If you really have the stomach to listen to where the reverse mortgage industry is headed, you better first get your vomit bag because the picture is just downright nauseating. Without examining the insipid numbers of closed loans, even a cursory look at the broader forward mortgage industry would tell the uninitiated, that "something is rotten in the State of Demark" (Hamlet).
The symbiotic relationship between the stagnant reverse mortgage industry and the forward mortgage industry has the fetid aroma of a rotting egg. If those in charge of the first mortgage debacle, are chosen to lead the mortgage industry out of the self inflicted mess, then stay tuned for the coming of the second great mortgage debacle.
The push is being made to disband Fannie and Freddie. They have served the mortgage industry well. It was only when the politicians interfered in policy, made it a haven for political appointments and then shut their collective eyes and ears, did the agencies loose their way. Had the seminal guiding idea remained that one earns the right to get a mortgage, this debacle would never had happened. Had the tried and true underwriting principles not been tampered with, the economy would not have suffered a recession. Had the types of "innovative" programs not been created out of thin air by an insatiable group of Madoff type denizens of Wall Street, then the mortgage industry would have remained the model for the world to see.
Politicians have a nasty habit. They either wait for things to get bad (by doing nothing)or precipitate the event, then come to the rescue. They use their own version of Dues Ex Machina, the tool that the ancient Greek playwrights used, when they needed a solution to a problem.
Talk about the demise of the 30 year mortgage has reached viral proportions. If the GSE's are no longer around and FHA will no longer insure them, private industry would be loathed to do the same. This move could once and for all destroy the reverse mortgage industry. It will have other far-reaching effects. It is possible then that one could see a 20 or 15 year mortgage become the linchpin of the mortgage industry. Sadly this will carry higher monthly payments and will again exclude millions from the mortgage market...........and then the inevitable tool that the ancient Greek playwrights perfected will be used by disingenuous politicians in Washington. And so it goes.
Modern political practice sadly requires that government fix the problem which it made. So now there is talk that the mortgage markets will be better served if government had over control to the private mortgage market. It is not hard to see that it is the banks that control the government and not the other way around. Three relatively recent examples: The Gramm Leach Bliley Act (1999), the enforcement of the SAFE Act (2008), HUD policy without statutory authority to outsource FHA approval (HUD's Final Rule 5356-F-02 as set forth in Mortgagee Letter 2010-20-Strengthening Risk Management Through Responsible FHA Approved Lenders-2011). Each gave more power and authority to the banks. Gramm Leach was a major cause of the first mortgage debacle. The other two will become the leading cause of the second mortgage debacle.
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