Attempts at Relief and Reform

Investors Say Transparency is Necessary for a Recovery

Posted on Tuesday, March 15, 2011

The Association of Mortgage Investors (AMI) said on Wednesday they consider the Obama administration’s GSE reform white paper a good start, but the organization says the plan is missing a key ingredient: transparency.
At the House Financial Services subcommittee hearing this week, the issue of bringing private capital back into the market was an important topic of the discussion, with the witnesses at the hearing advocating for a private market revival.
But the association says they see a number of omissions which will frustrate the success of returning private capital to the market.
In a statement, AMI said, “the AMI and its members are ready and willing to engage policy-makers to create a truly viable plan that offers long-term, sustainable, and effective solutions. The timely resolution of the foreclosure crisis is in the best interests of homeowners and fixed income portfolio investors reliant upon returns from mortgage-backed securities.”
To truly facilitate a solution, AMI calls for transparency in the lending process, and a revelation of the errors and defects within existing loans.
AMI executive director Chris Katopis continued, “Any truly viable solution must address the defective mortgage loans (many of which are a direct result of predatory lending practice) which still reside in pools and trust across the country and plague investors.”
In its statement, AMI says ample research confirms that the loans originated during 2005-2007 were often materially defective with respect to the reps and warranties:
• A complaint involving one of JPMorgan Chase & Co subsidiaries finds over 80% of the loans in certain deals breached representations.
• Fitch reviewed 45 early defaulting loans and found that the “result of the analysis was disconcerting at best, as there was the appearance of fraud or misrepresentation in almost every file”.
• Recovco, a mortgage consulting firm, has reviewed several thousand loan files and has found that over 50% of those files reviewed in the 2006-2007 vintage have material breaches of representations and warranties.
“Part of the problem is that the entities holding the evidence of breaches, or the mortgage files, have been unwilling to follow their contractual obligations and release documents to trustees and beneficiaries,” said the statement.
Without transparency, the association believes solutions can not fully develop.
“Sunlight is the greatest disinfectant; let’s get the documents and have the facts,” said Katopis.
Joy Leopold, DS News



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