Mortgage Associations Dispute Subprime Remedies

WASHINGTON, DC-Executives from two associations that represent factions in the mortgage industry–the Mortgage Bankers Association and the National Association of Mortgage Brokers–have exchanged words over the causes and remedies of the current woes in the subprime market. It began with a speech John Robbins, chairman of the MBA, delivered on Tuesday at the National Press Club’s Newsmakers Lunch, where among other things he called for greater oversight of brokers. Later that day, NAMB president Harry Dinham issued a statement condemning MBA’s attempt to shift blame away from Wall Street for the subprime situation.

If the argument sounds familiar that is because it is illustrative of a greater public discourse happening in Congress, in state legislatures and in the media on the same subject: Who, at bottom, is to blame for the record defaults among subprime borrowers: Brokers eager to close as many deals as possible or originators, spurred on by Wall Street, who have stretched underwriting and risk perimeters to the breaking point? Most of the borrowers that are defaulting are single-family home owners. However, anecdotal evidence is accumulating that the problems are affecting condo communities, with reports of delinquent fees increasing.

During his speech Robbins extolled the capital markets’ developments over the past 15 years that have allowed banks to package and sell risk, thus resulting in more cost-effective loans for borrowers. The market is efficient in weeding out predatory lending, he said, pointing to the number of such companies that have gone out of business lately.