Over the next couple of years more resources than ever will be invested into loss mitigation efforts. Foreclosures are at historic levels prompting lenders to consider doing many more loan modifications, forbearance’s and short sales. One would think that there would be sophisticated tools available to lenders who want to do this fairly and responsibley or at the very least some industry accepted best practices - but there aren’t. Like many things associated with this mortgage meltdown, many of the assumptions associated with risk never took into account the dynamics that led to the meltdown in the first place such as how these so-called exotic loans would perform in a market where property values were going south. The new housing bill contain a lot of goodies aimed at homeowner retention but in order to get at least a reasonably efficient net result it is imperative that some basic loss mitigation protocols receive industry wide acceptance. The question is what should be standardized and who should establish them. I’ll take a shot at these questions next week but would love to hear some other views. GA     

Why doesn’t anyone understand that affordable lending to LMI and minority homebuyers is the key to the housing recovery? Lenders, GSE’s and mortgage insurance companies are all curtailing their affordable lending goals and initiatives at the worst possible time and in the process are exacerbating an already dire housing market. If there is a “silver lining” in today’s housing meltdown it is that thousands of potential homebuyers that were priced out of the market two years ago have a second chance to fulfill their dream of homeownership, but the mortgage lending industry in response to record default rates have tightened their lending guidelines to the point where most of these credit-worthy families cannot get a home loan. The irony is that these more conservative lending parameters are drastically reducing the pool of potential homebuyers at a time when there is an unprecedented glut of homes on the market. This is causing further downward pressure on home prices, more foreclosures and at the end of the day will cause more bank failures, and more government bail-outs.

There is no question that in recent years lending standards got far to lax, but the pendulum is now swinging too far the other way. The recovery will only come when sensible lending returns to the marketplace. GA