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Wall Street's downbeat tune.

Running through the multiple explanations for loan modifications that do not succeed is "lack of documentation," said Janneke Ratcliffe. executive director of the University of North Carolina's Center for Community Capital, Chapel Hill, North Carolina. Speaking at the Mortgage Bankers Association's (MBA's) 98th Annual Convention & Expo in Chicago last October, Ratcliffe got specific: "The No. 1 complaint from borrowers is lost documents--resending and relaxing over and over again," she said.

Another common issue is "long trial-mod periods or delays in reviewing mod applications, which often add costs for borrowers and investors but often end up in foreclosure," according to Ratcliffe, who insisted that "who your servicer is affects many loan-modification outcomes."

Automotive comparisons--and more specifically tire references--were rolled out by two speakers at MBA's annual convention. Mark Hanson, vice president, securitization and cash execution, Fred-die Mac, McLean, Virginia, said servicing "touches everybody in the mortgage process. That makes change difficult. Unfortunately, right now we're Irying to change the tire on the car while it's still moving."

And Souren Sarkar, managing director at Nexval Inc., Miami Lakes, Florida, suggested, "our industry should take some cues from manufacturing, where quality is paramount. For instance, Goodyear can't have tires that fail 10 percent of the time."

But Hanson explained that "changes upset the market; Washington wants quick change without disrupting markets--that's a daunting task." Beginning in February 2012, Hanson noted that "all servicers under [the Dodd-Frank Wall Street Reform and Consumer Prolection Act and] securitizers have to report all repurchase activity, including repurchases requested and fulfilled, and that will have a transparency effect."

Hanson advised that "there is great concern that the industry has consolidated too much around servicing and the large players have become too large, much to the detriment [of] all the players involved."

A slew of strong opinions on the housing finance industry was offered by Ronald Kruszewski, chairman of the board, president and chief executive officer of Stifel Financial Corporation; and chairman of the board and chief executive officer of Stifel, Nicolaus & Co. Inc., St. Louis. Interviewed on-stage at the New York-based Securities Industry and Financial Markets Association's (SIFMA's) annual meeting in New York last November, Kruszewski told television personality Charlie Rose that the industry must be "careful after trying to solve the [housing] problem to realize that we didn't understand we were in a bubble and to regulate the problem will cost jobs and raise capital levels on American corporations." He criticized over-regulation, stating that "Dodd-Frank is a reaction to what happened, and it's too much. A combination of that and the Volcker Rule is holding us back. We need to simplify the tax code," Kruszewski argued.

Rose also interviewed Sallie Krawcheck. former president, global wealth and investment management, Bank of America Merrill Lynch, New York. "When you look at today's economic landscape," he asked, "what gives you optimism and some pessimism?" Krawcheck, much in the news last fall following her departure from Bank of America, responded off-handedly that "it's hard not to walk around and feel depressed. It's tough. Coming out of this downturn is different. It feels like it will take years until [the economy] comes hack."

She told her audience of financial professionals that "it's not politically correct to talk about any part of Wall Street doing good, but you actually can help families and institutions move forward."

Also at the S1FMA annual meeting, John Taft. president and chief executive officer of the U.S. division of RBC Wealth Management, Minneapolis, addressed new laws affecting the housing industry. "We all have to effectively operationalize new regulations in an ever changing marketplace, which means new and additional compliance costs, which will affect the bottom lines of our members firms and impact their ability to conduct business on a day-to-day basis," he said. Taft insisted, "regulators must take added, direct and indirect costs into account for each and every rule to see whether benefits outweigh costs."

And finally, at the SIFMA annual meeting, Donald Kohn. former vice chairman of the board of governors of the Federal Reserve System, said, "It's a very good thing that the financial system has come roaring back from the depths of 2008 and 2009, but the caveat is we cannot gel back to where we were in 2004, 2005, 2006, with the kinds of leverage, the kinds of maturity mismatches that made so many financial institutions and the federal banking system so subject to runs."

Said Kohn: "The financial sector and its institutions got to be too big and were doing things that weren't contributing to healthy results. Going forward, we're beginning to see in recent layoff announcements in the financial industry a little bit of a downsizing, and my guess is that it will create a more stable situation." In sum, the one-time Fed official counseled: "I don't think any of us should be under the illusion that Fed actions of the past or [those] to come are going to somehow turn a very slow recovery around."

The reverse-mortgage business could tick up, according to John Lunde, president of Reverse Market Insight, Aliso Viejo, California, citing numerous statistics to support his theory. "There are 20-plus million senior households in the U.S. The potential reverse-mortgage volume could be twice what it is today," he told an audience of devotees at the Washington, D.C.-based National

Reverse Mortgage Lenders Association's (NRMLA's) Annual Meeting & Expo in Boston last October.

"But how do we get in front of those decisionmakers?," Lunde asked, then answered: "It's an education effort. When you see that 30 percent of the reverse-mortgage business today is ARMs [adjustable-rate mortgages]--a lot of that should be [fixed-rate Home Equity Conversion Mortgage (HECM)] Saver [products], and eventually will be."

(The HECM Saver was designed as a second, initial mortgage insurance premium [MIP] option for the purpose of lowering upfront loan closing costs for borrowers who want to borrow a smaller amount than what would be available with a HECM Standard). "It's a better product than a HELOC [home-equity line of credit] for a lot of people," said Lunde, "and it should displace HELOC for our target customers."

He added, "The [HECM] Saver is our first opportunity to reach this demographic. It's about how we put strategies around reverse mortgages from a rational perspective that makes sense."

Neil J. Morse has worked in the mortgage finance industry for 15 years as a writer and marketing professional, enabling him to know a quotable quote when he (over) hears one. He can be reached at
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Title Annotation:On the Road
Author:Morse, Neil J.
Publication:Mortgage Banking
Date:Jan 1, 2012
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