I have no idea who this commenter (Tamquam Leo Rugiens, a Christian/Catholic reference of some sort) is on Wretchard's website but I was struck by the thoughts expressed. So, I wanted to post the whole thing here and if someone knows the context of Tamquam Leo Rugiens, please advise. Also, I don't want to overlook the substance of the post -- I am fascinated by Nassim Nicolas Taleb:
There is no doubt but that a whole raft of government entities from both the executive and legislative branches have left their fingerprints on the housing bubble and the credit collapse. Whereas it is important in many respects to pursue studies of who did what in order to correctly remedy the situation and prevent it’s recurrence, there is another side to the story that nobody seems to be talking about.
Some time back Real Estate Commissioners across the country began relaxing the requirements for licensing procedures. It got to be fairly easy to become a licensed Real Estate Sales Person or Mortgage Broker. And when the market got hot everybody and his brother saw that there was money to be made in real estate so they jumped in. Many did so without properly understanding or caring about the responsibilities of the job. Many, a surprising number actually, jumped in without bothering with the niggling formality of passing the real estate exam and getting a license. The result was a whole lot of people who presented themselves as real estate professionals who were incompetent and many were simply unscrupulous. The result was that a public that perforce trusted an agent or mortgage broker to safely guide them through the process wound up taking bad advice. And, in the case of mortgage brokers in particular, advice that was not just bad but positively rapacious.
Not a week goes by but that I don’t run into somebody who got an adjustable mortgage who had been promised a 30 year fixed; who paid double or triple or more the going rate for fees; a higher interest rate than what they actually qualified for and were promised; who had gotten a mortgage on the basis of fraudulent information; who had hidden fees rolled into the loan; who bought a house only to discover some major fault that had been hidden at the time of sale; who had paid for services which were never rendered. On and on it goes. The FBI has begun to go after some of these parasites, but meanwhile people are losing their homes as a result of the illegal actions of these unlicensed, improperly educated, improperly supervised so-called professionals. It’s gotten almost as bad as politics, the reprehensible behavior of 90% of these people make the rest of us look bad.
In the case of mortgage brokers especially, the actions of the unscrupulous tends to debase the integrity of the honest ones. “If you’re not willing to fudge the numbers for me so I can get the loan I want, I’ll take by business over to a guy I heard about who will.” When the choice comes down to fudging the numbers or no food on the family table, standards erode.
It is the job of the Real Estate Commissioner and the Corporations Commissioner to set the standards, oversee and enforce them. This they have failed to do. Despite blatant, egregious, widespread and ongoing abuse they have not done their job. They have become useless watch dogs on the public payroll who can neither bark nor bite. Oddly, I don’t see anybody calling them on it.
The first step is to start cleaning up the mess on the ground, never mind what they do in Washington. Until the States are willing to implement and enforce the regulatory, oversight and accountability powers they already possess it will be business as usual even if Congress manages to pull off a miracle and clean up the cesspool in Washington. I personally feel that the penalties for this kind of illegal behavior are too mild. These blood suckers have been enriching themselves at the expense of the public who have in many cases lost their life savings, their credit, their home, their hope for the future, their good name and their native trust in not only their fellow man but in the social institutions which exist to protect them in the first place. The law need teeth. Big teeth in strong, relentless jaws that will not only leave a mark but draw blood and break bones.
First, the unlicensed real estate and mortgage players need to be taken down and prosecuted to the fullest extent of the law. Same goes for licensed people who defraud their clients to enrich themselves.
Secondly, these people, including licensees, should be required to make restitution to the full extent of their assets. That goes for the Commissioners who failed in their trust. The practice of fining someone $1,000 for failures of ethics that cost their clients hundreds of thousands of dollars is baloney. You got paid $20,000 for setting someone up a crooked deal which led your client to lose their $500,000 home which gets auctioned by the bank for $350,000? You pay back the $20,000 plus the $150,000 plus you get the 1099 for the bank’s loss. You did it 175 times between 2001 and 2007? Add it up. Sorry, bankruptcy’s not an option and there’s no statute of limitations.
Third, there should be a Rapid ReFi available through FHA for people with these rotten loans who have been making their payments for two consecutive years. No appraisal required, the barest minimum of paperwork. Just a simple modification of terms to clean up the loan. In most cases people bought the home in the first place because they liked it and wanted to live there and that hasn’t changed.
Homeowners in trouble who contact the bank on their own initiative to try to work out a modification of terms should be able to do so whether or not they currently qualify for the loan under the new rules. Having spent years giving away loans based on insanely flimsy criteria, the banks have now thrown out the baby with the bathwater and are setting the bar so high that you almost have to prove that you don’t need a loan to buy in order to get one. Charge a little higher mortgage insurance to cover the risk. If a bank refuses a reasonable workout with an existing mortgagor they should not be allowed to dump the loan under the provisions of the rescue package, but must keep it.
Finally, REO asset managers need to thoroughly vet the brokers they are using to sell the inventory they’ve taken back. They are in many cases trusting the same crooked brokers and agents who caused so much of the problem in the first place. Unless they do so they will guarantee that the issue will not be solved, but keep on cascading into the future.
That, my friends, is a very interesting take.
As was the case with the ridiculous responses of nonstop bitching and moaning about the Katrina aftermath, so much of this situation comes back to state and local failures. As the folks closest to the people, and most responsible for protecting ordinary Americans, I always start my focus at this level and not the federal level.
Federally, I always think of the current commercial incessantly played of the motorized wheelchair that is available FOR FREE -- no cost to you -- and I always think . . . well, damn, there has to be a cost to someone. The only someone that can be is the American taxpayer.
In any kind of turnaround, we're going to have to relentlessly attack that kind of thinking. Many of us are sinners in this regard, myself included. The sins may differ and my excuses may be unconvincing to you and vice-versa but, there you have it.
All the more reason why Sarah Palin is the right individual for this time, the right politician we need as one of the primary faces of the Republican Party.
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