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Resetting attitudes.

"I have grave concerns about the overzealous attention by legislators" to the reverse-mortgage sector, said Margaret (Meg) Burns, director-Office of Single Family Program Development, Federal Housing Administration (FHA)/Department of Housing and Urban Development (HUD). Burns was a speaker at the Mortgage Bankers Association's (MBA's) Government Loan and Housing Production Conference in Washington, D.C., in June.

"Federal regulators are going to pay attention, but they don't know the product," said Burns, adding: "We have yet another party entering this world who wants to layer on additional consumer protection, but they don't understand the product well enough--[and yet] we have auditors nipping at our heels."

Is homeownership for everyone? Panelists at MBA's Government Loan and Housing Production Conference were asked to debate the topic by moderator Steve O'Connor, senior vice president of government affairs for MBA. In her response, Judith Caden, loan guaranty service director, Department of Veterans Affairs (VA), acknowledged that "maybe we have gone too far" --then she offered some personal reflection. "I grew up in a family that never owned a home, and we did OK. I now own three," she said, warning that "we have to be careful that people aren't buying into this [notion that] 'I must own a home, and especially for a deployed [active military] person ... in this market ... that's a concern, because they may not be able to sell their homes," she said. "We have to be careful. There's a balancing act that has to go on when deciding whether to buy a home."

Discussing the problem of fraud in the financial services sector, George Tubin, research director, delivery channels and financial information security, with TowerGroup, Needham, Massachusetts, told attendees at the group's Financial Services Business & Technology Conference and Exhibition in May in Boston that so-called malware--i.e., software developed specifically to enable fraudulent activity--was coming from a "criminal market that is developing and lucrative."

Tubin said the trouble is "no longer [being perpetrated] by 'nerds'; it's [been] professionalized." And, he warned, "there is no 'silver bullet' to fighting fraud--no one answer to solve everything. You need a layered security approach, front to back," he added. Tubin cautioned all to beware of "some vendors who are fanning the fires of fraud fear to generate business."

"Live with your client!" exhorted Ralph Silva, TowerGroup's London-based senior analyst, European banking and payments, speaking at the company's Financial Services Business & Technology Conference and Exhibition. "Banks understand customer behavioral patterns, but they don't understand interrelationships between these [patterns], because we are trying to determine customer behavior through the use of technology" instead of living with customers like in the old days, complained Silva.

"We have spent the past 20 years trying to destroy this [high-touch approach], because we want to believe that a customer walking into a bank branch in Manhattan is the same as the customer anywhere else in the world. Why? Because technology makes it easy to do that, but that's not the way we live. To succeed in banking, you need to live with your client," he said, repeating this advisory phrase throughout his presentation.

Despite an almost entirely bleak assessment of the U.S. (and global) economies for 2009, Robert Kapito, president, BlackRock Inc., New York, offered one bright hope to luncheon guests at the Securities Industry and Financial Markets Association (SIFMA) Mortgage-Backed Securities Due Diligence Conference in New York in June. "If you take a look at the marketplace, this is the best time we've ever had to add value long-term into a client's portfolio, because there are finally opportunities. Look at the CMBS [commercial mortgage-backed securities] market, look at the agency market and, if you can ferret out the values, they're finally back in the marketplace."

Otherwise, Kapito added, "The story can only get worse; [rates on] loans will continue to reset upwards; delinquencies will worsen. I don't know where the bottom will be." Eventually, he said, a turnaround will occur. "Billions of dollars are sitting in money-market [funds], and eventually there will be an incredible opportunity because there's more cash in the system today than ever in history--in institutions and retail--and that money, at some point, is going to come out fast and furious." However, Kapito added, "it will be a long time [before that happens], because no one remembers when they made money--but they remember every single time they lost money."

Warren Kornfeld, team managing director, asset financegroup, Moody's Investors Service, New York, said, "Investors signed up for credit risk; they didn't sign up for fraud risk" --a reference to the divide separating responsibilities when loans go sour. "Securitizations are a credit-risk transference," said Kornfeld, speaking at the SIFMA conference in New York. "We know lenders are not going to catch every thing. But in recent years, sales won and risk got pounded down, and that balance has to come back. We need balance around what investors should take upon themselves in terms of risk versus just transferring incentives."

Moderating a discussion on "The New World of Mortgage Securitizations" at the SIFMA conference, Scott Samlin, executive director, Morgan Stanley, New York, offered a succinct description of how vertical integration became a runaway train for many loan originators. "One day you're a retail originator and you're doing well, and somebody comes to you and says, 'Let's open up a small wholesale channel.' And you do. You try to keep it controlled; you only deal with top-performing brokers. That goes well, and the next thing you know you have some small brokers that want to become lenders, [so] you're table funding. The next thing you know, you have a small aggregation shop; you want to get into the servicing side. And the next thing you know, you're in all four channels."

That's where, according to Samlin, "you lose discipline--you think you can price for every risk." He concluded: "As long as property values go up 8 [percent] to 12 percent a year, everything is fine. But when they don't, [it's] not quite so good."

Neil J. Morse ( has covered the mortgage finance industry for more than a decade, and knows a quotable quote when he (over) hears one. He can be reached at
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Title Annotation:On the Road; Mortgage Bankers Association's conference on government loan and housing production
Comment:Resetting attitudes.(On the Road)(Mortgage Bankers Association's conference on government loan and housing production )
Author:Morse, Neil J.
Publication:Mortgage Banking
Article Type:Conference news
Geographic Code:1U5DC
Date:Aug 1, 2008
Previous Article:The marriage of automation and risk mitigation.
Next Article:Mortgage servicers: the industry's unsung heroes.

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