I thought subprime lenders were  the only ones left that the banks were writing mortgages for- or is that HUD and 3.5% down(lol) VA loans? 3 years after a foreclosure now and you are good-to-go to get another one.

illyia's picture

There has got to be a better way !!!

bunnyswanson's picture

Such as this?  FOR THE LOVE OF GOD, Rather than spending billions upon billions of dollars untying this knot, take a pair of scissors and cut it.  In the meantime, don't work for Bank of Assholes.

illyia's picture

That'll do for now, bunny. That'll do...

Seasmoke's picture

Use to actually like this guy.....boy was I wrong about this shill....and my gut instinct is usually good....think they got to him !!