It’s been too long since we’ve reposted one of old Doom friend Bill Maloni’s articles. In this piece Bill puts some forthright suggestions on the table. He certainly has some definite ideas as to how the new Administration should proceed in dealing with the present crisis.
Please welcome Fannie’s former chief lobbyist back to Doom Castle. I hardly ever agree with his policy prescriptions, but they’re always intriguing. (The version below has been edited; click on the title below to see the original.)
by Bill Maloni
… Let’s discuss what the Obama Administration needs to do to fix this problem of banks slow-walking the process of rewriting billions in toxic mortgage loans.
First off, there are too many Administration “chefs” trying to cook this mortgage meal: Treasury, the Fed, FDIC, CoC, Fannie and Freddie, etc. etc. etc., all positioning themselves for "huzzahs" when the job is completed. But they are using different operating systems and rules and not coordinating with each other well at all.
Geithner would have done far better picking on the GSEs and paying them $500 or some similar amount for every bad loan successfully converted to a good one.
A motivated Fannie or Freddie could have produced 2 or 3 million mortgage refis by now.
Last week, the Obama Administration was hyperventilating and gnashing its teeth about the snail-paced effort by the mortgage industry to restructure underwater loans. Treasury published a bunch of names of the least successful lenders / mortgage restructurers, i.e. those that had most successfully avoided their responsibilities. But while that’s a positive step, it ignores a major part of the “pace” problem, and it is hardly enough. These guys have armadillo skins, while claiming they are sensitive.
But look at the banks. One reason why the mortgage investors and servicers are moving so slowly is that the government has supplied them with so much money that they think the Feds will give them even more just to do the necessary mortgage work they should have been doing all along. So if the individual institutions aren’t going to lead us out of the mortgage mess, that job should go to the Treasury.
Instead of just publishing the names of the miscreant big bank lenders, Secretary Geithner should fire as many major banks execs as it takes until the larger members of the industry get the message. Take away their status, cash, and perks and they can move quite quickly.
The banks don’t respect anything but brute regulatory force. Once displayed, you’ll see how soon they move to overcome the problems they claim are stopping them from doing the required mortgage restructuring.
Do it, Tim. Just do it and then step back and enjoy all of the rose petals and congressional praise aimed at you.