Dear President Obama/My Mortgage Solution
Attorney
(866) 735-1102 Ext 540
Dear President Obama: I know it's Presidents Day and you have an awful lot on your plate. However, I hear you're going to address the mortgage mess this week after you sign the little stimulus package. By the way; I'm going to go shopping for solar panels today; got to do something to help.
Anyway; I'm not a Harvard educated lawyer or economist, so you might want to stop here. I had to work as an aide in the Massachusetts Senate during the day and go to Suffolk Law School at night to pay for my education. I'm just one of those trial lawyers that everyone loves to hate. I represent consumers and small businesses against those more powerful. Have done it for 27 years. Hey; someone has to do it! But; if you want to hear me out, here goes.
I've sat in conference rooms and taken depositions under oath of the loan officers and mortgage brokers. I've heard about the failure to underwrite, the "boiler rooms" where brokers were taught how to deceive homeowners, how to "up" the amount of a mortgage with credit cards and other debts rolled into the mortgages, the promises of swift refinances, the "income falsification" on loan applications, the broker commissions of 15k paid out at closings; I've heard it all. My take. All these people should be held accountable and held criminally responsible where appropriate. They have destroyed the lives of many and profited at the same time. Without accountability, our civil justice sysyem fails. Seeing some perp walks will make Americans feel better and know that something is being done.
I know, you want me to get to the mortgage part. Sorry, I do hate writing long letters; but I had to vent. OK, here goes:
a) Reduce interest rates. You know that all those rates after the 6% margins on LIBOR kicked in; and the choices on the Pick a Payment Option ARMS were simply a fraud and a facade to begin with. Didn't you see the guy on 60 Minutes last night say they all knew it was a fraud? All subprime interest rates should be reduced to market and all loans should be at fixed rates, or the old conventional 3 or 5 year ARMS with reasonable caps. Some people know they'll sell their homes in 3-5 years and should be able to get an ARM based upon their circumstances.
b) Reduce principal. Not doable you might say. Why? Housing prices inflated because of this fraudulent easy money in the first place. Principle should be reduced to 80-85% of actual appraised value (remember, many of the subprime loans were based upon fraudulent appraisals in the first place) . This would also give many a little cushion and the opportunity to stuggle a bit to pay off money they may own on an equity loan. You want to have the government insure the difference between the old principle and the new principle. Why? Let the banks that made the stupid decisions absorb these losses. Of course, shareholders may suffer, but all our retirement accounts have already tanked anyway. Remember Charles Darwin?? Let the strong survive!
c) Bankruptcy: Let bankruptcy court judges have the authority to modify mortgage loans. I know some damn smart bankruptcy judges and have a few of these cases coming up. Can't wait to get the loan officers on the witness stands. I know one mortgage broker at a place formerly known as Hyannis Mortgage (now defunct, of course) that lived off of the Pick a Payment loans and thought they were a great idea. The judge will love to hear her explanations.
d) Bring sound underwriting back into the marketplace. I know regulations were already in place that could have avoided this disaster. However, fill the potholes and make mortgage lending simple and transparent and stop the fraud. Another scam will come around tomorrow, but do what you can to stop this one.
In summary, Mr. President, you need to restore confidence in our financial system, punish the wrongdoers, and give those that qualify a chance to get back on their feet. I know this isn't perfect and your economists will likely rip my ideas to threads, but what do I know. I'm just in the trenches trying to help some good folks try to dig their way out.
Want to hear my ideas about the automakers??
Respectfully Yours,
Bruce A. Bierhans