Wednesday, August 13, 2008

Me? Couldn't Be. Then Who?

The following three articles are all from the Sarasota Herald Tribune although much the same can be found nationwide as such arguments of who's to blame for our "housing crisis" occur everywhere from the beach's snack shop to the Senate. I found the presence of these three highlighted on the SHT's website noteworthy, especially considering I've yet to read an article from the SHT about the great deals now available for first-time homebuyers and wage-earning workers. I know, I know (you don't need to remind me) that scary stories sell better than warm-fuzzy ones even when true. Last on the list is a letter from the President of the Florida Bankers Association offers a solution to the mortgage problem written in response to this article:

"Appraisers Felt Lender Pressure" by Harold Bubil:

"Placing Blame For The Collapse" by Harold Bubil:

"Bankers Blaming Mortgage 'Originators' For Market Mess" by Harold Bubil:

"We Must Protect Florida's Mortgage Industry" by Florida Bankers Association President and CEO Alex Sanchez

Upon reading recent news stories produced by an investigative team of the Miami Herald, I-like many others-was alarmed, disappointed and outraged. The stories revealed some startling statistics and heartbreaking stories related to mortgage fraud in our state. Some of what the newspaper found included:

  • One in three brokers who committed fraud were allowed to continue working in the industry without any monitoring.
  • More than 80 brokers who were caught stealing from clients by siphoning funds from escrow accounts and issuing excessive fees were allowed to continue working in the industry.
  • Tools that could have been used to protect consumers, such as suspensions and revoking licenses, were used rarely, if ever.
  • The number of licenses revoked by regulators declined each of the past eight years as Florida's mortgage fraud rate rose to the unenviable position of number one in the nation.

This news about these fly by night mortgage lenders is a stark contrast to the safety and soundness of the FDIC insured banking industry. Banks are highly regulated by the Federal Reserve Bank of the United States, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the State Banking Department.

An FDIC insured bank is highly scrutinized. Some of our banks are examined year-round and all others are examined every 12 to 18 months, which includes carefully screening and checking loan portfolios, bank procedures, bank practices and monitoring to ensure that our customers' money is safe and therefore sound. All of the banks operating in the state of Florida are highly regulated by state and federal agencies that monitor transactions, audit files and require numerous monthly, quarterly and annual reports.

In the 75 year history of the FDIC, no customer has ever lost one cent when their monies were in an FDIC insured bank savings account. The record speaks for itself. No one else can make that claim!

At times, bankers may have to tell customers things they don't want to hear such as "you can't afford this loan." But at the end of the day, I think people would rather hear that than "we're sorry, but your mortgage broker is in jail and all your money is gone."

Here-today-gone-tomorrow mortgage originators were in the practice of doing whatever needed to be done to close the loan. As we now see, some unscrupulous individuals working in the mortgage industry were willing to lie, cheat or steal just to seal the deal.

To the contrary, bankers want to build relationships with customers so that not just your mortgage is with the institution, but also perhaps savings and checking accounts, retirement accounts and more. When looking for a home or business loan, there is no better place to go than an FDIC insured bank.

Banks, which are well capitalized (meaning they have required rainy day funds) conduct a series of examinations to determine the credibility of a loan before its issuance, including verification of income, requiring a solid deposit and performing substantial credit checks. According to recent news articles, others peddled mortgages "that required no money down and minuscule payments for the first few years." Some even forged records like tax forms, account balances and income statements.

The Florida real estate market indeed has its challenges with flippers, fraud and foreclosures. We need to restrict the ability of criminals to work in Florida's mortgage industry from handling one of the most important-and often largest-financial purchases of a person's life: the purchase of a home. For this reason, there is just one group who should be entrusted with handling your vital financial transactions, an FDIC- insured bank.

Alex Sanchez is president and chief executive officer of the Florida Bankers Association (FBA). Established in 1888, the FBA is one of Florida's oldest trade associations and has a membership of nearly 400 financial institutions of various sizes; nearly 96 percent of banks operating in Florida are members.

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